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This message comes from Charles Schwab with their original podcast, Choiceology. Choiceology is a show about the psychology and economics behind people's decisions. Download the latest episode and subscribe at schwab.com slash podcast. You're listening to Life Kit from NPR. Hey, everybody. It's Marielle. I looked up the word volatile today. If you've been watching the news, you've probably heard that word a lot in relation to the economy and the stock market.
And when you hear a word enough times, it can lose its meaning, right? It just kind of breezes past your ear. So here are some synonyms. Unpredictable. Erratic. Tempestuous. Turbulent. Fitful. Yeah, it definitely feels that way. If you have money in an investment account, or if you're a federal worker bracing for possible layoffs, or if you're tuned in to the ever-changing details about what tariffs we're putting on which goods from which countries and how that's going to affect prices...
It's a lot. So how can we think about our finances in such a volatile time? We can start by taking a deep breath. Take social media and news breaks if you need to. Take care of your mind and your body and make sure that you're creating a supportive environment around you.
If everybody around you is doom and gloom, that's also going to affect your attitude. Lauren Williams is a certified financial planner and an Olympic gold medalist, by the way. Her firm is called Worth Winning. Your mental health and your self-care is as important as your financial health and the actual quantitative things. On this episode of Life Kit, I talk to Lauren about that and about the quantitative things.
like how to avoid financial scams, build up your emergency savings, think about your retirement fund, and decide whether to buy something in this moment.
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Support for NPR comes from the Wallace Foundation, an independent, nonpartisan research foundation collaborating with grantees and partners in the arts, school leadership, and youth development. More at wallacefoundation.org. This is a time of uncertainty in the economy. We have experienced many of those in the past few years, the past decade, the past 15 years. I mean, it's happened over and over again for different reasons.
What do you tell your clients when they come to you? Because I imagine they come with questions, whether it's about their retirement accounts or just like fears in general about not knowing what's going to happen. Yeah. The first thing I like to talk to my clients about is the idea of not getting sucked into information overload. Generally, when you have a financial professional in your life,
You have a plan. So you've organized your finances as best you can, but it's still very scary when you start to hear all the things that are happening in the news. So the first thing I say is be careful about information overload. So whether that's news and social media, these group chats, all sorts of different things that are inciting fear and making you kind of second guess your plans.
Maybe drown out some of that noise by unfollowing, not watching, limiting the amount of time that you're watching, not getting sucked into the black hole that is noise and chatter via the various news outlets is kind of thing number one. That feels like there's value to that too, even if you're not working with a financial professional. Absolutely. I would say that it is relevant for everyone because like I said, the news is...
you know, just constant, constant information and you're trying to educate yourself, but also the education is coming from so many different places and a lot of it is doom and gloom. And the best thing to do is kind of sit still, understand what is happening. And then when you absolutely know what's going on and you can govern yourself accordingly, make the changes, that's when you take action. You don't just panic and start changing your plan without actually any of this stuff having truly taken place.
All right. Takeaway one. Tune into the economic news as much as you need to stay informed, but also let yourself step back when it's no longer helpful or when it's making you anxious. Remember, the details about economic policies like tariffs are constantly changing. You may not need the play by play.
And don't let what's going on today throw you off your path and your financial plan. The other thing I would say that you need to do is be careful of scams. Because there is so much more information going out in times of uncertainty, people are trying to take advantage of
And so scams ramp up at times like this via financial influencers, get rich quick schemes, you know, recession proof your finances and three easy steps. Just give me two thousand bucks, you know.
Be really careful of things that sound too good to be true because they generally are. The way to avoid these scams is think about things like the credentials. Do some background checks on the organization before you send money off to it. Look at the link. Is it a .com or a .org account?
Does it have any weird letters afterward or in between that might, you know, it might be a fake website that looks like a real website. But asking about the credentials, looking at the experiences, verifying that it is like a registered agency. And like I said, avoiding people who are going to guarantee you that everything's going to be okay or they're going to, you're going to get certain returns or they're pressuring you to take quick action.
Takeaway two, be on the lookout for financial scams. These can ramp up during times of uncertainty when economic policies are changing quickly and there's a lot of confusion. One example are tariff scams. Small business owners have been getting messages claiming they owe tariff fees to the government. And customers are getting messages saying they need to pay tariffs to release a product they ordered online. These are fraudulent. By the way, we have a whole episode about financial scams and how to avoid them. So check that out.
What else would you tell your clients in this moment? Focus on what you can control. There are so many variables that are beyond your control, and those are the things we're fixating on, the what-ifs. But if we focus on what we can control, that brings our anxiety levels down. It makes us feel a lot better about the possibilities of what could happen in our particular situation. And so, one, continue building your emergency fund and your short-term savings.
