Improving Your Financial Health in 2013

Presented by John B. Steiger

As a New Year begins, many people make resolutions to better themselves and their lives—lose weight, volunteer, spend more time with the kids or grandkids . . . nearly everyone has something they hope to change. Why not add one more important item to your list this year?

Throughout the last few months, the media has focused on the fiscal cliff—those sweeping tax increases and spending cuts that are due to go into effect on January 1, 2013, unless Congress acts to change them. But that discussion shouldn’t overshadow positive developments in the U.S., nor should it stop you from making improvements to your financial health in 2013.

Consumer Markets Look Good

Consumer sentiment is as high as it has been since 2007; this can be attributed to three main areas: unemployment, consumer debt, and housing.

At 7.7 percent, as of November 2012, the unemployment rate is well below its peak, and analysts expect slow but steady increases in employment in 2013. Estimates from the National Association for Business Economics suggest that, at this time next year, the economy will be adding an average of 173,000 new jobs per month; the current average is 151,000.

A second bright spot is consumer debt. Low borrowing rates have helped consumers reduce their obligations significantly, bringing debt to its lowest level since the start of the recession.

For most people, their home is their biggest asset, so positive developments in the real estate market are especially promising. Demand for houses has risen, resulting in increased prices and leading both sellers and buyers to take action. Demand should stay high if the Federal Reserve continues its bond-buying program, which will keep mortgage rates low.

Uncertainty Abroad

Although there are signs of optimism on the home front, there are many international concerns that could spill over into our economy in 2013:

If the euro continues to rebound, it could signal a potential end to the European debt crisis.
It remains to be seen, however, whether or not Spain will be too proud to accept the European Central Bank’s offer to buy its bonds.
Elections taking place in Germany and Italy in 2013 are expected to have a significant impact on the future of the eurozone as well.
A current feud between China and Japan over ownership of several islands in the South China Sea could restrain growth in this booming region.
The euro is not the only currency to face struggles—the yen is very weak as well.

Your Personal Financial Health

These, of course, are all macroeconomic issues that are beyond our control, and we often have to accept a degree of uncertainty and unpredictability when it comes to the financial outlook both at home and abroad. That doesn’t mean that you should leave your personal financial future to chance, however. You can always make positive adjustments to help ensure that you are better prepared for whatever the future might bring. Here are some simple suggestions:

Pay down debt. Although it’s normal to have some debt, too much can quickly become overwhelming—and debt often piles up after the holiday shopping season. Make a plan to pay off debt starting with credit cards that have the highest interest rates, and, whenever possible, pay more than the monthly minimum to pay off debt more quickly.

Increase your savings. As you pay off your debt, keep an eye to your savings as well. No matter what your goal is—maybe a vacation or an emergency fund—create a timeline and action strategy to help you get there.

Develop a budget. A budget is an extremely valuable tool for people of all income levels. Outline your monthly and yearly expenditures so you can see exactly where your money goes, as well as how much discretionary income you have left to work with.

Review your credit report. Everyone is entitled to one free report a year from each of the three major credit reporting agencies—Equifax, TransUnion, and Experian. Use a website such as annualcreditreport.com to request your reports and find out where you stand. Be sure to check for any errors or suspicious activity.

Start a college fund. Many students are now paying more than $60,000 per year for college, and this number is continuing to rise. There are many options for creating an effective college savings plan, and it is never too soon to start discussing them with your financial advisor.

Assess life changes. Even the smallest life changes can affect your financial situation. As each year passes, it is a good idea to review your insurance coverage, retirement plan, will, and estate plan to ensure that they continue to meet your needs.

Protect your identity. With the wonders of technology comes the risk of identity theft. Be sure to review monthly statements for suspicious activity, avoid using your social security number—and don’t carry your card with you—make online purchases only on secure websites (which have addresses that begin with https), and don’t open e-mails from unknown senders.

Further your financial knowledge. Your financial advisor is here to help you through any financial obstacles, but it never hurts to learn something new. There are countless websites, TV shows, and books that can help you further your knowledge.

No matter what 2013 brings, your financial advisor can help navigate your way to your goals. Please do not hesitate to contact our office with any questions you may have. Most important, best wishes for a happy and healthy New Year!

John B. Steiger is a financial consultant located at Wealth Planning Resources 460 Totten Pond Road Suite 600 Waltham, MA 02451. John offers securities as a Registered Representative of Commonwealth Financial Network®, Member FINRA/SIPC. John can be reached at 781.547.5621 or at john@financialconnector.com.

At Cleary, we are committed to a holistic approach of protecting and preserving our clients’ financial assets. Give us a call today at 617-723-0700 and let us know how we can help you.