4 Tips to Keep Your Finances from Going Off a Cliff

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4 Tips to Keep Your Finances from Going Off a Cliff
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Digging yourself out of credit card debt is a lot harder than getting into it. © iStockphoto.com/Pawel …

These four tips can help keep your finances on solid ground.

1. Lower your tax burden by saving to the 401(k) max. No matter what your tax rate is, saving for retirement in a 401(k) can help you save money on taxes and boost your retirement security. Contributions to a traditional 401(k) are not subject to income tax withholding and are not included in your taxable wages—and earnings on Roth 401(k) contributions are tax-free. In 2013, the 401(k) limits are $17,500 and employees aged 50 or over can contribute an additional $5,500 for a total of $23,000.

Cool tool: FINRA’s 401(k) Save the Max Calculator does the math for you and helps you determine whether you are doing all you can to reduce your tax burden by saving for retirement.

2. A rainy day fund can lead to greater financial security. Building up a rainy day fund may be one of the most important things you can do to maintain solid financial footing. Set aside at least one month of your current salary (and work your way up to three months) in a federally insured savings account. A rainy day fund will give you a cushion to handle a short-term job loss, a surprise car repair or other financial emergency. FINRA can help you set up a rainy day fund.

3. Avoid credit card debt. Digging yourself out of credit card debt is a lot harder than getting into it. Try to pay all of your credit bills in full and on time. If you cannot pay your whole monthly bill, every dollar you pay above the minimum payment can reduce your interest payments. Women in particular should make a point to be careful with credit. A FINRA Foundation study found that, compared to men, women were five percentage points more likely to carry a credit card balance, four points more likely to pay the minimum payment and six points more likely to be charged a late fee. Resources at SaveandInvest.org can help you track your spending.

4. Do a yearly background check on your investment professional. Take a few minutes to check up on your broker or adviser. FINRA BrokerCheck® is a free tool that lets you check the professional background of brokerage firms and individual brokers, and investment adviser firms and representatives.

Gerri Walsh is Senior Vice President of Investor Education at the Financial Industry Regulatory Authority (FINRA).

FINRA is the largest independent regulator for all securities firms doing business in the United States. Our chief role is to protect investors by maintaining the fairness of the U.S. capital markets. FINRA does not endorse, sponsor, or guarantee, nor is it sponsored by, any advertisers on this site, and any dealings with those advertisers are solely between you and the advertisers.

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