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

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