The first months of 2018 have brought a few more financial questions than usual it seems.
What exactly will the changes in the tax code mean for me? Will interest rates go up or down? The economy seems strong, but what about inflation?
Predicting what awaits us in the economy is an imprecise endeavor at best, and a fool’s errand at worst. Sometimes it feels as if the only certainty is uncertainty, and that can understandably lead to anxiety.
With so many factors out of our control, we Central Oregonians should focus on what is in our power — namely how we manage our own finances. Being sound financially can help anyone weather the unknown. And now is a good time to review your financial situation to ensure that your finances are on the right track.
Recalibrate your financial picture: Regardless of outside forces, such as tax reform, life circumstances change all the time. Perhaps a promotion at work has put a little extra money in your pocket, or a child on the way will forever change your financial goals. Whatever the circumstance, it is wise to annually look at your finances and reassess your goals.
This reassessment should help you budget accordingly. Only about a third of American households have a detailed budget, but knowing precisely how much money comes in and how much goes out each month is a key to financial stability. SELCO Community Credit Union, like many financial institutions, offers useful online tools that can help you set and stick to a budget.
Of course, one of the key tenets to being fiscally sound is to leave a cushion of savings. Once you know your budget, pay yourself first. Plan to set aside a certain dollar amount with every paycheck, then deposit it into a savings, CD or money market account before you spend a nickel on anything else.
Stay on top of your credit: If you have a big purchase in mind that will require a loan — such as for a home or car — you need to take steps to stay on top of your credit and preserve (or improve) your credit score.
Most importantly, if you have high credit card bills, or your debt in general is too high — both of which negatively impact your credit score — create a plan to pay down debt.
Each credit inquiry affects your credit score, so be judicious in how often you seek credit. And being able to differentiate good debt from frivolous debt is important. Using debt as a means to afford a home is an obvious example of good debt. Overspending on a credit card for items or services that are not necessary is bad debt.
And finally, many are predicting interest rates to rise over the year. So if you are planning a big purchase, stay on top of interest rate news.
Changes ahead: The elephant in the room is tax reform. Congress’ tax reform legislation, which was been implemented in time for the 2018 tax year, will have far-reaching effects on anyone who pays federal income taxes. Taxpayers in Oregon — where the amount of property and state income taxes that can be deducted from federal income taxes will be limited — will have to pay particularly close attention to the changes.
In the end, knowing your tax burden is important to fully understanding your financial situation. Seek help from a qualified tax professional who can help you understand what your liabilities will be in 2018, and help set you on a safe course.
Of course, these are complicated issues. Many local financial insitutions, including most local credit unions, can offer general advice to improve credit worthiness. For those who are more established, a certified financial advisor can help you reach your goals.
Being financially savvy now will help prepare you for any changes that may come.
Jeff Ludeman, Redmond branch manager, SELCO Community Credit Union, jludeman@selco.org
selco.org
