Is Your Financial Plan Still on Track? 7 Ways to Evaluate It Amid Economic Uncertainty

Key Takeaways

• A well-designed financial plan can adapt to economic uncertainty while keeping you on track
• Regular portfolio and insurance reviews help protect against inflation and market volatility
• Smart tax and diversification strategies can significantly boost long-term returns

You did everything by the book: You created a solid financial plan, set clear goals, and built a diversified portfolio. But lately, something feels off.

Despite the S&P 500 hitting record highs and a low unemployment rate,¹ the signs of economic uncertainty abound: The sticker shock at the grocery store. A potential trade war. Possible tax policy changes.

The University of Michigan’s February 2025 survey of consumer sentiment slid nearly 10% in the month of January alone.² No wonder more than three-quarters of Americans report feeling anxious about their finances. Nearly 60% feel like their finances control their lives.³ 

Economic uncertainty doesn’t have to derail your progress. While you can’t control the markets or geopolitics, you can control your financial plan. 

A well-designed financial plan is like a GPS navigation system. Sometimes, you need to recalculate your route when you hit unexpected conditions, but the destination remains the same, even if your route needs adjusting.

Here are seven ways to evaluate whether your financial plan is still on track — and how to course correct if it’s not.

1. Your Investment Strategy Fits Your Goals

When you check your investment accounts, do your eyes automatically snap to that big number at the bottom? Does your stomach lurch when that number drops? Do you experience euphoria when it’s up? This singular focus on your account balance can be misleading. While important, it’s just one of many indicators you need to watch. 

Your portfolio’s true health depends on multiple factors:

• Asset Allocation: Are your investments still right for your goals and risk tolerance? A properly diversified portfolio might underperform high-rising investments during bull upswings — and that’s by design. Bull markets aren’t perpetual; eventually, a bear market or correction will surface. Research suggests that improperly diversifying your portfolio could result in a lifetime wealth reduction of up to 20%.⁴
• Risk Management: Your portfolio balance doesn’t reveal whether you’re taking appropriate risks for your age and circumstances. A 35-year-old’s nest egg should have a very different risk profile than a 60-year-old at the cusp of retirement. If your blood pressure surges each time the Dow Jones drops, you might be taking too much risk.
• Tax Efficiency: An impressive return might look less so after taxes. Government research shows that investors in taxable mutual funds pay out as much in taxes each year as they do in investment fees, although the former doesn’t get as much attention.⁵

2. Your Cash Flow Matches Economic Reality

Remember that budget you created? The one with neat categories and optimistic savings goals? It’s time to pressure-test it against today’s realities — especially if you’re thinking about a career transition or retirement is in your sights.

Inflation has dramatically reshaped household spending in ways your original plan might not have anticipated. While inflation has been tamed from 2022 highs, it’s taken a toll on family budgets. Government statistics show the average household spending $863 more per month now than they did in 2021.⁶ And that’s just for the basics. What probably matters even more is your ability to maintain the lifestyle you’ve worked so hard for.

To keep your cash flow on track, start by examining whether your compensation package, including salary, bonuses, equity, and other benefits, has kept pace with your lifestyle goals. If you’re thinking about consulting or launching a business, map out potential income streams that could replace your current compensation during the transition.

It’s also important to look at your emergency fund. Given recent inflation, you may need to increase your reserves to ensure that they still provide six to 12 months of living expenses. 

Finally, make sure you’re maximizing tax-advantaged savings opportunities through vehicles like 401(k)s, Roth IRAs, and executive compensation plans. Do you need to adjust your budget to continue making retirement saving a priority?

3. Your Safety Net Fits Your Life

When was the last time you reviewed your insurance coverage? Rising costs, combined with life changes, can leave gaps in your insurance protection, even while you’re focused on growing your investments. A coverage amount that seemed generous five years ago may fall short of your needs. Confirm that your insurance matches your current finances.

Keep these things in mind:

Life insurance: Protecting your family’s future

• Your death benefit should reflect your total compensation package, including equity and bonuses.
• Don’t forget to account for new financial obligations like a mortgage, college costs, or business ventures as you take them on.
• Fully fund your business succession plans or buy-sell agreements.

Disability insurance: Protecting your income

• Your coverage should reflect your total compensation, not just your salary.
• Confirm that your policy still matches your specific occupation and specialization in its definition of disability.
• Build an emergency fund big enough to cover your policy’s elimination period (the waiting period before benefits kick in), typically between 30 and 180 days.⁷

Property and liability coverage: Protecting your assets

• Look for homeowner’s insurance that accounts for surging building materials costs (up approximately 40% since 2020).⁸
• Maintain umbrella liability — extra insurance coverage that goes beyond other insurance limits — of at least two times your net worth.
• Regularly review your coverage to ensure that your growing asset base continues to be fully protected.

Protection Planning Gut Check
The time to discover gaps in your protection isn’t during a crisis. Conduct a thorough insurance review annually to ensure that it still meets your needs. Schedule a comprehensive protection audit with your financial advisor and insurance specialist. Consider coverage amounts and how your protection strategy integrates with your broader financial plan and future goals.

4. Your Portfolio Is Recession Ready

Economic forecasts rise and fall. Understand how your portfolio might perform in a downturn. Historical data tells an important story about what actually works during tough times, and it might not be what you expect.