People get tired of hearing about the emergency fund, but I guarantee someone listening today still has not taken the time to actually build one up appropriately. And that could be the game changer because if the economy is as bad as we think it is or if things are going as bad as the world is saying it's going to go, what are you going to need? Something to kind of help you bridge the gap if it's inflation, whether it's a layoff or some other emergency.
You need to have that cash on hand to be able to get you, see you through the tough time. And I usually say that you need to have an emergency fund of at least six months. And then you can bump up to 12 months if you're single, if you're a business owner, if you are the breadwinner for your family.
If you're in a more risky job or if you feel like you're at risk of being laid off. And how do we build up our emergency savings? The easiest way to build up your emergency savings is automate your savings. So put something automatically into a savings account. I always also recommend that you use a savings account that's separate from your main banking.
So if you bank at a big bank where it's easy to have two or three savings accounts, there's ATMs all over the place, maybe try a high deal savings account that's only online so that you can move your emergency fund to a separate place. You're not looking at it every time you log in. And it might take a couple of days to transfer, which some people are like, oh my goodness, but what if it's emergency? I need that money right now. You keep a little bit of money in your savings, your main bank savings.
to get you going. And it usually only takes a day or two to get money, you know, transfer money from that outside bank into another bank.
But you don't want to have the temptation of being able to see this big number of cash and easily transfer over like, oh, well, I just want to go to this nice dinner this weekend. Or, you know, we start justifying reasons and we make those transfers. And before you know it, we're using our emergency fund for non-emergencies. Right. You want to keep it sort of locked away with double locks on it almost. Exactly. You want to have access to it, but you don't want to give yourself too much access to that emergency fund.
Takeaway three, build up your emergency savings. Lauren recommends having at least six months of expenses saved up. And if that feels totally out of reach, take this one day and one month at a time. It all adds up. Also, look for a high-yield savings account so you'll earn more interest on your money. And consider putting the bulk of that money in an account where it'll take a few days to transfer the funds. That can help you stop from dipping into that account casually or for non-emergencies.
I imagine you might also need to, if you find that you're not saving money in the month, you might need to look at what you could cut back on to help you build that. Absolutely. You're spending right now in this uncertain economy is something that you can absolutely control yourself. So not buying things that you don't need, consider kind of holding off on large purchases that aren't necessary.
Your promotional emails, unsubscribing to things like that, that make you just click and purchase. You can't be anxious about, oh my goodness, the economy is in doom and gloom, but also continuing to do what you would regularly do when you felt like the economy was in good place.
Now, what about in a moment like this, if you have some debt that you've been trying to pay off, but you don't have your emergency savings where you want them? Yeah, this is a great question. Like I said, in times of uncertainty, you might want to go to just making the minimum payment on your debt.
It's a great idea to have a goal at the beginning of the year to pay off debt by, you know, X amount of day or in this amount of time or to be able to put this amount toward your debt. But in a time of uncertainty and if you feel like there's a possibility of being laid off or that, you know, something major is going to happen economically where you're not going to be able to be in the same financial situation as you had hoped,
you're going to want to have those dollars in your pocket because you can't call the debt agency that you've been paying and saying, hey, I paid $500 last month and I only meant to pay, you know, I only could have paid $25. Could you give me the other $475 back because I got another emergency going on?
Once you've paid, that money is gone and out of your pocket. So maybe you ratchet down for this, you know, short period of time to just paying a minimum or a little bit over the minimum. You know, if you're paying $500, maybe you start paying $250 so that you can put $250 into your emergency fund.
which I'm a big proponent of even when you have debt and, you know, we're not in times of uncertainty, you should also be saving. So to be putting more money toward debt when you don't have an emergency fund is not the ideal scenario. You should always be putting something aside for yourself because what happens if you have an emergency while you're focusing on your debt?
you go into more debt because you don't have the emergency savings. So you always want to be splitting between the two and trying to pay down debt and also build the emergency fund. Takeaway four, if you haven't finished building up your emergency fund, consider cutting back on debt payments. In times of economic uncertainty, you want to make sure you have cash available.
Now, you should keep making the minimum payments on your debt. And keep in mind that when you make this change, it is going to take you longer and probably be more expensive to pay off the debt in full.
In general, one thing you can do to minimize interest is to pay off your highest interest rate debt first. Let's talk about retirement savings. This is a fear for a lot of people right now that with the market volatility that their retirement accounts, their retirement savings are going to get at least partially wiped out. And especially if you're someone who's close to retirement, that's super scary. What do you say to clients who are in this situation?
Yeah, if you are close to retirement, I think this is the time to invest in a financial professional to make sure that you are properly balanced and that you are on track. When retirement is three years out, five years out, you have a really short time frame. And these swings in the economy can affect you more than they would affect a millennial or Gen Z person necessarily.
And so you want to really focus in on what can I do to create a buffer so that I'm not hit really hard as I get prepared for retirement. Yeah. For the other generations, we're not really that close to retirement. And so you need to focus on the long term.
