Whether you agree or disagree with President Trump’s policies, there is no doubt that the U.S. economy has been on fire since he took office in January 2017. Unemployment is at record lows, wages are rising, and the stock market has broken multiple milestones. Add-in tax reform and working men and women have much to smile about.
That’s particularly true in the defense and aerospace industries, where increases to the defense budget mean more work for security clearance holders. But alarm bells are sounding in some quarters, with pundits and Wall Street bears warning that stocks are overpriced and due for a significant correction that could trigger a recession.
It’s hard to see that now, and not everyone agrees that a stock market meltdown is imminent. Indeed, some observers suggest that this bull market has more room to run, and not until 2020 or later will the market face a potential reckoning.
Yet either way, history demonstrates that all good things eventually come to an end. Strength of the U.S. economy notwithstanding, a financial crisis again at some point is inevitable. That may be in a year or it may be in a decade, but when it does happen the consequences will be disastrous for both equities and housing market alike – two areas where security clearance holders are deeply invested.
What Can You Expect from the Next Recession?
If it’s anything like the 2008-2009 recession, countless individuals will see their security-worthiness called into question by the government due to financial conditions like foreclosure, judgments, or delinquent debt. Some of these longtime patriots will lose their security clearance – and their livelihood – because of the appearance that they are overextended financially and thus at a heightened risk of criminal activity or espionage to secure funds.
Its an extremely unfortunate situation, but one that is largely preventable with some advance planning and foresight. To start, heed the lessons of the last recession and avoid investing more than you safely can lose in rental properties like single family homes and small apartment complexes. Similarly, don’t buy a primary residence you can’t afford. As recently as 2017 my office was still dealing with the aftermath of the 2008-2009 housing bubble burst, with security clearance revocation proposals based in whole or in part on homes lost to foreclosure. (Fortunately, most were winnable, but not without additional time, stress, and headache).
Secondly, consider whether your investment allocation needs to be rebalanced in a more defensive posture. Should you have eighty percent of your net worth held in the stocks of large companies – the value of which may be more susceptible to trade war fears – or are some of your investments better off in small company stocks, municipal bonds, or elsewhere?
Finally, take a moment to consider whether you’ve adequately saved cash for your rainy-day fund. Many experts advise having cash on hand of at least six months’ salary to bridge the gap in the event of a job layoff or similarly unexpected life event. With interest rates on the rise, now may be a good time to consider a high-interest savings account, Certificate of Deposit (CD) or money market account.
I’m no financial expert, but after seeing plenty of cases where unprepared security clearance holders were caught flat-footed by a recession these are the steps I’m taking to protect myself. With a security clearance the effective equivalent of a professional license – and with financial considerations the number one reason for unfavorable security clearance determinations – there’s a lot riding on getting your personal finances right. Don’t be caught unprepared.
This article is intended as general information only and should not be construed as legal advice. Consult an attorney regarding your specific situation.
