Just Give Me the Answer$: Expert Advisors Address Your Most Pressing Financial Questions

352 Pages·2004·1.47 MB·English

by  Sheryl Garrett

This publication is designed to provide accurate and authoritative information in regard
to the subject matter covered. It is sold with the understanding that neither the publisher
nor The Garrett Planning Network, Inc., is engaged in rendering legal, accounting, or
other professional service. If legal advice or other expert assistance is required, the ser-
vices of a competent professional should be sought.
Vice President and Publisher: Cynthia A. Zigmund
Acquisitions Editor: Mary B. Good
Senior Project Editor: Trey Thoelcke
Interior Design: Lucy Jenkins
Cover Design: Design Solutions
Typesetting: the dotted i
Photo Credit: T. Michael Stanley
© 2004 by Sheryl Garrett
Published by Dearborn Trade Publishing
A Kaplan Professional Company
All rights reserved. The text of this publication, or any part thereof, may not be repro-
duced in any manner whatsoever without written permission from the publisher.
Printed in the United States of America
04 05 06 10 9 8 7 6 5 4 3 2 1
Library of Congress Cataloging-in-Publication Data
Garrett, Sheryl.
Just give me the answer$ : expert advisors address your most pressing financial
questions / Sheryl Garrett with Marie Swift and The Garrett Planning Network.
p. cm.
Includes index.
ISBN 0-7931-8339-1
1. Finance, Personal. I. Swift, Marie. II. Garrett Planning Network. III. Title.
HG179.G37 2004
332.024—dc22
2004000083
Dearborn Trade books are available at special quantity discounts to use for sales promo-
tions, employee premiums, or educational purposes. Please call our Special Sales Depart-
ment to order or for more information at 800-245-2665, e-mail [email protected], or
write to Dearborn Trade Publishing, 30 South Wacker Drive, Suite 2500, Chicago, IL
60606-7481.
|
DEDICATION
To the countless individuals who have had a hard time finding competent,
objective financial planning services and advice when they needed it and on
their terms.

C o n t e n t s
FOREWORD ix
PREFACE xi
1. FINANCIAL PLANNING FUNDAMENTALS 1
Tip 1:Common Money Management Mistakes and How to Avoid Them 1
Tip 2:How Financial Planners Work and Get Paid 5
Tip 3:Identify and Prioritize Your Goals—The First Step toward Financial Success 10
Tip 4:Financial Planning and Goal Setting—More Techniques for Success 12
Tip 5:Enhanced Life Planning Strategies Boost Personal Satisfaction and
Financial Success 15
Tip 6:Getting Your Financial House in Order—Tips to Get and Stay on Track 18
Tip 7:Living Responsibly—With or without a Budget 22
Tip 8:Emergency Funds Create a Needed Safety Net 23
Tip 9:Understanding Your Credit Score 25
Tip 10:How to Improve a Credit Score 27
Tip 11:The Benefit of Making Subtle Credit Score Improvements 30
Tip 12:How to Resolve Credit Problems 30
Tip 13:Steps to Prevent Identity Theft—Don’t Let It Happen to You 33
Tip 14:There Are Debts on My Credit Report That Aren’t Mine.What Now? 35
Tip 15:Managing and Leveraging Your Debt 37
Tip 16:Drowning in Debt? How to Get Out and Stay Out 39
Tip 17:When Rethinking the Rules Makes Sense 41
Tip 18:Best Books on Personal Finance 44
Tip 19:Best Software and Systems for Managing Your Personal Finances 47
Tip 20:Top Web Sites for Learning about Personal Finance 50
2. RISK MANAGEMENT 55
Tip 21:Minimizing Your Financial Risk with Insurance Products and Legal Contracts 55
Tip 22:The Purpose and Varieties of Life Insurance 57
Tip 23:More on Comparing Types of Life Insurance 59
Tip 24:A Closer Look at Term and Whole Life Insurance 63
Tip 25:How Much Coverage You Need to Protect Your Loved Ones 65
Tip 26:The Dos and Don’ts of Disability Insurance 67
Tip 27:How to Buy a Good Disability Insurance Policy 68
Tip 28:Finding Affordable Health Insurance If You Don’t Have Group Coverage or Are
Self-Employed 71
Tip 29:Continuing Health Insurance Coverage in Early Retirement and for
Self-Employment 73
v
vi Contents
Tip 30:Understanding Long-Term Care Insurance—Asset Preservation and Aging
with Dignity 74
Tip 31:Obtaining a Good Auto Insurance Policy 77
Tip 32:Protecting Your Insurance Record Pays 79
Tip 33:How to Protect One of Your Biggest Investments 80
Tip 34:Protecting Your Family from Catastrophic Loss with an Umbrella Policy 82
Tip 35:Best Web Sites for Insurance Information 83
3. PROPERTY OWNERSHIP, MORTGAGES,AND TITLES 85
Tip 36:Should I Buy or Lease a Vehicle? 85
Tip 37:Home Sweet Home—Should You Rent or Buy? 87
Tip 38:How to Get Everything to Which You Are Entitled from Your Home 89
Tip 39:Assess All Your Financial Goals to Determine the Right Mortgage Amount 90
Tip 40:Choosing the Best Type of Mortgage Loan 91
Tip 41:Private Mortgage Insurance (PMI)—How to Avoid Unnecessary Premiums 93
