MONEY matters

When national polls and surveys are conducted on the subject of retirement planning, the question that’s inevitably asked is: how well prepared are you and your spouse or partner for retirement? The results are usually pretty alarming.

Many of us are procrastinators by nature, but place money, financial planning and the big Kahuna - retirement planning on the to-do list and many of us could win a gold medal at the annual Procrastination Olympics. You know who you are. That retirement planning to-do list grows year by year and the amount of money you think or imagine you need to accumulate grows exponentially each year along with your stress level.

As an avid John Bogle fan as well as a strong believer in the value of using low cost index funds for your core portfolio, these new kids on the block, fundamental index funds are, well - sexy!

As any fan of John Bogle would know, his esteemed leadership as the former head of Vanguard is one that has benefited investors worldwide. It was John Bogle that brought index fund investing to the masses.

If your house has gone down in value and you are considering dropping insurance coverage to save a few bucks, you may want to reconsider.  I’m all for tightening the belt and saving money in creative ways during challenging economic times – but lowering your insurance coverage on your home is not a place to cut back on.

Kimberly Lankford, Contributing Editor, at Kiplinger's Personal Finance says you should never lower the amount your house is insured for just because housing prices have dropped. Read her recent article How to Save Money on Homeowners Insurance to find out more.  

This task list is taken from the Financial Planning Association (FPA) website. I've divided the list into four posts, one for each calendar quarter starting with Jan-Feb-March 2011. There is much to do in January, but Feb and March are much lighter task months.

If you’ve made a New Year’s resolution to get control of your finances in 2011, here’s a list of important planning and execution tasks that should be on your money calendar for the year:

Should you choose a ROTH IRA or a Traditional IRA? That’s a tax planning question that deserves much scrutiny. First thing you need to do is find out if you’re eligible to contribute to a Roth IRA. Here’s a link that can help determine the answer: Roth IRA Income Eligibility

Let’s say for argument sake you’re eligible to contribute to either a Roth or a Traditional IRA. If you take the Traditional IRA route, you’ll deduct the IRA contribution from your reported income which will have the effect of lowering your income tax bill.

Unless your plan for financial independence is based on luck, winning the lottery or an unknown relative that decides to leave you their estate, like most people, you’re going to become financially independent the old fashioned way-you’re going to earn it.

And the way you’re going to earn it is by saving money. And saving money means delaying consumption today (delayed gratification) for a brighter and more prosperous future tomorrow. But that’s easier said than done. The simple truth is spending money is way more fun than saving money.

One of my favorite clients, Eddie from N.Y., sent me the following 7 principles article. He and his wife are on a quest to reach financial independence (FI) sooner rather than later. This is a goal they take very seriously and is why their financial plan sets specific benchmarks that measure their progress as well as success.  They are well on the road to FI. Being in their 40’s, they’ll reach this destination much earlier than most of their friends and colleagues. They have amazing teamwork and can discuss money openly and freely. I love working with couples like them.

Another dear client and friend from Colorado, Terry, was one of my first clients back in 2003. We caught up on the phone today for a financial portfolio review and financial planning “tune-up”. Terry has a heart of gold and continues to wake up each day asking this question:  How may I serve? Her attitude of gratitude is remarkable. She’s a light that shines so brilliantly and brightly. She lives each day by paying it forward and helping as many friends as she can with their money issues. I am grateful for her continued support, trust and friendship. Terry, you inspire me.

For most small business owners, discussing the pros and cons of a pension plan vs. a 401(k) vs. a SEP IRA is about as exciting as watching paint dry. I get it. Yet, I’ve noticed over the years just how much time entrepreneurs invest in growing their business and how little time and money they spend on designing smart and sensible tax savings strategies that could save them big money at the end of the year.

Growing up, my Mom made sure to teach the lessons of delayed gratification. No dessert until you finish dinner. Who doesn’t remember hearing that growing up? Lucky for me, my dog Bochie was more than happy to act as my willing accomplice so I could get to the ice cream sooner rather than later.

As adults managing our personal finances, the lessons of delayed gratification are more important than ever. Spending money is all about choices. Many of us have a hard time resisting the instant pleasure a purchase can bring us. It’s the impulsive side of us that wants everything now. Who wants to delay consumption when you can buy it now and pay for it later?