Surviving your own 'fiscal cliff'
The year begins with a walk to the edge of the “fiscal cliff” and a nauseating look below.
Have you dared look over the edge of your own cliff, or has the fear of falling kept you from contemplating the possibility of another recession, job losses, tax increases and likely cuts in your Social Security and Medicare at some distant date?
No need to fear. Rather, walk to the edge, look down and then picture your own safety net ready to stop the fall. Install one now to save yourself from the ongoing risks you and your family undoubtedly will keep facing during the next few years.
The recent federal debate about tax increases and government spending cuts has just begun. Regardless of what happens in the near term, the nation will be trying to whittle away at its gigantic debt for years. That means your taxes are likely to rise at some point, and when you arrive at retirement you will need more of your own savings to survive because the government will pull back.
Here's how to erect your safety net now, before tax increases kick in months or years down the road:
• Keep an emergency stash. Does your employer depend on the government as a customer, or will your employer face pressure to attract customers if taxes increase and people cut back on spending? That could lead to new layoffs, so have at least six months of savings in case you lose your job.
• Rummage for cash. Americans have been living more frugally the past few years, but even the most frugal can find savings if they go through credit card bills and checking accounts and list items they've been buying that they don't truly need or want. Many waste money on duplicative Internet and phone services, have more cable access than they truly need or may have life insurance that can be whittled back after children leave the home. With home values rising somewhat, it may be possible to refinance your home and get monthly payments down.
• Cozy up to a budget. Many people consider budgeting a pain, but those who live within a 50-30-20 budget eventually have peace of mind because they no longer feel out of control when bills arrive. For necessities, spend only 50 percent of the pay you have left after paying taxes. Necessities are mortgage/rent, insurance, food, utilities and so on. Thirty percent goes to wants, like vacations and gifts, and 20 percent goes into savings. In other words, savings are not what's left over.
• Save for retirement. Young workers who don't want to be stuck in a La-Z-Boy without cable at 70 are going to have to take saving more seriously than previous generations. According to the Employee Benefit Research Institute, 44 percent of baby boomers and Generation X households are at risk of being short on retirement money if they retire at 65.
What to do? Start saving on your very first job, ideally 10 percent of pay. But if you can't, start smaller and every three months consider increasing the amount by a percent. Devote half of every raise to a 401(k) or IRA. Remember, a person saving just $25 a week in a Standard & Poor's 500 index fund on their first job could end up with close to $1 million. But a person waiting until their 40s would have to invest almost $300 a week to get to the same point.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Supreme Court justices ream EPA for ignoring costs to meet air standards
- Snappers treat revitalizes Lawrenceville’s Edward Marc Brands chocolatier
- Heinz executives to dominate post-merger management of Kraft Heinz Co.
- Bank of New York Mellon seeks to intervene in N.J. casino saga as power plant taps collateral
- Drillers to submit electronic records on fracking chemicals to Pa. DEP
- Pending home sales in U.S. climb to 9-year high
- University mine rescue teams join to set rules, competitions
- Teen retailer American Eagle Outfitters goes mobile, revamps site
- Energy Spotlight: Erin Magee
- Greece makes stocks slip to worst day of year