Winter is Coming. What You Need for Indestructible Wealth in 2021

January 4, 2021 5 Minute Read

I’m adopting the House of Stark motto this month because winter is coming for the U.S. economy.  I say that not to scare you, but because, like the Lords of Westeros, I want you to be prepared to endure it with foresight and vigilance.

You may have heard lately of some of the conditions creating the inevitable storm.  The frost has already hit the North tip.  The first round of unemployment that hit last year was mostly people in service, entertainment, travel, and leisure.  An estimated ⅓ of all restaurants – a trillion-dollar industry – will close in the coming year.  In this next wave, layoffs are likely to hit higher-income earners.  How many of these kinds of losses can our economy endure before we start to see the impact?

U.S equity markets are overvalued.  The price you pay for many stocks relative to their earnings has only been higher two other times.  Neither of those ended well because the price you pay for a stock should be some reasonable function of those companies’ profits.  Overvaluation happens when people get excited about the market, and they fear missing out.  It may be better for some investors to invest in boring staples or utilities than a stock like Tesla, currently valued at over 1000x earnings.

We may not have fully recovered from the 2008 recession because we’ve been living on stimulus since then – low-interest rates, easy credit, and The Fed has not been able to raise interest rates successfully since.  The market has gotten used to the stimulus.  Eventually, we will run out of the ability to stimulate the economy.  Like a parent soothing a child with an ice cream cone, we will have to take the ice cream away, and there will be a meltdown.

So how should you protect your wealth in 2021?

The most important thing to do now is to reduce debt wherever possible.  Consolidate and combine where you can.  If you need help with it, debt analysis is part of what we do.  Not all debt is bad debt, and much of what is can be re-negotiated to your advantage.  If you own property and you haven’t refinanced yet, call us, text us, let us know. We can help with that.  If you have credit card debt, we can come up with a plan.  Let us know if you need support.

Increase your savings.  You’ll want to build up your reserves, so you have choices.  We suggest six months of expenses in savings, CDs, something liquid.  You don’t have to think of it as emergency reserves.  Think of it as take six months off and travel the Amazon money.  Leave the job you no longer love and teach or volunteer your time money.  It is about having choices and the freedom to work because you want to, not because you have to.

Some folks think that a line of credit takes the place of an emergency reserve, but when credit gets tight, the banks could reduce or take away your line.  Depending on that, instead of liquid assets, is a considerable exposure.  Find ways to add 10% more than you saved last year to your savings and investment with systematic contributions.  We’d love to help here.

Take an inventory of all your assets and impose some austerity measures.  I am not talking about eating Ramen noodles or Kraft macaroni and cheese; instead, discontinue a few of the subscriptions you aren’t using, like Louisville Vegan Jerky of the Month Club.  Look it up; it’s a thing.  Here’s a thought.  Do you need that 3rd car or another pair of Tom Ford shoes?  We have been seduced with easy credit and powerful advertising to buy what we don’t need to impress people we don’t even like.

Consider making yourself bulletproof from the financial uncertainty ahead and get into the monetary equivalent of that bikini you have always wanted to wear or strut on down to the Venice Beach of balance sheets with those new gleaming biceps.

Count on us to continue to put your financial well-being first and to add the power tools that will help you get pumped this year.  Here are a few highlights:

Asset+map® – all your financial assets represented visually updated in real-time.  You can adjust any setting – from how much you’re saving to your retirement budget to see how it impacts your wealth in real-time.

StratiFi® – helps us quantify an appropriate level of risk for you and keeps you on track for financial independence goals.

We’re concerned that you may have questions about your best financial practices for the coming year that we haven’t addressed, and we’d like to hear from you what you would like to know.  Please reply with topics you’d like to see handled in the coming year.  How about Turn the Tables at the Car Dealer for the next time you go to buy a car?  Or Your bank, she’s just not that into you?

I look forward to hearing your thoughts.  I’m here.  Let’s prep.