Treasury bonds are often overlooked in rising markets but are consistently reliable in downturns. High-quality government bonds have delivered positive returns in all eight of the last recessions.⁹

In contrast, stocks declined in five of those eight recessions. And while that’s expected, what’s less obvious is that lower-quality bonds often follow stocks down, failing to provide the diversification that many investors count on.

Recessions are impossible to avoid, but balanced portfolios with high-quality bonds (and other assets) can help you weather the storm by providing reliable performance in different economic environments.

5. Your Tax Strategy Maximizes Your Returns

When volatile dials up, one of the best approaches is to focus on what you can control. For instance, market volatility creates unique tax planning opportunities. 

In times of downturns, there are tactical ways to enhance net returns: Investors can add up to 1.1% a year in additional return by employing tax-smart strategies, such as tax-loss harvesting, to their investment portfolios.¹⁰ 

If your tax plan features these strategies, you’re in good shape:

• Tax-loss harvesting: Market dips create opportunities to harvest losses while maintaining your overall investment strategy. By carefully timing these sales during market downturns, you can offset gains elsewhere in your portfolio while staying aligned with your long-term goals.
• Asset location: Volatile markets make it especially important to place investments in their most tax-efficient accounts. Consider holding tax-inefficient investments like bonds in tax-sheltered accounts while keeping growth-oriented investments in taxable accounts where they can benefit from preferential capital gains treatment.
• Roth conversions: Market declines can be an opportunity to convert traditional IRA assets to Roth accounts at a lower tax cost, allowing future recovery to happen in a tax-free environment.
• Business income deductions: For business owners and consultants, economic uncertainty might impact your income streams. This could create openings to optimize qualified business income (QBI) deductions or adjust your business structure for maximum tax efficiency.

6. Your Estate Plan Reflects Your Wishes

The estate tax landscape could be shifting dramatically. While the current exemption sits at nearly $14 million per person, it could drop to $7 million in 2026 when the current law sunsets. This potential change, combined with evolving tax laws and family dynamics, makes regular estate planning reviews crucial. 

Yet too often, estate plans sit untouched for years, creating potential misalignments that could affect both tax efficiency and your legacy wishes.

Here’s what to evaluate:

• Key documents: Are your beneficiary designations on retirement accounts, life insurance policies, and transfer-on-death accounts still in sync with your overall estate plan? These designations override your will, so make sure they reflect your current wishes.
• Trust funding and maintenance: It’s one thing to create trusts, but have you properly funded yours? A perfectly crafted trust provides no benefit if your assets aren’t properly titled in the trust’s name. Review trust funding annually, especially after acquiring new assets.
• Business succession: Does your succession plan still match your business’s current valuation and structure? Market conditions can dramatically impact business valuations, potentially creating liquidity challenges for your heirs.
• Digital assets: Have you accounted for cryptocurrency, non-fungible tokens (NFTs), online accounts, and other digital assets in your estate plan? Many traditional estate plans overlook these less conventional assets.

7. Your Plan Is Flexible

The path to financial independence rarely follows a straight line. Whether you’re contemplating a career pivot, launching a consulting practice, or transitioning to retirement, your financial plan should be agile enough to adapt to these pivotal moments — particularly if these decisions come in the throes of a foreboding economy. 

Start by mapping out how much runway you need for your transition. This isn’t just about savings — it’s about understanding your monthly cash flow requirements and building in buffers for unexpected expenses.

Next, stress-test your income sources. Could your investment income, rental properties, or side businesses support your core expenses during a transition? What if markets fall or a once reliable well dries up? Understanding your passive income and its resilience can give you the confidence to take (calculated) risks.

Finally, assess your health care coverage. If you’re striking out on your own or taking early retirement, you might be looking at a health insurance gap. Research options like private insurance or professional associations that offer group coverage. Factor premium costs into your transition budget.

When to Seek Professional Guidance

Financial plans aren’t “set it and forget it” documents. They need regular maintenance and occasional adjustments. Working with a financial advisor can help you identify and address blind spots in your current plan, understand new tax policies, and get perspective during periods of economic uncertainty.

Most importantly, an advisor can help you see beyond the numbers to what really matters: building and maintaining the life you want.

Ready for a fresh look at your financial plan? Schedule a free consultation, and we will help you evaluate where you stand and create a clear path forward — no matter what the economic weather brings.

Sources

1. U.S. Bureau of Labor Statistics, “Civilian unemployment rate”

2. University of Michigan Institute for Social Research, “Consumer sentiment drops as inflation worries escalate“

3. Capital One, “Big-Picture Thinking Leads to the Right Money Mindset”

4. Ning Tang, Olivia S. Mitchell, Gary R. Mottola, and Stephen P. Utkus, “The Efficiency of Sponsor and Participant Portfolio Choices in 401(k) Plans”

5. National Bureau of Economic Research, “Tax Efficient Mutual Funds Do Better Before Taxes. Too”

6. U.S. Bureau of Labor Statistics, “Consumer Expenditures—2023”

7. Disability Help, “Disability Insurance Elimination Period: How Does It Work?”

8. St. Louis Federal Reserve, “Producer Price Index by Industry: Building Material and Supplies Dealers”

9. Morningstar, “Can You Recession-Proof Your Portfolio?”

10. Shomesh Chaudhuri, Terence Burnham, and Andrew W. Lo, “An Empirical Evaluation of Tax-Loss Harvesting Alpha”