Protecting your money after a U.S. credit downgrade

Matt: With the U.S. credit rating taking another hit and investors worrying about what comes next, a lot of people are asking: Should I change my plan? Should I stay put? Or is now the time to re-evaluate?

In this weekend's Matt on the Money, certified financial planner Dan Bennett from Lakewater Advisory joins us to help make sense of the situation from a strategy standpoint.

So Dan, after a downgrade like this, should long-term investors consider shifting their portfolios or stick with their plan? That's the big question.

Dan: You want to make sure that when headlines like this hit, you're not making any drastic or knee-jerk decisions or reactions.

Specifically with your portfolio, we saw right after Liberation Day, which was almost six weeks ago if you can believe it, the S&P 500 dropped almost 10.5% in two days.

Matt: Been a ride.

Dan: It was quick.

Usually when we see a downgrade like that in the markets, it's typically an elevator down and an escalator back up.

But what we saw this time was an elevator down and an elevator back up. The recovery has been pretty significant.

For a lot of people, if you were nervous during that time, if you had a hard time sleeping, if you were stressed, or if you were about to hit that proverbial panic-sell button, now might be a really good opportunity to re-evaluate your portfolio.

Ask yourself: Is the amount of risk I'm taking really suitable for the situation I'm in right now?

We're back to roughly flat with the S&P 500, so now is a good time to re-evaluate and potentially make some small changes.

But again, if you don't have a plan, you don't want to make big changes without one.

Matt: Okay. I like what you said about scaling back your risk exposure if the volatility made you feel nervous or panicked. You have to be able to ride out these ups and downs in the market.

Another question I had for you, Dan: What's the biggest takeaway for families trying to build financial stability in this era of growing national debt?

Dan: I think number one, it's important to have a plan.

You don't need an elaborate 35-page financial plan. Every family can sit down, either with their spouse, by themselves, or with a financial professional, and gain a clear understanding of where they are today and where they ultimately want to be in the future.

You can establish goals, identify action items, and make minor course corrections along the way.

Things are going to change. Your life is going to change. Tax laws will change. Income will change. Family circumstances will change.

It's important to make sure you're not trying to turn the Titanic one year before retirement. Set goals and action items today.

The first step is creating a budget. It's kind of that dirty word that nobody wants to hear.

Matt: We'll call it a spending plan.

Dan: Nobody likes the B-word.

Matt: Budgeting isn't always fun, but maybe budgeting with a glass of wine makes it a little easier.

Make it a family event, a spousal event.

Dan: Yes, exactly.

Matt: Really quickly, can we expect the Federal Reserve to adjust interest rates based on this credit downgrade? Do you see that happening?

Dan: I don't see that happening.

The Federal Reserve is maintaining its independence, and there are other factors they're focused on right now.

Inflation remains a major concern and could potentially re-emerge as an issue.

As I mentioned before, the budget bill that recently passed the House still needs to move through the Senate. The expectation was for that process to be completed by July 4th.

That may ultimately influence whether the Fed decides to cut rates or keep them where they are.

Matt: Expert insight. Thank you so much. That's sound advice for uncertain times.

We want to thank Dan Bennett from Lakewater Advisory for joining us. You can learn more and connect with Dan at LakewaterAdvisory.com.

We'll have more after the break.