Stick to These Five Money Truths No Matter What Happens in Washington

Washington is a chaotic place these days, and a lot of political promises are throwing pundits into a tizzy (though, to be fair, they’re kind of always in a tizzy). Big new bills are being alternately praised by one political party as “needed change,” while the other party cries “major disruption.”

While it may seem as though everything is up in the air, sound financial planning will always win out no matter what’s happening in the capital. So, don’t freak out and make major changes to try to keep up with the prevailing political winds. Stick with a tried and true game plan and ride out the turbulence in financial safety.

Money Truth One: Maintain Your Health Insurance

The see-saw with our country’s health policy is enough to give someone a pre-existing condition of severe political allergies. Whether or not the mandate to have health insurance goes away, it is still imperative for you to maintain a basic level of coverage if you can. If you drop your health insurance coverage, it could be incredibly expensive to get a new plan at a later time or nearly impossible if you develop an illness. In a worst case scenario, you could become ill, get in a car accident, or have a heart attack without coverage. The medical bills could easily leave you destitute. It is likely that health insurance will become more expensive in the near future for those without an employer covered plan, but resist the temptation to drop your coverage. Paying up now could keep you financially solvent if a health crisis should arise in the future. It will also likely encourage you to see your doctor more often and sooner if you notice symptoms of illness, which could save your life!

Money Truth Two: Keep Saving for Retirement

Massive entitlement programs, such as Medicare and Social Security are always in danger of landing on the chopping block as politicians look for ways to balance the federal budget. If your retirement strategy revolves around depending heavily on Social Security, that is a risky gamble. According to the Social Security Administration, 48% of married elderly couples and 71% of unmarried elderly people rely on Social Security for more than 50% of their income. What happens to these people if the government decides to lower benefits or pushes the qualification age up? What if out-of-pocket costs rise for Medicare?

Rather than relying on the government, rely on yourself by continuing to save aggressively for retirement. That means socking away at least 10% of your income each year into a 401(k) at work (especially if you get matching funds) or an IRA if you are self-employed. Check out our great series on how you should save for retirement in your 20s, 30s, 40s, 50s, 60s and beyond.

Money Truth Three: Keep Saving for College

Many progressive politicians are calling for free two-year community college education for everyone. Some have even floated the idea of free four-year university tuition as well. While this idea would be music to the ears of every parent with kids in the house, it’s not a reality yet, which means you need to prepare for the possibility that college costs will land squarely on your shoulders. Keep saving. Consider opening up a 529 Plan.

The “worst” thing that could happen is that new legislation passes that finances some or all college for your child, and then you’ll have a nice pile of money that you could use for something else…like giving your child a home down payment when he or she graduates!

Money Truth Four: Investing In Stocks Will Pay Off in the End

Uncertainty in Washington has a way of spooking investors and sending the stock market on big jumps and falls. These lurches may seem scary, but that’s only the short-term view. Historically, the stock market has always gone up with enough time. There have been some very bad years (the 2008 recession is a great example), but even those losses have eventually been wiped away over time by those who stayed in the market. Don’t let volatility in Washington scare you into selling your stocks or staying out of the stock market altogether. Logic tells us that long-term investing is always a good bet. (Find out if fear is running your investment strategy.)

Money Truth Five: Home Ownership Will Probably Pay Off

Recent tax proposals have threatened to eliminate some helpful tax incentives for homeowners, but that doesn’t mean you should give up your dream of buying a home. Buying a home is often a sound financial investment. There are some big caveats here. Owning a home only makes sense for individuals and couples who plan on staying in a single area for at least five years. Being able to put down at least a 20% down payment also helps, as does buying a home with monthly mortgage payments of 30% or less of your monthly take-home pay. If you are in this situation, owning a home is a way of paying into an asset that is likely to continue appreciating over time. It also adds important stability to your life! (Not sure whether you should rent or buy a home? This article can help!)

Washington is a crazy town, but that doesn’t mean you should throw your financial planning out the window to try to stay on top of changing trends. Your life is a marathon, not a one-mile sprint. Develop good, strong financial habits and stick to them. Tax incentives, government subsidies, and political priorities might change, but sound financial planning will always be a winning strategy. Stay on track by reading our investment and saving article archive and by starting a Money Club near you.