The stock market has been experiencing significant volatility recently, primarily driven by ongoing discussions about tariffs. Many investors have noticed substantial declines in their investment portfolios, including 401(k) plans. In response to these concerns, Leah Diehl, an Assistant Professor of Accounting and licensed CPA at the University of Montana, appeared on Montana This Morning to provide financial advice to worried investors.
Boosting savings amid economic uncertainty
Diehl stressed the importance of staying informed and not making hasty decisions based on short-term market swings. She advised investors to review their financial plans and consider consulting with a financial advisor to make well-informed decisions about their investments. Personal finance expert Ramit Sethi also shared his tips and advice for investors amidst the economic uncertainty caused by tariffs.
Sethi, the author of “I Will Teach You to Be Rich,” emphasized the importance of increasing savings given the current macroeconomic risks. I have an aggressive recommendation that I’m making, and that is to focus on assembling a 12-month emergency fund,” Sethi said. He warned that the approach to tariffs lacks a clear plan and could “light a fire through the global economy.”
Sethi provided a five-step plan to help individuals boost their savings:
- Review discretionary spending and redirect money from non-essential activities into savings.
- Pause major expenses like moving, home renovations, or buying a car to increase short-term savings.
- Pay off low-interest debt and redirect the funds to an emergency savings account.
- Adjust 401(k) contributions if necessary to free up more cash for savings, while still receiving any company match.
- As a last resort, consider minimizing payments on high-interest debt to increase emergency funds. Sethi explained that while traditional advice often favors avoiding debt, low-interest debt can be better managed by making minimum payments and investing surplus funds, since potential investment returns could exceed the low interest rates. However, he cautioned against focusing solely on debt repayment without building a robust savings account.
The problem is, you might end up debt-free and then get laid off the next month, and now you’re in a real pickle without any money in a savings account,” Sethi said. As the stock market continues to react to tariffs and other economic factors, experts advise investors to stay informed, review their financial plans, and prioritize building emergency savings to ensure financial stability during uncertain times.
Image Credits: Photo by Reynaldo #brigworkz Brigantty on Pexels
