Financial Literacy - Growing your bottom line
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smart spending
How to shrink your bottom line

"Many people just simply fail to learn about the tax strategies that can help them," says Tyson. "Taxes are something that can be managed and can be reduced, and people do need to keep up with the ever-changing laws. Your failure to do so is going to result in paying much higher taxes than you need to."

Investing also results in taxation if you buy and sell stocks willy-nilly in taxable accounts. Even if you do nothing, your mutual fund company may serve up a big plate of taxable gains, particularly if they engage in a lot of trading. It's even possible to owe taxes when your fund is shrinking in value. Investors with a plan to manage taxes can save themselves a ton of money.

Tip: Use every deduction you can think of to reduce your taxes, as long as it's legitimate, of course. Uncle Sam even provides tax breaks to help you get ahead in life.

10. Believe everything you hear, read and see

Do you get flyers in the mail that promise you can beat the market -- any market, any time? Do they say that the methods have been proven to make money 90 percent of the time? Does the strategy for busy, conservative investors promise to generate returns of 88 percent a year?

These promises belong in the "too-good-to-be-true" file, otherwise known as the recycling bin.

If you're not sure about how to deal with your finances, you need to develop the ability to distinguish truth from fiction. And if you want to hire someone to help you, you'll need to distinguish the skilled, honest advisers from the shysters. Knowing who to listen to and who to ignore is an important skill.

"The average person has a hard time discerning the good from the bad, and that's why you should do some homework," says Tyson.

Says Carbonaro, "My job (as a financial planner) is to help my clients make smart decisions in all these different areas -- cash management, insurance, which is risk management, tax planning, retirement planning, investment planning and estate planning.

"If you make mistakes in any of those areas, you will negatively impact your net worth," she adds.

For instance, at tax time you might want to consult with an experienced CPA with good references.

"The average person is not going to contact the IRS and order publications and read through them," says Tyson. "They're horribly written and don't highlight the information that people can benefit from."

Or you can find hundreds and hundreds of books and articles written by knowledgeable people eager to tell you what you should be doing. But from news sources, to books, to well-meaning relatives, discriminating between good and bad advice can save you from making bad investments in oil wells and bullion or stock tips from your cousin George.

The alternative, learning the hard way -- through experience -- can be an expensive lesson.

Tip: Read Bankrate's story on Finding a financial planner to help you separate the wheat from the chaff.


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