Sun, Fun, & Financial Review

By Bob Moeller
WEAC Member Benefits

June 2003

Financial Planning Seminars
Achieving Financial Independence

Well, it’s summertime and many of you will have a moment or two to check out your financial situation and plan for the future. There have been some real changes since last June. The stock market is way down, interest rates are very low, and because of these changes it behooves you to pay a little closer attention to your money. The rules of personal finance don’t really change much, but some areas need a little more attention as circumstances change. Here are some guidelines to consider. Make these rules for yourself for the summer and for the future. I published a similar list of suggestions last June.

1. I will do some research on my current home mortgage and what I might save if I refinance. I understand that closing costs are the significant consideration here, and I understand that they are quite negotiable. If my mortgage is fairly small and I have not refinanced because I expect to have my home paid for in a few years, I will consider taking out a home equity loan to pay off my current mortgage. (One example of a good deal available at the WEA Credit Union is 5% frozen for 7 years, with total costs of $500 to set it up.) I will shop around a little to see what kind of a deal I can get.
   
   
2. I will make sure all my high-priced debt is paid off. I will carry no credit card balances month to month. It may make sense to consolidate my credit card debt into my home mortgage if the rates are better since that interest will be tax deductible. I will give serious attention to any situation in which I have large sums of “emergency” funds invested at 1% or so while at the same time I have debts on which I am paying over 5% in interest.
   
   
3. I will not invest in esoteric investments such as private limited-partnerships, commodities (futures), precious metals, options, etc., unless I thoroughly understand what I am investing in and can clearly explain it to someone else. I will not believe salespeople who hustle this stuff. I will never make an investment with a stranger who calls me at home.
   
   
4. I will take full advantage of the tax breaks for all my long-term investing. That includes 403b tax-sheltered annuities, 401k retirement plans (for spouse), 457 deferred comp plans, and Roth IRAs. I will make sure I have a “good” plan in terms of fees, etc.
   
   
5. I will approach every investment from the viewpoint of first understanding what the investment is going to cost in fees, penalties, etc. Then I will consider the actual investments. This approach will most likely mean I will not invest in products offered by life insurance companies.
   
   
6. If buying “load” mutual funds, I will make sure I understand the costs of the class of fund I am buying. Before agreeing to buy Class B or Class C shares, I will demand a good reason for the recommendation. Generally, I will buy only “no-load” mutual funds.
   
   
7. I will not chase high interest rates such as 1st-year bonus rates, etc., that are offered as part of an annuity product. They sound attractive but are usually not good deals.
   
   
8. I will remember that the “principal protected” investments where I get to share in the growth if the market goes up, but have no risk of loss if the market goes down, are generally not such good deals.
   
   
9. I will not get despondent because of the stock market crash. I will gradually begin to participate again, concentrating on a well-diversified portfolio using Index Funds with low management fees and no sales charges, such as Vanguard Funds.
   
   
10. I will take a few minutes to roughly figure out just how my family spends its money and how much. That knowledge will be useful when I try to make future plans for my finances.
    
    
11. I will thoroughly enjoy my summer, as I take graduate-level classes to advance me on the salary schedule and eventually get me a higher pension.
    
    
12. Finally, if I have any questions or need will forms or State of Wisconsin Power of Attorney forms for myself or my family, I will e-mail Moellerb@WEAC.org. These services are benefits of my WEAC membership. There is no cost.
    

The time to start financial planning is now. Have a nice summer. I hope to see you at my seminars next year or in individual appointments.
• • •

Bob Moeller is providing individual member financial planning appointments throughout the summer. . To schedule appointments, contact Diana Buchholz at 608-276-7711 or 800-362-8034, extension 253.

Posted June 10, 2003