If you have been paying attention to the recent business reports, you must have heard the term fiscal cliff. This is yet another financial term that has become popular when discussing the current state of the economy.
Now, you may have asked, what is the fiscal cliff? Well, it is a slowdown of the economy due to a kind of perfect storm of factors, all falling within the scope of federal spending cuts and tax increases. Here are a few factors contributing to the fiscal cliff. The highly anticipated 2002 Bush tax cuts will end leaving capital gains, dividends, and estates to be taxed at a higher rate. Then, you have an increase to corporate and payroll tax rates. Not to mention, the alternative minimum tax is estimated to affect a larger number of households. Meanwhile, taxes related to the new health care law will take effect and spending cuts surrounding the debt ceiling agreement from 2011, automatically reducing spending, all happen simultaneously. Thus, the perfect storm, comprised of taxes going up while spending is reduced. Much like what companies did when the recession hit, reduced expenses (spending) and increased prices (tax revenue).
Another term used quite often these days on the business channels is QE. QE – or Quantitative Easing – is a monetary policy used by central banks to stimulate the national economy when conventional monetary policies have become ineffective. A central bank buys financial assets from commercial banks and other private institutions with newly created money, thus Easing the current situation Quantitatively in order to inject a pre-determined amount of money into the economy.
Why is all this important? Well, the better informed you are, the easier it is for you to make good decisions regarding your money. And I am all about keeping you well informed of everything coming up regarding finances.
So, sit down and evaluate your current portfolio. There may be some adjustments you’ll want to consider as part of your year-end planning. I realize that each day, we must embrace learning and our awareness of what is happening around us. They really do affect our everyday lives and make a difference to what our life will look like in the future. As someone once told me, never underestimate knowledge. For knowledge is power and builds confidence. So, put that in your stiletto and walk tall in it.