Tip 42:Determining When to Refinance 94
Tip 43:Refinancing a Mortgage and Taking Out a Line of Credit 96
Tip 44:Save Money by Refinancing,Then Put the Savings to Work for You 98
Tip 45:Using Your Home’s Equity Wisely 98
Tip 46:Mortgage Acceleration—How to Determine If It’s Right for You 100
Tip 47:Reverse Mortgages Help Cash-Strapped Seniors Enjoy Retirement 101
Tip 48:Holding Title on Your Property 104
4. EDUCATION FUNDING 107
Tip 49:Ways to Save for College 107
Tip 50:How Much to Save for College 108
Tip 51:Pros and Cons of a 529 Plan for College Savings 110
Tip 52:Saving for Education—Coverdell Education Savings Accounts 112
Tip 53:Saving for College with Uniform Gifts and Uniform Transfers to
Minors Accounts 115
Tip 54:Prepaid Tuition Plans 116
Tip 55:Series EE and I Bonds 117
Tip 56:Variable Universal Life as a Savings Vehicle 118
Tip 57:Saving for Education in a Parent’s Name 121
Tip 58:How to Pay for College IfYou Haven’t Saved Enough 123
Tip 59:How Student Financial Aid Works 127
Tip 60:Federal Tax Incentives for Education 129
Tip 61:Balancing Retirement Savings Needs and College Funding Desires 132
5. RETIREMENT PLANNING 135
Tip 62:Eleven Things You Must Do Now to Ensure 24-Carat Golden Years 135
Tip 63:Many Variables Make Retirement Planning a Complex but Important Task 139
Tip 64:How to Maximize Your 401(k) for a Brighter Financial Future 141
Tip 65:Rolling Over a 401(k) or 403(b) to an IRA 145
Contents vii
Tip 66:Traditional IRAs Can Help You Secure Comfortable Golden Years 147
Tip 67:Roth versus a Traditional IRA—Picking the One That’s Right forYou 149
Tip 68:Getting Older Doesn’t Always Mean You Should Be More Conservative 151
Tip 69:When You Inherit an IRA,Understand Your Options Before You Take Action 153
Tip 70:Deciding to Take an Early Distribution from a Retirement Account 156
Tip 71:Your Pension—Should You Take a Lump-Sum Distribution or Monthly
Annuity Payments? 156
Tip 72:Should Annuities Be Included in an Investment Portfolio? 159
Tip 73:How to Create a Stream of Income after Retirement 161
Tip 74:How to Safely Draw Down Your Portfolio to Ensure That Your Nest Egg Lasts as
Long as You Do 163
Tip 75:Collecting Social Security in Retirement 165
Tip 76:Disability,Divorce,and Widow Benefits through Social Security 167
Tip 77:Medicare—Know Your Options 170
Tip 78:Medicaid Decisions for Long-term Care 172
Tip 79:Medicare Myths and Misunderstandings 174
Tip 80:Choosing a Place to Live during Retirement 176
6. LIFE TRANSITIONS 179
Tip 81:Your First Job 179
Tip 82:Getting Married 181
Tip 83:Financial Planning Issues for Nontraditional Couples 183
Tip 84:Starting a Family 187
Tip 85:How to Raise Moneywise Kids 190
Tip 86:Planning a Smooth Transition to a New Career 192
Tip 87:How to Protect Yourself in Today’s Uncertain Job Market 195
Tip 88:When Divorce Is Inevitable 198
Tip 89:Divorce and Your Money 200
Tip 90:Determining Fair and Equitable Division of Assets 202
Tip 91:Viatical Settlements Can Help the Terminally Ill but Weigh All Your
Options First 205
Tip 92:Managing an Inheritance or Other Lump Sum 207
Tip 93:Final Arrangements—Preparing Your Family 209
Tip 94:Final Arrangements—Costs for Funeral Services and Goods 210
7. INVESTING 213
Tip 95:Investment Mistakes to Avoid 213
Tip 96:Getting into the Saving Habit 216
Tip 97:The Sooner You Begin Saving and Investing,the Wealthier You Can Be 217
Tip 98:Investing Early Pays Off—How to Measure Your Investments’ Real Rate
of Return 218
Tip 99:Funding an Investment Program That’s Right for Your Pocketbook 219
Tip 100:Using Benchmarks Can Help You Evaluate Portfolio Performance 221
Tip 101:Portfolio Design Can Reduce Volatility and Risk 224
Tip 102:Asset Allocation Principles and Investing Fundamentals 225
viii Contents
Tip 103:Trying to Time the Market Can Be Hazardous to Your Portfolio’s Health 228
Tip 104:Portfolio Basics—Understanding Growth and Value Investments 229
Tip 105:Understanding Investment Philosophies—Active and Passive 230
Tip 106:Mutual Fund Fees and Expenses 233
Tip 107:Understanding Fund Share Classes Can Help Manage Investing Expenses 235
Tip 108:Exchange Traded Funds 237
Tip 109:Pros and Cons of Mutual Funds versus Individual Securities 239
Tip 110:When Investing in Real Estate Makes Sense 241
Tip 111:How to Add Real Estate to Your Portfolio Using REITs 243
Tip 112:Understanding Employee Stock Options 244
Tip 113:Understanding Your Employer’s Stock Purchase Plan 247
Tip 114:Fixed-Income Investing—Understanding Your Options 248
Tip 115:Protection against Inflation—TIPS and Series I Bonds 252
Tip 116:Fixed-Income Investing When Interest Rates Are Low 254
Tip 117:Making a Difference—Spend and Invest Your Money Based on
Your Values 255
Tip 118:Using a Discount Broker 257
