Financial Planning for Life

Unauthorized people can steal your personal information and investment records several ways:

• A thief can rummage through your garbage, mail box, or computer or steal your wallet, PDA, or laptop.

• Anyone who has access to your home can copy down information that is not locked up.

• Someone can trick you into giving out personal information by misrepresenting themselves as someone entitled to your information.

Once thieves have your personal information, they can create documents that represent themselves as you. The documents they create can be your driver's license, a social security card, or a charge card. They can do substantial mischief with any of these documents.

This issue may be more common than you think. Did you know that you are twice as likely to have your identity stolen in this way during the next year as you are to be in an automobile accident and six times as likely as dying from any cause whatsoever? What precautions are you taking to reduce the odds?

You should lock up, shred, and encrypt. Put unobvious passwords on your computer and don't leave the passwords out where someone can get them. Keep out of harm's way - don't flash valuables or personal information where they may be stolen. And protect your children's information too, because your children probably have no bad credit history - their identity may be quite valuable to a thief.

Posted by learninglife at 12:04 PM | Permalink | Comments (0)

Do you know what you have and where it is? Where are your critical papers? Where is your money, and by the way, how much is there for your different objectives?

Here are just some things that you should consider organizing and why you might want to do so:

• Critical papers - so you can find them when you need them.
• Money - so you have it when you want it.
• Bills - to avoid late fees.
• Tax information - to minimize taxes and fight off the IRS if they misinterpret the facts.
• Legal information and documents - to assure what happens when you are not around or able to do things yourself.
• Health and prescription information - so you or someone else can get what you need in a medical emergency.
• Important people list - to get help and support from the right people when needed.

Getting organized frees you up and saves you time. It improves efficiency and effectiveness. For example, when you organize your clothes and decide what to give and throw away, you have more room and can find things more easily. This is also true for papers - that is why smart people invented filing cabinets (and computers and scanners!). Consolidating investments lets you track and manage them more easily.

Getting organized lets you know what you have. It helps you to prioritize your next steps and simplify your life, if that is what you want. In fact, it is the first step in planning for the future.

Some people enjoy getting organized - at least some of their things. For others it is about as much fun as having their teeth pulled out. What if you hate doing the work or have no time or skills to do it right yourself? Then you can find someone else who actually enjoys (or will accept pay for) doing what you do not want to do - and you can spend your own time doing what you really want to do.

Posted by learninglife at 2:02 PM | Permalink | Comments (0)

If you don't know where you are going, you will wind up somewhere else!

Yogi Berra

Retirement goals, life goals, money goals, family goals, community goals - the first two letters of goals spell "go." Just what is the right direction for you?

So what is holding you back? Does having a goal seem just too constraining for you? Will you feel like a failure if you do not achieve it? Is it too much work? Well, yes, you might have some problems if the goal is not really your own - if it is someone else's goal for you. But if setting your goal comes from something important within yourself, it can generate a force strong enough to make a difference in the world.

Working towards a goal can be even more than arriving at the right destination. Here are some additional benefits to consider. Setting a goal and acting on it will require you to:

• Sit back and think about what is really important to you. That very act of pausing can give you perspective on your life. It can produce the "aha" moments. It can lead to better decisions.
• Put priorities on activities - both for what you do and also for what you don't. Priorities add focus to your mix of activities. And that focus can lead to the power to accomplish things.
• Marshal your resources - time, money, energy, connections, skills - to work together in unexpected and exponential ways and to increase the effectiveness of your actions.
• Try and do things that you might not have done. This leads to a life full of new and different experiences.
• Learn about what worked and what didn't. And learn about yourself and the world outside. By proceeding down a different path you will open up new opportunities and be able to start this process all over again.

All of this has to do with money, but it has more to do with life. As you walk down new paths, remember another of Yogi Berra's recommendations: "When you come to a fork in the road, take it." I have found this to be true. You will see and do more that way than if you sit there immobilized and uncertain about which is the right way to go.

Posted by learninglife at 8:05 PM | Permalink | Comments (0)

Are you concerned that you may not have enough money to retire, maybe ever? Do you believe that there is not much that you can do about it? And are you therefore stuck? Well, get over it.

