Cash Flow Questions
Could your cash flow change substantially?
Re-examine your budget for areas to reduce spending, especially discretionary expenses. Fund shortfalls strategically, prioritize obligations, and use opportunities to extend due dates or alter payment schedules while minimizing fees and credit damage.
Might you need to increase your emergency fund?
Evaluate how many months of living expenses your fund can support and plan for a worst-case scenario.
How likely is a disruption in your employment?
Prepare your résumé and stay connected to first-, second-, and third-level contacts.
Were you planning to retire soon?
Review whether you are still comfortable retiring or whether working longer makes sense. Revisit the budget and consider reducing non-essential spending in the first retirement years.
Are you taking distributions from an investment or retirement account?
Consider changing the distribution schedule to protect accounts, such as deferring or spreading withdrawals.
Asset and Debt Questions
Do you have a mortgage or other debts?
Consider refinancing while rates are favorable. After fully funding an emergency reserve, paying down debt may reduce required monthly payments.
Do you want to rebalance investment and retirement accounts?
Revisit your asset allocation and investment philosophy. Consider whether holdings retained only because of a low basis should be reduced while valuations are lower.
Do you have extra cash not earmarked for an upcoming expense?
Evaluate whether taking advantage of lower valuations makes sense after the emergency fund is fully funded.
Do you make traditional IRA or Roth IRA contributions?
A market correction may provide an opportunity to contribute at lower valuations.
Are you a small-business owner?
Explore small-business loans and other relief. Ask bankers about extending terms, refinancing, and managing cash flow.
Tax Planning Questions
Do you have a traditional 401(k) or IRA?
A partial Roth conversion can be beneficial while valuations are low, particularly if income falls and there is room in the tax bracket.
Do you have assets with a tax loss?
Consider harvesting the loss to reduce tax liability.
Long-Term Planning Questions
Review annual gifting, intrafamilial loans, assistance to family members, and estate-planning documents. Changes in asset values may affect how probate and non-probate assets are ultimately distributed.
When outside factors such as the economy change, it is a good idea to review your financial situation and determine whether adjustments are warranted.
-Paul R. Rossi, CFA