I’ve got a bit of a confession to make and it may solidify my standing as one of worst personal finance bloggers ever. After the election results came through with Obama projecting to win Ohio, I saw a bunch of tweets on my Twitter stream with two messages: 1) “Congrats Obama” and 2) “Next up, tackle the fiscal cliff.”
To the Google
phone website: What is this fiscal cliff thing?
This Wikipedia article does a much better job explaining the fiscal cliff than I ever could. It’s too complex to break down in this post, so I’ll do a grand generalization and let you get all the fine details from there if you are interested.
The grand generalization is two-fold:
- Some tax cuts that President Bush created during his time in office are expiring
- Some planned budget cuts from the past would expire resulting in more spending
As I mentioned before it gets complicated especially with the politics of the Republicans and the Democrats slinging a bunch of nonsense. On my recent drive across the country, talk radio had Rush Limbaugh, Glenn Beck, and Sean Hannity on the multiple channels. I’m not into politics, but these big three of conservatives made it sound like Obama was out to purposely kill America, by raising taxes on the wealthy to help balance the deficit. Sounds like a very logical thing to me, but I’ve lived in blue states my whole life.
During the week, I ended up listening to a good 30 hours of their unproductive hatred of the democrats… stuff that makes a Red Sox fan and Yankees fan having a “discussion” after a few beers seem downright civilized. I finally came to this conclusion…
I don’t care about the fiscal cliff… and neither should you.
Well, you should care about the fiscal cliff a bit, because it can have a real effect on your financial situation. If taxes go up, you’ll have less money to spend. If spending is cut, you might lose on some key benefits you were counting on.
However, unless you happen to have the ear of the politicians working on it, you can’t change anything that’s going to happen with it. It’s out of your hands. With that being the case, let’s look at the things you can control:
- Limit Your Tax Liability – If nothing is done long term capital gains tax will go up. So if you are sitting on a pile of stock and are looking to use the money any time soon (I love the real estate market), this may be a good time to sell some stock and hold on to cash. I’m personally not going to sell any stock, choosing instead to stay invested and hope that the gains of the market surpass the tax liability. This is also a good time to think about putting more money in a Roth IRA as you’ll get it tax free no matter what the tax rate is. If income tax rates go up, there will be even more incentive to stash money in your company’s 401k plan.
- Minimize Your Expenses – Look into cutting down on any unnecessary subscriptions. I know multiple who have Netflix subscriptions that they admit they don’t use. It may seem like a drop in the bucket, but it adds up to a couple of hundred dollars a year. I’ve compiled hundreds of ways to save money on nearly everything.
- Double up on your Investment in your Career – Learning a new skill or two can not only help you keep your job, but also get a raise. Sure, some careers have limited ceilings, but you’d be surprised how many do not. I learned that lesson when I worked at Papa Gino’s (a New England Italian food chain) at the age of 16. While being a cashier was my specialty (no one knew the PLU codes like me), I soon learned that if I could make pizzas and man the grill area, I’d be more valuable to them. I was one of the first to do dishes during the slow period, which showed management that I had the drive to do even mundane tasks if it helped the business (the truth was that I was just bored). In the end, it didn’t take long before I was getting raises and as many hours as I wanted to work.
Don’t know what you can do to make yourself more valuable to your company? Ask your manager that question, she/he should be able to give you a good and hopefully productive answer.
If you going to waste your time with pointless debates, I suggest you move away the Republicans and Democrats debating the fiscal cliff and go all out and check out some Skip Bayless / Stephen A. Smith debates on the Patriots (ESPN is good for one of these annoying things a month):