Here are some questions you should ask yourself. They can help reduce your frustration by lowering the gap between where you are and where you want to be:

Change your need for retirement income by changing what you do during retirement.
What is the right mix of play, being with and helping family, contributing to your community – whichever is really important for you? How much do you really need to consume? How much does having a meaningful life really cost?

Generate more earned income.
What is so special about retiring at a particular age? Is it because you are tired of working at your current job? So, why not do something you might enjoy more and get paid less? If you would like the new job more, why would you not want to work longer? If there are other things that you would rather do besides work, couldn’t you work part-time to generate some income and still have some time to pursue other interests and passions?

Generate more retirement income.
Are your investments in order? Do they work together properly? Do you have an investment and income plan that takes longer life expectancies, inflation, and the uncertainty of investment returns into account? Do you know how much income you can reasonably take from your investments so that you will have enough for your whole life, and do you know how to improve the results? Do you have any guarantees that your income will last as long as you do?

Change your focus.
Working for pay or not, can’t you obsess about something else? Shouldn’t you be focusing more on your diet and health to improve the quality of your life? How about the quality of your relationships and the sharpness of your mind – can’t you work on these instead? Shouldn't your goal be to have a more meaningful life, so why not work on that?

Some of these questions you can and should work through by yourself. If you are getting stuck on the questions, why not get some help from a partner, family, your network, or professionals?

Posted by learninglife at 2:39 AM | Permalink | Comments (0)

You may know about some of your upcoming financial events in advance, others not. The more predictable events include big expenses for a car, vacation, children’s education, and retirement. Those that are not predictable we label emergencies, such as being between jobs or needing extraordinary health or long term care.

If you are not as prepared for these events as you would like, you should look carefully at what you are doing. It may be one of those times when Einstein’s definition of insanity comes into play. Are you “doing the same thing over and over again and expecting a different result”? What needs to change to get a different result – in this case being prepared?

Perhaps you have concluded that having more savings would be helpful. Are you planning to save “extra money” (whatever that is)? For most people, that does not work. Here are three ideas to help you be more successful in this area:

1. Concentrate on the process, not just the outcome. Decide first on the amounts you will need and when you will need them, then build success into your action plan. How do most people save effectively? They save automatically and regularly. For retirement savings, for example, many people use their retirement plan at work or a (Roth) IRA if there is no retirement plan available there. In either case money is deposited from each and every pay check before it can be noticed or spent.

2. Segregate savings funds. In the old days people used to put cash into a piggy banks or envelopes, one for each purpose. In the 1930’s my grandmother secretly put money aside in a tin can for my father in case he wanted to go to college – it was cheaper then. My father went to college even though it was the Great Depression. Keeping funds separate can help you prevent “Peter from robbing Paul” and can let you match the money with the appropriate investment, although we don’t recommend the tin can approach.

3. Start now. If it is important to save, you need to make saving a high priority. Time has a way of sneaking up on you. If you start your automatic savings process early, you have time working for you, not against you.

Good luck.
Mark Fischer

Posted by learninglife at 12:45 AM | Permalink | Comments (0)

Here are four concrete things you can do to take advantage of lower prices of stocks now that the stock market has fallen.

1. Buy more stocks. If the growth potential of stocks seemed great when prices were higher, aren’t they an even better deal now? You should continue to contribute to your 401(k), 403(b) or other retirement plan at work. You may also be able to contribute to an IRA or to a Roth IRA. When you buy stock investments now through those retirement or other plans, you will acquire more shares per dollar invested of the companies or mutual funds than when prices were higher. If and when prices return to previous or even higher levels, your investments will be worth correspondingly more money.

2. Take a tax loss. If you have an investment not in an IRA or retirement plan that has fallen below your purchase price (plus reinvested interest, dividends and capital gains) and you sell it, then you have a capital loss. You can use that capital loss to offset present or future capital gains. You can also deduct $3,000 against your taxable income each year. And you can carry any unused capital losses over to future years until they are used up. Be careful, though. If you reinvest the proceeds in the same or a “substantially similar�? investment within 30 days after the sale, you will not be able to use the capital loss right away.

