The Financial Industry Regulatory Authority Investor Education Foundation has released its Five Tips to Keep Your Finances From Going Off a Cliff, a money management investment alert which addresses a fragile 2013 economy and recent tax code changes associated with the new year.
From retirement savings to debt, mortgage payments and beyond, FINRA's five words of wisdom include:
1) Lower 401(k) tax liability by saving big. FINRA advises those contributing to retirement savings via a traditional 401(k) plan or Roth IRA that in 2013, 401(k) limits for employees at or over the age of 50 have increased to $23,000 with a $17,500 limit for those under 50. Remember, traditional 401(k) contributions are not part of taxable wages and are not subject to income tax withholding while Roth 401(k) earnings are tax-free.
To help maximize savings, FINRA offers an investment tool called the 401(k) Save the Max Calculator.
2) Build up a rainy day fund to maintain financial security. FINRA advises opening and maintaining a federally insured (for instance, with an institution that is a member of the Federal Deposit Insurance Corporation or FDIC) savings account. Though the most common liquid insured account is indeed a savings or interest-bearing checking account at a bank or credit union, FINRA also references a technique known as "laddering" in which a series of CDs are acquired, with one maturing every six months or so. Government-backed U.S. Treasury bills are another option.
Regardless of method, FINRA advises saving a consistent yet affordable amount of money each week until you reach three-to-six months' worth of living expenses.
3) Consider refinancing your mortgage through HARP. The Home Affordable Refinance Program is ordinarily available to those who are not behind on mortgage payments and have been unable to obtain traditional refinancing due to a decreased home value. This process requires a loan application and underwriting process, but can result in a long-term financial gain.
For more information, visit the Treasury & Housing and Urban Development's MakingHomeAffordable.gov website.
4) Avoid credit card debt. Just like investments can provide financial gains for investors, credit card debt can provide financial gains for credit card companies—at the expense of their customers. Interest payments can balloon and make digging out of debt a difficult chore. To minimize your risk of falling into this financial pit, FINRA recommends paying all credit bills in full and on time, which also will save you from dreaded late fees, not mention credit score hits.
5) Run a background check on your broker, adviser or other investment professional. FINRA has listed this vital tip last because broker misconduct resulting in negative consequences for investors remains an exception to the rule in the securities industry—it simply isn't a statistically common and widespread issue: the majority of investors are familiar with 401(k)s, rainy day funds, mortgages and/or credit card usage, but most will likely not encounter rogue investment professionals.
Accordingly, FINRA has found that only 14 percent of over 28,000 adults who identified as casual to serious investors have reported running a professional background check on their broker with a state or federal regulator. These background checks—often offered via free tools on regulatory agency websites—generally will list past complaints against the financial professional, as well as testing and qualification records, disciplinary sanctions and, in some cases, liens and civil decisions or criminal convictions.
FINRA BrokerCheck is one such tool that offers professional background information on the Authority's 1.3 million-plus current and former brokers and firms. As BrokerCheck is updated regularly, FINRA advises performing these free background checks at least once annually.
State regulator contact information may be obtained via the North American Securities Administrators Association (NASAA) website.
Though wrongdoing by financial professionals is not widespread, when it does occur, it can have devastating consequences for investors. If you suspect a broker or firm has engaged in fraud or other misconduct, and such activity has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.