"That's One Of The Worst Financial Decisions You Could Possibly Make": 7 Things A Personal Finance Expert Wants You To Know About The Trump Tariffs

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09-04-2025

Last week, President Trump announced blanket tariffs on imported goods from over 180 countries around the world.
Shortly afterward, panic rippled through the market as stocks plummeted, and economists have been saying that we're now more likely to experience a recession and higher inflation (again, ugh) in 2025.
What does this news mean for you and me? Last week, I spoke with an economic analyst about how the tariffs are likely to pan out, and the tl;dr is "not great." So, this week, I reached out to personal finance expert Ramit Sethi to get his advice for surviving a bad economy.
Ramit Sethi is the author of I Will Teach You To Be Rich, host of the Money For Couples podcast, and host of the Netflix series How To Get Rich.
One of the things I love about Ramit's work is how he emphasizes that a " rich life" isn't about buying status symbols and hoarding wealth. Instead, Ramit talks a lot about how we can use our money as a tool to live more meaningful and enjoyable lives. Lately, he has also been answering viewer questions on Instagram and talking more about how money is inherently political.
Here's what we talked about:
1. First, Ramit said that the tariffs will impact middle-class and poor Americans far more than wealthier people.
Ramit Sethi: Tariffs are going to hit the poor and middle class quite dramatically. There is good data showing that on an annual basis, these tariffs will hit the median American household, costing them over $2,500 per year. Trump's tariffs are directly a tax on the poor and middle class.
All of this for no reason, so that wealthy people can get a big fat tax cut. These tariffs make no sense for America. Tariffs have very specific surgical uses, but putting a blanket tariff on essentially the entire world, minus, of course, Russia, for very conspicuous reasons, is unprecedented and unexpected, and as a result, the market dropped dramatically.
2. Declining 401(k) balances and retirement worries are dominating headlines, but Ramit cautions against taking drastic action right now, especially if you're still decades away from retirement age.
RS: If you are in your 20s, 30s — even 40s — you can reasonably expect that the market will go up some years and it will go down some years, and because you have the ultimate luxury, which is time that allows continued compounding. And what that means is, stop looking at your investment accounts and in general, keep investing consistently.
Now, I think this is a really important point because people make very poor life-changing decisions during chaos like this. I saw it happen in 2001, I saw it happen in 2008, I saw it happen in 2020. You can literally cost yourself millions of dollars if you make a panic decision. And the most common type of panic is that people see those charts in the red for one day, one week, one month, and they finally can't take it anymore, and they log in, freak out, and sell everything.
That's one of the worst financial decisions you can possibly make in your entire life. That will cost you more than all the coffees, all the vacations, all the unscrupulous 1.5% AUM fees that you will ever pay is selling in a panic. There are so many other ways to protect yourself besides selling.
But just to circle back, if you have the benefit of time, historically, the market has recovered and done very well through multiple World Wars, through pandemics, through oil crises. So I will tell everybody, I'm not selling. I plan to be continuing to invest, and if you do the same, it will give you a very good shot at living at a very rich life.
3. Instead, he says your number one financial priority right now should be beefing up your emergency fund.
RS: I have an aggressive recommendation that I'm making, and that is to focus on assembling a 12-month emergency fund. That's not typical. Most, a lot of financial experts recommend three to six months. I'm recommending 12. The only time, the only other time that I have recommended a 12-month emergency fund was when COVID hit, which should suggest the seriousness of the situation that we are in.
Let me explain: Yes, the fact that the market dropped this dramatically in a matter of three days is extremely dangerous. This isn't normal ups and downs of the market. This is one dangerous dictator who, on a whim, decided to wreak havoc across trillions of dollars, and he cost most Americans tens of thousands of dollars in a single day. This isn't a joke. It's not something to be made light of.
It's not something that just disappears. The toothpaste is out of the tube, meaning other countries now regard America as an unstable partner. And even if Trump waved his hands and undid the tariffs tomorrow, they would still treat America like an unstable partner because, frankly, we are.
So, what does it mean for individual investors? That is why I say a 12-month emergency fund because I see a lot of uncertainty ahead of us. And when there's uncertainty in the market, companies re-branch, they lay people off. That's very dangerous. You do not want to get in a situation where your back is against the financial wall, and you have to make really bad decisions. Those can haunt you for decades.
4. If you, like a lot of Americans, don't have much in savings at the moment (much less a fully-stocked emergency fund that could cover your basic living expenses for a full year), Ramit offered a five-step plan for socking away cash.
RS: First, I would take a look at my discretionary spending, and I would get serious about tamping down or eliminating most of it. Discretionary spending is the fun stuff. It's stuff like going out, travel, drinks, eating out those kinds of things, and I would immediately redirect that toward savings.
Second, I would pause and stretch out expenses as I could. A simple example would be any major plans to move, to buy a major purchase, like a car, home renovation, anything that can be paused. I would pause it and anything that can be stretched out, for example. You know, even if you were able to stretch out, say, regular purchases that you make, for example, let's say, any type of self-care, even if you stretch that out one month over the course of a year, you can save hundreds of dollars.
Next, I would consider decreasing [payments toward] any low-interest debt that I am overpaying. For example, if I have a 3% mortgage and I'm paying an extra $200 a month, not anymore, I'm sending that $200 a month straight to my savings account to build that emergency fund up.
Number four is, if necessary, I would consider decreasing my 401(k) [contributions] just to get the match. I would really try hard not to eliminate it altogether, but I would consider decreasing it for the time being.
And then finally, and I really, really try not to get to this, but it's an option if necessary. If you're aggressively paying high-interest debt, like a credit card debt, I might, in the worst case, consider decreasing the amount I am paying towards that to build up a savings account, but I would try as hard as possible not to get to that level.
5. If you're torn between paying off debt and building your savings, Ramit explained that paying it all off could come back to bite you in the ass if you don't also have an emergency fund you can draw on.
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RS: In America, most people are taught that debt is like a snakebite. You do anything you can to avoid it, and so the way that people think about debt is like they have two pedals in their entire financial life. Pay off debt or not. That's a very simplistic way of looking at the world.
There's a different way to look at it. If you have low-interest debt in usual times, mathematically, you can pay the minimum and maybe invest any extra money you have, because you can probably make more investing than you would paying off a 3% mortgage or student loan.
But in times like this, when you have people who take who just hate debt, and they pay it off as fast as they can. The problem is, you might end up debt-free, and then you might get laid off the next month, and now you're in a real pickle. You have no money in a savings account, and because you thought you were doing the right thing, "Oh, I'm paying my debt off." Well, you need to build a savings account as well because times are very chaotic, and if you end up getting laid off, you need to have money to survive.
6. To make your savings do the most work for you, Ramit advises keeping your emergency fund in a very specific type of savings account that offers higher-than-average interest rates.
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RS: A high-yield savings account is the place to put it. There are a number of great accounts. Pick a great account, store your money there.
The important thing is not agonizing over which account to open. They're all fine. The point is to set your money up to automatically go there every single month. That's the most important thing you can do. And then second is to take a very critical look at your spending right now, eliminate expenses that you can and be sure to redirect that money to savings.
7. Finally, Ramit gave his take on one of the most common questions people have been asking him about the tariffs.
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