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Protect Your Wealth During an Economic Downturn

The world has changed in ways that the world did not expect. The COVID-19 crisis has crippled many healthcare systems all over the globe, and the ensuing recession did the same for the financial world. It has left many investors worried about the future. Not a lot of people were prepared for this onslaught, and governments were largely not ready.

Pundits have no exact timeframe for when the economic downturn will end, but the majority agree that the recovery will be long and difficult and that things will get worse before they can get better. In the meantime, while the future remains uncertain, investors would be wise to do all that they can to shield whatever wealth and properties they have left. Here are some ways businessmen and entrepreneurs can protect their wealth and assets in the time of a recession.

Shield your liquidity.

No matter the state of the economy, setting aside three to six months’ worth of cash and cash equivalents to fund your living expenses and to keep you and your family afloat is always a wise idea. Now that we’re living with the worst recession in a century, many would have benefited from this practice. Reduce spending on non-urgent and non-essential expenses and closely supervise all cash outflows to see what you can cut back on.

Make wise investments.

Choose companies and businesses that are backed by quality leaders who were able to navigate, rebuild, and recover from the effects of the first few months of the pandemic. Though we may never fully and exactly predict the future of the stock market, those who only make quality investments can expect to face fewer drawbacks in the event of another market crash.

Stay focused on income diversification.

Maintain a diversified portfolio to help reduce your overall risk in the long-term. There are specific debt and equity investments that can potentially produce favorable outcomes when you consider them from a medium-term to long-term outlook. Given the world’s current financial situation, it is a must for investors to maintain discipline regarding asset diversification and allocation.

Consider what steps you can take as a business owner.

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For small to mid-sized businesses, there are a lot of provisions in the Coronavirus Aid, Relief, and Economic Security (CARES Act) that can help you. For larger corporations, if your company’s stock is down, consider taking positive actions for you and your business, such as developing a 10b5-1 plan to bolster trust in your company’s future by buying its stock.

Take proactive steps to protect your real estate assets.

Here is a step-by-step guide to protecting your real estate properties and assets.

  • Talk to your property attorney and other financial and legal advisers about what kind of impact delays in rent and other income streams will have on your finances. Take a thorough look at your obligations under leases, loan documents, and other agreements, as well as local ordinances and regulations, to have a full understanding of what payments may be delayed. Write down a list of your obligations and prioritize the most urgent matters.
  • Get in touch with your insurance providers, so they can help you review business interruption, liability, and other applicable insurance policies to know if insurance proceeds may be available to you, and determine the right time to file for those insurance claims.
  • Communicate with your tenants to stay abreast of any issues that may arise at any point. Keep them updated on the steps that you are taking as a landlord to help prevent and reduce the spread of infections, and establish an expectation that they would also keep you informed about any COVID-19 related incidents with any of their employees and guests.
  • Stay updated on all restrictions or guidelines imposed by the state, local, and federal government regarding COVID-19.

Prioritize charitable giving.

It may be tempting to consider corporate social responsibility as non-essential, but the U.S. government is encouraging businesses to give back to their communities since there is so much need around the world right now. Non-profit organizations around the world need donations to help people who are currently affected by COVID-19, and to be able to continue operating the way they did before the pandemic started. The CARES Act has two provisions that can allow you to deduct up to $300 of cash contributions made to non-profit and charitable organizations this year and to reduce your tax bill down to zero. Take note though that these tax breaks will not apply if you contribute to your private foundation.

The Bottom Line

Do everything you can to protect your assets by reading up on your options, consulting with your legal and financial advisers, educating yourself about what can happen to the financial world in the coming months and years, and finally, by working out a strategy that can offer you and your business the best protection.

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