The economy may be recovering, but individuals need to maintain fiscal prudence—right down to properly vetting the financial professionals they choose to work with.

Even though the vote went right down to the wire, Congress, for all of its dysfunction, managed to avert the dreaded “fiscal cliff” of tax hikes and spending cuts economists said would ruin the economy.

So far, so good. Most economic indicators say the economy is on a slow, upward path to recovery.

While Uncle Sam’s financial health continues to improve, individual Americans would do well to take a step back and review the risk of going off their own fiscal cliffs.

So says the Washington, D.C.-based Financial Industry Regulatory Authority, warning that “the financial situation of many Americans remains fragile.”

“With changing tax rates and a still recovering housing market, many Americans face an uncertain and precarious situation,” FINRA Foundation president Gerri Walsh says. “You cannot control your tax rate or the value of your home, but there are practical steps you can take to achieve greater financial security even in the face financial shocks.”

FINRA says those “practical steps” should include the following five:

  • Max out on your 401(k). To save on taxes and upgrade your financial future, make sure to contribute the maximum amount to your 401(k) plan. The maximum allowable contribution limit for 2012 was $17,000. For 2013, that figure jumps to $17,500. That’s less money you have to pay in taxes this year and more cash socked away for your golden years.
  • Build a rainy-day shelter. To alleviate the financial pain of a short-term job loss or a big home or auto repair issue, set up a rainy-day fund. Aim for six months’ worth of your annual income. It might take time, but just 10% of your paycheck steered into an emergency fund can pay big dividends down the line.
  • Refinance your mortgage. Standard 30-year fixed mortgage rates are at a bottom-scraping 3.54%, according to the BankingMyWay Weekly Mortgage Rate tracker. FINRA says to move quickly and take advantage of those low mortgage rates and refinance your house. “If you haven’t fallen behind on your mortgage payments, but have been able to get traditional refinancing because the value of your home has declined, you may be eligible to refinance through the Home Affordable Refinance Program,” FINRA says. Visit for information.
  • Get drastic about the plastic. Credit card debt is a real bank account drainer. As FINRA puts it, “digging yourself out of credit card debt is a lot harder than getting into it.” Put the credit card down and use a debit card. Also, make more than the minimum payment on your credit card. Your debt will dissolve faster, and your credit rating will improve once you start reducing your credit card debt.
  • Trust, but verify. Take a cautious approach and vet financial advisors, accountants, tax preparers, or stockbrokers you’re working with. Most consumers don’t bother, but FINRA says there are enough scam artists out there to warrant a closer look at the people managing your money. FINRA offers a useful tool for checking out brokers called FINRA BrokerCheck. The Better Business Bureau also holds data on financial professionals.
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