1 Thing To Do With Your Money Because of the ‘Serious' Tariff Situation, According to Ramit Sethi
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With the unpredictability surrounding the economy, many have wondered what to do with their money and how to plan for the times ahead. Ramit Sethi, personal finance expert and host of the YouTube channel 'I Will Teach You To Be Rich,' gave his two cents in an Instagram post about the one thing you should be doing right now.
Immediately after the drop in the stock market, Sethi said, 'in times like this, this is where people make very bad decisions that have life-altering ramifications. If you get nervous and you see three, four, five days, ten days of bad news, it is very tempting for people, who even think they are disciplined investors, to get too scared and sell.'
The chaos that Sethi fears comes when most people and companies face financial uncertainty. With more risk than usual, companies will likely decide to charge customers more and lay off employees to cut costs. Investors may feel intense pressure to respond to falling stock prices by making poor decisions to sell, further deepening the crisis. He cautioned against making any impulsive actions as they could have severe negative consequences.
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To navigate these challenges, Sethi urged people to stay calm, saying, 'I would not sell. I am not selling. I invest in the long term. I recommend you do the same.' However, he does recommend taking one very important measure to keep yourself and your finances safe.
'I'm building a war chest, and I recommend you do the same,' Sethi said. The war chest Sethi is referring to is an emergency fund, which serves as a cash reserve you can use for unexpected expenses. For example, if you have a sudden dental bill, vehicle repairs, a large appliance breakdown or get laid off, you can dip into your emergency fund instead of going into debt.
While most personal finance experts recommend saving up three to six months' worth of expenses for this fund, the unpredictability has Sethi reaching for more. 'If you have a three-month one, that's not enough in my opinion. I would recommend a 12-month emergency fund,' Sethi said.
Saving up a year's worth of expenses is no small feat, but with the amount of uncertainty surrounding the economy, it's better to be safe than sorry.
According to Sethi, creating an emergency fund 'means cutting discretionary spending now before the world forces you to.' If you don't start when you have the ability to do so, you could end up with no money and no ability to spend anyway.
You can give yourself less room for error by automating your paycheck routine. Sethi recommended linking the account that receives your paycheck to a savings account, investment account, credit cards and any other bills. Then, automate exactly how much goes to each category the day after you get paid.
With your emergency fund goal in mind, you can determine how much you'll automatically send to your savings account each month. This will make it easier to regulate your spending and determine the speed at which you'll reach your goal.
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