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Five things to do to prepare for a recession
(StatePoint) Experts agree that periods of economic downturn, or recessions, are unavoidable and often follow a period of market growth. However, experts also acknowledge that it is difficult to predict exactly when the next recession will begin.
It is important to manage the pieces of your financial life knowing that a market decline is possible, regardless of the exact timing. A Certified Financial Planner (CFP) can provide you with competent, ethical advice on how to financially prepare to weather a down market.
Here are five steps you can take today to get ready for a possible recession:
• Create or revisit your financial plan. Now is a good time to update your financial plan, including your savings strategy for retirement, to ensure it can withstand a market decline. If you do not yet have a financial plan, start working to put one in place ahead of a recession.
• Develop a cash flow. The simple technique of identifying how much money is coming in and how much is going out can help you develop a short-, intermediate- and long-term plan that keeps you in control of your finances.
• Maintain a healthy emergency reserve fund. If you are still working, maintain six to 12 months of expenses in a safe, liquid account. Retirees should aim to keep 12 to 24 months’ worth of expenses in reserve.
• Pay down your debt. While incurring debt can be a smart financial choice, carrying too much of it -- particularly high-interest debt -- can be dangerous, especially during a recession. Prioritize paying off your highest interest consumer-related loans (credit card and auto) and then work your way down to the lower interest ones. Try to avoid taking on any new debt.
• Maintain a diversified portfolio. Creating and adhering to a diversified portfolio spreads your risk across different asset classes. You may need to rebalance periodically by trading up assets to maintain your desired level of asset allocation. Be sure that your allocation is tied to your long-term financial goals, instead of basing it on the market’s ups and downs.
A CFP professional can provide you with guidance on navigating any of these financial moves to prepare for a recession. To find a CFP professional near you, visit letsmakeaplan.org.
The good news is that recessions do not last forever. Taking these proactive steps now will help protect you from significant financial damage and quickly recover from potential losses.
Tips for a stress free tax season
(StatePoint) Taxes are an unavoidable fact of life. Unfortunately, they can be somewhat overwhelming, which can cause people to put the task off and miss the deadline. Use these tips for a stress-free tax season:
Get It Over With
The sooner you get your taxes filed, the sooner you can stop worrying about them. Early filing also means an earlier refund -- if you’re due one -- or time to plan to prepare to pay any owed taxes. To ensure it all happens on time, actually block out time in your calendar to sit down and work on your taxes. Be sure not to underestimate how much time is needed. If your situation has gotten more complicated over the last year, figure that into the equation.
Check Your Work
The last thing anybody wants to hear is that they are being audited. You can avoid this anxiety by having the right tools on hand. Start by keeping your records filed in an organized way – both digitally and on paper with a filing cabinet that locks. As you do your taxes, it is a good idea to take your time, and do a practice run. A printing calculator is a good way to keep records of all necessary calculations. Be sure your printing calculator is up to the task. The two-color ink printer of Casio’s HR-170RC allows you to quickly see both positive and negative numbers to avoid reading errors, and its 12-digit LCD display showcases crisp, sharp numbers for easy viewing. A must-have tool for tax season, its functions include a grand total key, cost/sell/margin buttons, sign change, tax calculation, decimal selector and more.
Maximize Your Refund
While many people look forward to their tax refund and view it as a windfall, it is important to keep in mind that this money is simply your own income that you overpaid to the state and federal government throughout the year. That said, you should have a smart plan for your refund wisely so that is not wasted on an impulse purchase. A few good ideas for tax refunds is investing the money into a retirement account, using it to pay down debt or padding out your rainy-day fund.
This tax season, don’t get overwhelmed. For stress-free filing, stay organized and give yourself plenty of time.