As you have probably heard by now the folks in Washington DC did what they do best – wait until the very last minute and then just extend the deadline. Basically they have reopened the government until mid-January 2014 and increased the debt ceiling until mid-February 2014. The reason for the mid-January 2014 date is to try to force a budget agreement (the US hasn’t had an actual budget in over 5 years) before the next round of mandatory budget cuts as part of the sequester that was implemented back in the summer of 2011 (the last time we faced this same situation). The structure of the agreement also allows the Treasury Department to continue to use “extraordinary measures” which will likely extend the debt ceiling beyond mid-February. (note: technically the debt ceiling was hit back on 5/19/13 but these “extraordinary measures” allowed the Treasury to operate until 10/17/13)

Since last Thursday,  a relief rally has occurred in the equity markets.  However, I wouldn’t be surprised to see a “buy the rumor, sell the news” pullback now that a deal has been struck.

So now the financial markets will again focus on truly important things like economic growth and corporate earnings.  On the economic front, the 16-day government shutdown is estimated to have cost the US economy $24 billion as per Standard & Poor’s.  However, on a Gross Domestic Product of almost $16 Trillion that is fairly insignificant.  What is more important is the damage this episode has caused to sentiment and confidence, especially among consumers. Third quarter 2013 earnings season started last week and so far earnings results have been mixed, with some important companies like American Express & Verizon beating estimates and some like IBM & Goldman Sachs missing estimates.  My sense is that earnings overall may be somewhat disappointing.

In summary, I feel that we will likely see a pullback in the equity markets on the order of 5% to 10% near-term but then a move higher into year-end.   On the fixed income front I expect interest rates (basis US 10yr Treasury) to remain in the 2.4% – 3.0% range for the foreseeable future.

I hope you find this update useful.  Please feel free to call me with any questions or concerns.

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

 Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

Don’t let the title fool you – this article should be read by both women and men.  Too often I meet women and men who do not share & collaborate in managing their finances.  According to a Securities Industry Association study in 2006, only 54% of couples handle financial decisions jointly,  with women making decisions alone 21% of the time and men deciding alone 25% of the time.

Here are some thought provoking facts:

Women earned about 80% as much as men in 2011[1]; the life expectancy of a 40 year old woman is about 42 years, while a 40 year old male’s is about 38 years[2];  44% of women aged 65 and older are widows[3], and 70% of nursing home residents are women.[4]  Women are also more likely to be the caregivers for their family.

For all these reasons, a majority of women will spend many years having to manage finances on their own. Today, every woman – single or married – needs to plan for personal and family security. A strong financial future begins with a sound financial plan.  Husbands should want a financial plan to help the family carry on in the event of either spouse’s death.

The first step in creating a sound financial plan is establishing your goals.  Your goals should be specific but also realistic.  I generally recommend breaking goals down into short-term (1 to 3 years), mid-term (3-10 years), and long-term (10+ years).  In order to determine the action steps to meet your goals you first need to understand your current cash flow.  The best way to do this is to create a budget by looking at all sources of income and all expenses.  I suggest doing this monthly for at least a three month period to capture all recurring and non-monthly items.  You should try to capture cash expenses as well, because those daily latte’s can really add up! You may be surprised by the results.

Once you know your net cash flow the next priority is to build an adequate emergency fund, which should be kept separate from your regular checking/savings account.  Three to six months of expenses is usually adequate depending on the source(s) of your income.

Most folks think about the expected – like buying a home, retirement, or paying for education. A good financial plan includes guarding against uncertainties such as a death, disability, or medical situation.  This next step is a review of current health, life, disability and liability coverage. Having the right types and amounts of insurance provides protection against events that could jeopardize family income and assets. Most folks are not fond of insurance but my experience is that it doesn’t make sense to risk a lot to save a little.

The next step is to look at growing your assets.  This involves understanding risks, anticipating inflation, allocating your assets and diversifying your investments. Understanding the tax implications of your investments should not be overlooked.  Investment planning is a broad subject that I will cover in a future column.

Estate planning should also be a part of your plan. Everyone has an estate, regardless of how much money they have or what they own.  You should have a will, which directs the “who, what, and when” of the disposition of your assets after death.  A Power of Attorney and a health care proxy / living will allows a trusted person(s) to manage your financial/legal affairs and health care in case of incapacity.

One thing to consider is whether to seek help.  There are good reasons to seek professional financial advice, just as there are good reasons for consulting a doctor when you need medical care. Working with a trusted advisor may mean the difference between achieving your goals or having to change your standard of living.  A good advisor will provide clear explanations, treat you respectfully and work as an equal partner with you.

Remember knowledge = power, so the more you know about your current financial situation the more power you will have to succeed.

Come back next month when I will share some ideas on how to manage debt.

 McCarthy Wealth Solutions, LLC and Wall Street Financial Group, Inc. are separate entities. They are independently owned and operated. Only securities and advisory services offered through Wall Street Financial Group, Inc. Registered Investment Advisor. Member FINRA/SIPC.

Information herein is taken from sources deemed reliable and WSFG is not responsible for any errors that might occur.  All opinions expressed are those of the author and not necessarily those of WSFG. Health and other non-variable insurance products are not offered through WSFG.