Regaining Control

A big tax bill prompts the McCoys to take charge of their finances

emergency account for unexpected expenses,” Williams says. “I also advised them to reduce their debt and advised Mrs. McCoy to establish a 403(b) retirement account.” Williams’ advice for minimizing debt included paying off credit cards by establishing a solid financial budget and strategy in order to be debt free in a certain period of time. Williams also encouraged them to make the maximum annual contributions to their retirement savings accounts. A couple of their current mutual fund holdings include Van Kampen Strategic Growth (ACEGX) and Principal Investors SAM Balanced (SABPX). By being proactive and seeking professional assistance, the McCoys feel that they are on firm financial footing for the first time in years.

“Our finances are better now than they have ever been in the past,” Kathy says. “We have our adviser maintain our emergency fund, and we keep an adequate amount in our checking account.” She says the family has three credit cards and only one of them carries a balance. That card is used as a supplement to emergency funds when needed for unexpected car or home repairs.

Perhaps it was climbing out of the abyss of financial uncertainty that has made the McCoys diligent and steadfast when it comes to finances. “We were big on seeing what the amount of our checking account was and nothing else,” Kathy says. “We were not investing the extra money in the account or saving it in a manner that was beneficial to us.” Hoover says having the peace of mind to pay a $4,000 tax bill is a lot better than having no money and a $500 tax bill.

“We feel that we are in a position to not be as concerned about taxes as we were in the past,” he says. “Thanks to some of the advice and investment strategies implemented by our financial planner, we will be totally debt free in seven years.” This includes paying off their cars loans, a student loan balance of $20,000, and their $160,000 mortgage.

The McCoys’ Advice:
Don’t sit on your cash. Invest. Depositing money in a long-term investment account is wiser than simply maintaining a large balance in a low- or non-interest-bearing checking account. The McCoys maintain an adequate balance in a checking account to cover monthly obligations and invest the additional funds in high-yield investments.

Keep an eye on taxes and withholdings. If you frequently relocate to other states, determine if you need to adjust your tax rate. State taxes vary, so review the tax laws and determine if you must make adjustments to avoid facing a big tax bill each year.

Plan for the future. Set aside a regular amount in a retirement vehicle such as a 403(b) or 401(k). Whenever possible, contribute the maximum annual amount allowable.

Establish an emergency account. The McCoys’ financial planner oversees an emergency savings account in case of unexpected expenses. It’s also a good idea to keep one or two low-interest credit cards free and clear of a balance in case of an emergency.

Find a good financial planner. When in

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