Don't get panicked. Think about what we're trying to do 20 years from now. These swings that are happening in the environment on a day-to-day basis are not going to affect your long-term outcome. We need to be focused on, hey, I got to continue to save. I got to continue to get ready. Maybe, you know, I said I got to recession-proof myself in the form of getting ready for inflation, so I ratchet down my retirement savings a little bit. But you definitely don't want to stop it.
because when we're taking these big swings down, you're buying at kind of a discount. And so by you not being able to participate in the market, you're not being able to continue to grow so that when the market swings back up, you can take advantage of that. So don't change your plan as a millennial or Gen Z-er. But if you're Gen X or baby boomer, and like I said, you're a lot closer to retirement, you definitely want to check in on your portfolio. ♪
Takeaway five. If you're within about five years of retirement, now would be a good time to hire a financial planner if you don't already have one. Look for someone who is fee only, meaning you pay them for their time like you pay a lawyer or an accountant. If you use someone who makes a commission based on your investments, they may have an incentive to give you advice that benefits them, but not you.
Also, make sure the person is licensed to give you financial advice. Lauren recommends finding a certified financial planner or CFP. Among other things, as part of their certification, they agree to act in the best interest of their clients at all times when providing financial advice. You can find CFPs listed at cfp.net. Now, if retirement is farther away for you, you don't have to keep checking on your retirement accounts and following the ups and downs.
Okay, let's talk about tariff purchases. Some folks are saying, oh my gosh, like there are all these tariffs now on different items and the prices are bound to go up. So I should buy those things now before the price jumps up.
Do you have any advice around this? I think we need to focus on controlling what we can control as it relates to tariffs. You can't control the tariffs. And if the whole economy needs to adjust and have new pricing based on these tariffs, if they're not going away, if this is not a short-term or temporary thing that is coming into play, then as we've always done in the past, we will adjust. The economy is going to have to kind of adjust and settle to these tariffs if they are here to stay.
There are many that are of the opinion that tariffs may just be here temporarily and that this may not be a long-term fix that's going to work out. That is also a possibility. But the biggest piece of the puzzle as it relates to your spending is focusing on what you can control once again and deciding, do I need this item regardless of the tariff? If I need a new car because I can't get from work and I can't earn a living because I can't get to work because I don't have the car,
then you might need to purchase right now. You know, you could wait it out and tariffs go away and car prices go down. Or you could say, let me get my car immediately because the tariffs could actually make this worse. And I'm afraid of prices going up. The reality is none of us know for sure. And so think about what you actually need and only purchase those things that are necessities.
Okay, takeaway six. Nobody knows exactly how things are going to shake out when it comes to tariffs. Not me, not you, not even the experts. If there's something you need and you can afford, buy it. Don't buy things you don't need or want just because they may go up in price later.
Don't start hoarding items or spending, you know, dollars on big ticket items thinking, let me shield myself now for something that might be coming in the future when you're not really sure about it. And you don't necessarily need that item in this particular moment. Lauren, thank you so much. My pleasure.
Okay, time for a recap. Takeaway one, allow yourself to step back from the news when it's no longer helpful. And remember, the details about economic policies like tariffs are changing a lot. You probably don't need the play-by-play. Takeaway two, be on the lookout for financial scams. These can ramp up during times of uncertainty when economic policies are changing quickly. Takeaway three, build up your emergency savings. Lauren recommends having at least six months of expenses in a high-yield savings account.
Takeaway four, if you haven't finished building that emergency fund, consider cutting back on debt payments. You should keep making your minimum payments, though. Takeaway five, if you're within about five years of retirement, consider hiring a financial planner if you don't already have one. Look for someone who is fee-only, meaning you pay them for their time, like you pay a lawyer or an accountant. And also make sure the person is licensed to give you financial advice and is a fiduciary.
If retirement is farther away for you, stop checking your retirement accounts right now. Step away from the computer. And takeaway six, nobody knows exactly how things are going to shake out when it comes to tariffs. So if there's something you need and you can afford it, sure, buy it. But don't buy stuff you don't need or want just because you think the price might go up later with tariffs.
For more Life Kit, check out our other episodes. We have one all about credit cards and another about how to take your dream vacation. You can find those at npr.org slash life kit. And if you love Life Kit and want even more, subscribe to our newsletter at npr.org slash life kit newsletter. Also, we love hearing from you. So if you have episode ideas or feedback you want to share, email us at life kit at npr.org.
This episode of Life Kit was produced by Claire Marie Schneider. Our visuals editor is Beck Harlan, and our digital editor is Malika Gharib. Megan Cain is our supervising editor, and Beth Donovan is our executive producer. Our production team also includes Andy Tegel, Margaret Serino, Sam Yellow Horse Kessler, and Sylvie Douglas. Engineering support comes from Zachary Coleman. I'm Mariel Segarra. Thanks for listening.
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