Tip 119:Improve Your Knowledge of Investing—Tap into the Web 259
Tip 120:Software and Web Sites for Portfolio Tracking 262
8. TAX ISSUES 265
Tip 121:Cafeteria Plans—An Employee Benefit Often Overlooked 265
Tip 122:Strategies for Managing Taxes on Your Investments 268
Tip 123:Tax Strategies for Mutual Funds 270
Tip 124:How to Calculate the Cost Basis of Your Mutual Funds 273
Tip 125:Common Mistakes in Utilizing Tax Deductions 274
Tip 126:Worry Less about an IRS Audit—Preparation Is the Key 276
Tip 127:Failure to File Tax Returns Can Create Big Trouble 279
9. ESTATE PLANNING 283
Tip 128:Estate Planning Basics—The Primary Documents 283
Tip 129:Using Trusts to Preserve Your Assets 286
Tip 130:Blended Families—Why Estate Planning Is Critical 290
Tip 131:Providing for a Disabled Child Takes Proper Financial and Estate Planning 293
Tip 132:Executors—How to Settle an Estate 296
Tip 133:Gifting Strategies Can Help Reduce Estate Taxes 299
Tip 134:Charitable Gifting—A Win-Win-Win Approach 303
APPENDIX:MEETTHEALL AMERICANPLANNER 309
INDEX 324
F o r e w o r d
T
oday, honest, trustworthy, and hardwork-
ing Americans like yourself are in need of financial help. But where can you go?
Whom can you trust?
I remember advising Janet and Jim on the Oprah Winfrey Show. Janet’s eyes
opened wide as I explained to her how small changes could make a big difference
in her financial future. And Janet then took some actions based on that guid-
ance. But what if that guidance wasn’t trustworthy? What if I were telling Janet to
buy some financial product solely because I was making money from it?
The mission of my organization, Family Financial Network (http://www.
familyfn.com), is to help hard-working Americans fulfill their financial dreams.
Objective, conflict-free financial planning and advice for working Americans is
now within reach. When everyday Americans and do-it-yourselfers need assistance
from a professional advisor, they can seek out an advisor who will work with them
on their terms. And now, they can turn to Just Give Me the Answer$. By following
simple tips, the reader can learn how to save hundreds to thousands of hard-earned
dollars. Everyone should own his or her own copy of this invaluable resource.
Just Give Me the Answer$is brought to you by someone folks can trust. Sheryl
Garrett was named one of the 25 Most Influential People in the financial plan-
ning industry by Investment Advisor magazine in May of 2003, along other such
notables as Alan Greenspan, Charles Schwab, John Bogle, and Noble Prize win-
ner William Sharp, and for good reason. She has become a pioneer in the finan-
cial planning industry. She and her network of advisors share one very powerful
core principal: that all people should have access to competent, objective finan-
cial advice when they need it. The advisor should have only the client’s interests
at heart and should not be receiving commissions or other payments for “selling”
products that are not in the client’s best interests. The Garrett Planning Network
members seek to empower their clients to make smarter financial decisions
through this book and via financial literacy programs, community education, and
one-on-one financial coaching. These highly skilled financial advisors work with
their clients on a fee-only, hourly, and as-needed basis to evaluate and implement
the strategies outlined in this book. Family Financial Network will soon be align-
ing with the Garrett Planning Network to ensure that objective, conflict-free
financial advice is available to all Americans.
ix
x Foreword
Now, Sheryl Garrett, with Marie Swift and The Garrett Planning Network,
have developed a breakthrough guide to financial matters. They have expertly com-
piled Just Give Me the Answer$, a reference guidebook of their most frequently
heard questions, and they provide detailed responses, answers, and direction for
each of the 134 tips contained within these pages. You now have a resource that
you can rely on time and time again to get answers to your financial questions
from more than 75 experts.
Most people are not interested in reading a whole book about personal fi-
nance to gain a few grains of wisdom that apply to their situation. After all, we’re
all too busy for that. Yet, money management decisions face every person in so-
ciety, often on a daily basis. We want answers when we need them. Just Give Me
the Answer$does just what it says.
Sheryl Garrett has delivered the quintessential personal finance reference
guidebook. It’s easy to use, straight to the point, and, most importantly, written
by experts you can trust.
Jennifer Openshaw
CEO, Family Financial Network
Host of Public Television’s, What’s Your Net Worth?
http://www.familyfn.com