This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Steps to Avoiding Your Own 'Fiscal Cliff'

Stocks in this article: GS

NEW YORK ( TheStreet) -- Even though the vote went right down to the wire, Congress, for all of its dysfunction, managed to avert the dreaded "fiscal cliff" of tax hikes and spending cuts economists said would ruin the economy.

So far, so good. Most economic indicators say the economy is on a slow, upward path to recovery.





For example, the Federal Reserve reported today that U.S. manufacturing sector output is up for the second straight month, boosted by stronger auto and business equipment sales, and Goldman Sachs (GS) said the domestic housing market should "outperform" in 2013, which would be significant for the U.S. economy.

While Uncle Sam's financial health continues to improve, individual Americans would do well to take a step back and review the risk of going off their own fiscal cliffs.

So says the Washington, D.C.-based Financial Industry Regulatory Authority, warning that "the financial situation of many Americans remains fragile."

"With changing tax rates and a still recovering housing market, many Americans face an uncertain and precarious situation," FINRA Foundation President Gerri Walsh says. "You cannot control your tax rate or the value of your home, but there are practical steps you can take to achieve greater financial security even in the face financial shocks."





FINRA says those "practical steps" should include the following five:
  • Max out on your 401(k). To save on taxes and upgrade your financial future, make sure to contribute the maximum amount to your 401(k) plan. The maximum allowable contribution limit for 2012 was $17,000. For 2013, that figure jumps to $17,500. That's less money you have to pay in taxes this year and more cash socked away for your golden years.
  • Build a rainy day shelter.

    To alleviate the financial pain of a short-term job loss or a big home or auto repair issue, set up a rainy day fund. Aim for six months worth of your annual income. It might take time, but just 10% of your paycheck steered into an emergency fund can pay big dividends down the line.

  • Refinance your mortgage. Standard 30-year fixed mortgage rates are at a bottom-scraping 3.54%, according to the BankingMyWay Weekly Mortgage Rate tracker. FINRA says to move quickly and take advantage of those low mortgage rates and refinance your house. "If you haven't fallen behind on your mortgage payments, but have been unable to get traditional refinancing because the value of your home has declined, you may be eligible to refinance through the Home Affordable Refinance Program," FINRA says. Visit MakeHomeAffordable.gov for information.
  • Get drastic about the plastic. Credit card debt is a real bank account drainer. As FINRA puts it, "digging yourself out of credit card debt is a lot harder than getting into it." Put the credit card down and use a debit card. Also, make more than the minimum payment on your credit card. Your debt will dissolve faster, and your credit rating will improve once you start reducing your credit card debt.
  • Trust, but verify. Take a cautious approach and vet financial advisers, accountants, tax preparers or stockbrokers you're working with. Most consumers don't bother, but FINRA says there are enough scam artists out there to warrant a closer look at the people managing your money. FINRA offers a useful tool for checking out brokers called FINRA BrokerCheck. The Better Business Bureau also holds data on financial professionals.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs