It's certainly important to protect yourself from fraud, but it's just as important to protect your financial future. At the start of the year people tend to set goals, so we called on the experts for advice.
"Anything could happen in this year." News 13's chartered financial consultant Robert Dokken is keeping a close look on the developments out of Washington, the averted fiscal cliff and the looming deadlines lawmakers will have to overcome in the months ahead.
But what does this all mean to you? "People making less than $400,000 a year will not see their taxes go up." Dokken says.
But the payroll taxes will go up on everyone. In 2011 it was temporarily lowered to stimulate the economy, but now it jumps back to 6.2% If this may be a concern for you and your family, Dokken suggests you set up a rainy day account.
"Cash will be king, if things get as bad as they can, the saving grace that you'll have is cash in the bank and everyone can do it." Dokken adds.
Michael Sears, a consultant with Merill Lynch is also in favor of saving and planning ahead. "if you were fortunate enough to get a raise and you may be facing higher taxes, one of the ways to curtail that possibly is to take advantage of those pre-taxes funding vehicles." Sears suggests a 401k. This year the maximum deferral for those under the age of 50 rose to $17,500.
If you're over 50, it stayed at $22,500.
Here is some additional tips from the InConcert Financial Group:
1. Set clear goals. We don't mean only financial goals such as building a larger retirement account or getting out of debt. We're talking any goal you'd like to work toward or achieve in the new year that has financial consequences. For example, perhaps you want to work less so you can spend more time with your family, or you want to change to a career that excites you more but that pays less. How can you afford such goals?
That's why setting specific, realistic goals—and writing them down—is such a powerful financial tool for realizing them. It not only clarifies what you have to do financially to achieve the goals, it motivates you to achieve them within a specific timeline. Saving for something provides much more financial incentive than merely following the standard advice to save 10 or 15 percent of your monthly pay.
2. Discuss the goals with your family. Include your spouse, your children if they're old enough, or other loved ones who might be affected by your goals. They can help you clarify the goals, motivate you to make changes, and aid in their achievement.
3. Create a financial plan. All financial actions (or inactions) affect other financial actions. If your financial left hand doesn't know what your financial right hand is doing, one may undermine the other. For example, lack of adequate insurance for home, health, and other aspects of your life could decimate your retirement savings and investments if something goes wrong.
You may need professional advice at this stage, or you may feel you can do it yourself. Regardless, the key is creating and following through with the plan.
4. Review the last year. Life is continually in flux and change can have a profound impact on your financial plans. For example, during the past year did you get married or divorced, have a child, suffer a death in the family, change jobs, or change short-term or long-term goals?
5. Establish a spending plan. Achieving financial goals is built on a single principle: spend less money than you earn. And it's difficult to spend less than you earn if you don't know where your money is coming from and going to.
First, list your regular, dependable sources of income. Then track how much and where you spend money every month (including cash). Average out on a monthly basis periodic expenses such as car insurance or property taxes.
Subtract monthly expenses from monthly income and…do you have a surplus, are you in balance, or are you spending more than you're taking in? Are you skimming 5 or 10 percent right off the top of your income for savings and investing? If not, what expenses can you reduce or income increase in order to save toward goals? Automate savings to make it less painful.
6. Reduce debt. Resolve to lower debt this year. As interest rates rise, every dollar of accumulated debt becomes a heavier and heavier drag on your entire financial life.
7. Diversify your household assets. You know not to put all of your investment eggs in one basket (such as high-tech stocks). Apply this advice to your overall financial household. If possible, working spouses should be employed in separate companies in separate industries in order to reduce the possibility of both of you losing jobs at the same time. Go easy on company stock and industry stock where you work. If your employer or the industry suffers hard times, you might lose not only your job but also much of the value of your investments. Avoid investing in a single business or industry that dominates the economy where you live. If the company or industry suffers, so might your home values along with your investments.
8. Educate yourself financially. The more you understand about finances—from budgeting to investments to insurance—the more confident and motivated you'll be to take the right financial steps this year.
And the happier you'll be for it. Moreover, if you need any assistance in evaluating your financial position, we are always glad to help. We provide services such as Investment Planning, Retirement Planning, Risk Management, Real Estate Planning, Education Planning, Income and Taxation Planning, and Philanthropic Planning. In addition, we provide wealth management and investment services such as Asset Allocation, Portfolio Management Services, Trust and Fiduciary Services, Income and Taxation Planning, Family Wealth Integration, Business Retirement Plans, Business Succession Planning, and Banking and Financing Services.