How Election Years Can Create Financial Stress (and What to Do About It)
Election years are always stressful, and your personal finances are not immune. The prospect of a new government and potential policy changes could create a whirlwind of speculation, leading to market volatility that can upset even seasoned investors. Understanding the dynamics and developing strategies to navigate this turbulent period is critical to maintaining financial stability and making sound investment decisions.
Why Election Years Cause Financial Stress
Election years always mean two things: the promise of change and the uncertainty about that change. Each candidate or party proposes different economic policies, tax plans, and regulatory approaches; Until we get answers, it’s natural to react with caution. “The combination of the possibility of change and the uncertainty of those consequences creates anxiety,” says Julie Guntrip , head of financial wellness at Jenius Bank. When you can’t predict or influence the economic outcomes of different candidates, Guntrip says, “you may wonder whether the changes will have a negative impact on progress toward your financial goals, such as the performance of retirement savings markets or the value of your home.” or investment property.”
How election years affect personal finances
So how exactly do macroeconomic trends like elections affect your wallet? Guntrip gives several examples:
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Retirement accounts . Volatility in the stock market can cause fluctuations in 401(k) and other retirement accounts, leading to stress about long-term financial security.
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Job security : Economic uncertainty may lead to hiring freezes or layoffs in some sectors.
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Consumer confidence . Uncertainty about the future can affect spending habits and important financial decisions, such as buying a home or starting a business.
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Investment Decisions : The temptation to make hasty investment decisions based on short-term market movements or projected election results can be strong.
Of course, elections are cyclical events, and markets historically tend to rise over the long term, regardless of which party is in power. Let’s look at some strategies to maintain a long-term perspective.
Tips for managing financial stress during election years
To keep a level head and avoid investing mistakes, Guntrip offers three key pieces of advice: stick to your plan, diversify your portfolio and maintain an emergency fund.
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Stick to your plan . A well-thought-out investment plan helps serve as a roadmap for your financial future, aligned with your long-term goals, risk tolerance and overall financial situation.
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Diversify your portfolio . Diversification, the golden rule of investing, can help protect your portfolio from the impact of any single underperforming investment by spreading your investments across different assets, industries and regions.
Create your emergency fund . This financial safety net is critical because it can help you avoid liquidating your investments during a market downturn to cover unexpected expenses.
Bottom line
While election years can indeed cause increased financial stress, it is important to remember that they are a normal part of the economic and political cycle. By maintaining a long-term perspective, maintaining diversification, and focusing on personal financial goals, investors can navigate these periods of uncertainty with greater confidence.
Remember that hasty reactions to short-term market fluctuations often lead to less-than-ideal investment decisions . While it’s important to stay informed, constant exposure to election news and market commentary can increase anxiety. Set boundaries for your media consumption.
Instead, use this time as an opportunity to review and reaffirm your financial strategy, making sure it aligns with your long-term goals—regardless of the election outcome. For now, focus on what’s within your control, like triple checking your voter registration status .