How to avoid a personal 'fiscal cliff'

MYRTLE BEACH, SC (WMBF) – While the government may have kept us from falling off the Fiscal Cliff, 2013 is already off to a more expensive start.

You should have already noticed the expired Payroll Tax Cut, which means two percent less in your paycheck. Plus there's the rising cost of commodities.

So how are people coping? One Myrtle Beach couple and their financial advisor say you can survive your own "fiscal cliff" if you know what to do.

As Dan and Hope Licursi watch television in their Myrtle Beach home, the couple is also watching their finances closely. Married for nearly six years, the retail and hospitality employees hoped the condo they purchased would be a good investment.

They also make sure they have no more than one car payment at a time. They're making payments on their Nissan, but their Jeep is paid off. Now they want to find more ways to save.

Carolina Wealth Financial Advisor Chris St. John has met the couple and suggest to "maybe take that 5K and put it into a traditional IRA."

"When he first sat down with us, he really tried to get to know us on a personal level, understand what we spend our money on, what our bills look like every month," explains Hope.

Chris even encouraged them to shop around for their insurance companies, allowing them to cut their auto policy in half.

"I thought it was a misprint," claims Dan, recalling the cost of their new auto policy.

Now, Hope and Dan have noticed the two percent payroll tax increase cutting into their monthly take home pay, but they were ready.

"Being able to plan accordingly, I think it's helped us, so it hasn't been such a dramatic hit," Dan says.

In fact they were so prepared they're letting the government take even more out of their check on a monthly basis.

"We increased their withholdings a bit, just for the fact that they'll have a little bit bigger refund, so that might mean they can budget in 2013, thinking about that," their financial advisor says.

It's a forced savings of sorts for a bigger refund at the end of the year for any extra expenses.

But that's not for everyone. Chris St. John says that two percent tax increase amounts to $100 less each month if your household income is around $60,000 a year.

And if you're having trouble paying the bills, he says you might consider doing the opposite of Hope and Dan. Talk to your employer about changing your exemptions, reducing your yearend refund but increasing your monthly take home.

Chris St. John says, "If you're getting an extra $1,200 at the end of the year, than you need to change your withholdings to get an extra $100 in your paycheck and that just made up the difference right there. But now you can't bank on getting a big refund check come April."

But its more than just the two percent. Meat, poultry and dairy prices are all expected to jump as much as four percent, largely because of the summer drought. Healthcare premiums could also spike as much as six percent, but there are other ways to offset the costs.

"I look at everything and what they're spending, whether it be their car payment, how high is their interest rate, can we go back and can we refinance that, do they have a mortgage if so, can they qualify for the Harp loan, can they go back and refinance it, " St. John details.

He says a home refinance could bring the biggest savings. "If you own some place and able to change your interest rate down by two percent, to 3.5 percent for 30 years, that two percent change right here can more than meet what you need for that two percent increase in the social security,"

Chris St. John also urges you to keep a journal of what you're spending and separate the needs from the wants.

"Going to lunch, buying coffee when you could be brewing it at home, it is unbelievable the little amounts that you can do there," Chris believes.

Those little amounts add up, but for Dan and Hope, the savings will only come with a budget, a plan and a little honesty.

"How long can I hide that pair of boots in my closet, not very long," Hope laughs."So just being honest and accountable to what we agreed upon, what our common goals are, where we want to go."

And Dan agrees saying, "Being on the same page of realizing hey, we need to just make these cuts together, and it's not on an individual basis."

If you're interested in earning more money each month and a smaller tax refund, ask your employer to adjust your exemptions on your W-4 form. Just remember your refund check next April will be less.

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