Ellie Kay on Neil Cavuto, Fox News – Fiscal Cliff Strategies

Ellie Kay on Fox News Neil Cavuto - Aug 2011

 

As the wife of a fighter pilot, and now as the Mom of a Marine, I’ve had my share of crisis.  So I’m not really new to the idea of looking a challenge in the eye.

I’ve found myself faced with life-and-death situations where there are two basic responses: panic or strategic planning.  I have found that panic often leads you to “crash and burn” emotionally or financially, while strategic planning will lead to a safer landing.

As we face the Fiscal Cliff, I’ve been asked to appear on Fox News and share my thoughts about proactive ways to handle the crisis from a personal finance point of view.

Ellie’s Fiscal Cliff Financial Strategies

 1)    Maximize Tax Strategies to Offset a Tax Increase

  •  If the AMT (Alternative Minimum Tax) patch is not approved, 60 million Americans will pay more in taxes – an average of $3500 per family
  • Prepay 2013 college tuition and fees if you haven’t maxed out the $2500 American Opportunity Credit
  • If you itemize, make donations to IRS-qualified organizations online
  • Stay informed on updated tax law changes by going to IRS.gov or TaxAct.com to get accurate and up-to-date info on all the tax deductions you qualify for and to get updated tax forms and computer systems
  • Don’t pay for tax prep, when there are free and thorough solutions and don’t trust minimally trained seasonal tax preparers
  • Expect to take more time to get refunds due to these problems. The fastest way to get this year’s refund is to file taxes online, e-file and choose direct deposit

2)    Maximize 401(k) contributions and IRA contributions

  • For 2012 IRAs, up to $5,000 ($6,000 if you are over age 50) + consider converting retirement accounts to a Roth IRA
  • For 2012 401(k)s up to $17,000 ($22,500 if you are over age 50)

3)    Maximize contributions to Coverdell Education Savings Accounts

  •  Contribute up to $2000 per beneficiary because this will decrease to $500 in 2013

4)    Be Smart About the Stock Market

  • Don’t panic and bail out of the market
  • Only sell those stocks you were going to sell anyway or investments that have generated deductible losses to offset any gains.
  • The market is only expected to adjust 3% maximum
  • The average portfolio is 70% stocks and 30% bonds, you could adjust to 60% stocks and 40% bonds, but don’t do any dramatic repositioning

5)    Don’t go “All Cash”

  • This is a sure sign of “The-Sky-is-Falling- Chicken-Little” kind of panic
  • If you do that, you might as well bury your cash in a Mason jar in the back yard

6)    Cut the Fat in Your Household Budget

  • In order to bolster your emergency fund
  • In case taxes take an extra tax bite out of your budget
  • It’s smart to spend smart whether there’s a Fiscal Cliff or not

7)    Delay Purchase of High Ticketed Depreciating Items

  • Now is not the time to get the new Mercedes SLS Roadster or a 96” LED HD 3D Television!

 Be sure to let me know YOUR Fiscal Cliff Strategies and feel free to share this with your friends.

Ellie Kay

America’s Family Financial Expert (R) 

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