If you sell an investment at a low price and reinvest the proceeds right away in a different investment, you may also be purchasing at a lower price. Of course, if the investment is truly different, its price movements will also be different.

3. Convert your IRA to a Roth IRA. If your adjusted gross income is less than $100,000, you can convert your IRA to a Roth IRA. This works best if you have the cash already set aside to pay the tax on the IRA distribution. Why is this a good time to do this? When the market has fallen, your IRA is worth less, so your taxes from the conversion are less than they would be if your investment were higher priced. In the year 2010 you will be able to convert your IRA to a Roth IRA no matter how high your income is. But the tax cost would be higher if the IRA has increased in value.

4. Make a stock gift to relatives. You can make a tax-free annual gift of up to $12,000 per donor and per recipient. If prices are lower, you can give more shares of stock without bumping into the annual limit.

These are your chances to make lemonade from lemons. Make sure that you talk with your tax advisor if you are not sure how these ideas will impact your taxes and financial situation.

Posted by learninglife at 1:19 AM | Permalink | Comments (0)

Who do you really want to get your money when you (and your spouse) are done with it? Is your will up-to-date and complete? Did you know that if your investment account has beneficiaries, your money will go where you have designated it to go, not where your will says it should? In fact, this is an issue for many types of accounts you may own – those jointly held, your IRAs, 401(k)s and other retirement plans, all kinds of trusts, annuities and life insurance.

What if your primary beneficiary is not around to receive the money? Make sure that you spell out a secondary (contingent) beneficiary. If you have older accounts and your circumstances have changed – perhaps a retirement plan from a place you worked before you married or remarried – make sure you have the right person mentioned as the beneficiary.

Your retirement plans have separate issues. They do not belong entirely to you. These are accounts with pre-tax dollars. You have never paid taxes on them. When you or your beneficiaries take out any money, it is subject to income tax.

When you die, your entire retirement plan will be cashed in and taxed, with a few exceptions. A spouse can roll it over to his/her own plan and continue to defer paying tax. And a charity can accept it. Since charities do not pay income tax, they get the whole amount tax-free.

Notice that there are no exceptions for unmarried partners, children, grandchildren, or other family members. All the money is paid to the beneficiary, and taxes on retirement plans are due, frequently at a high tax rate.

There is one approach for postponing payment of taxes that is becoming more popular. For inheriting children it is possible to keep the IRA intact and stretch out its distributions. Then only those smaller distributions are taxable at the time they are dispersed.

Get professional help with both of the issues – making sure that the right people get the money and that taxes are delayed, if possible and appropriate. Your attorney can help you with the right wording for beneficiary designations so that they are compatible with your will, trusts and other components of your estate plan. For stretching your IRAs and retirement, work with a competent financial, accounting or legal professional so that it is done right. If what you do does not match every aspect of the law, stretching will not work and income taxes can be substantially more than necessary.

Posted by learninglife at 9:47 PM | Permalink | Comments (0)

Mark Fischer says that financial planning is 20% about money and 80% about everything else. How can holistic financial planning help you craft a more meaningful life? If you start thinking of your money as just one of many resources you possess, then you’re on the right track. Let Mark guide you toward the life you want with his unique perspectives and expert insights.

Mark Fischer is a Certified Financial Planner who owns and operates Fischer on Finance, an independent, financial planning firm. Since 1986, he has been helping people craft life strategies for more meaningful lives and a better world. Fischer holds a Ph.D. and an MBA, has taught at several universities, and has done seminars with numerous organizations. He also authored the financial planning/money management chapters of Mapping Your Retirement, published in 2007. Mark teaches life skills workshops in LearningLife.

Disclosure Statement
Fischer on Finance offers securities through Multi-Financial Securities Corporation, member FINRA, SIPC. Fischer on Finance, LLC, is not affiliated with Multi-Financial Securities Corporation.

Posted by learninglife at 6:28 PM | Permalink | Comments (0)