The 30 Minute Financial Plan

June 29, 2007

A quick review of your financial health is today’s topic.  I am taking a brief break from talking about investments. Instead I am going to load you up with planning ideas and even tools that I use to keep my financial house in order.

Estate Planning & Risk Management (I know that it is dark to talk about death or other bad events that could occur in your life, but it is important to discuss).

Wills – If you have children you must have a Will. Otherwise, you are leaving their future in the hands of the state. I find it hard to believe that the state would be better at determining your families future instead of you. DON’T PLAY WITH FIRE….. GET A WILL!!!

Life Insurance – The primary purpose of life insurance is to replace income that is lost by a deceased provider. The majority of individuals would do great to choose Term Insurance and the period of level premiums (term) should be long enough to get your children through college. With children a good rule of thumb is 10x your annual gross earnings. If you do not have children and both you and your spouse work then I would make sure that each of you have enough life insurance to cover all of your debts and mortgages.

Shopping for insurance – you should use the Internet to price out your options (Insure.com is a good option), but I would not buy from the Internet. Most states regulate insurance premiums, so it is actually not cheaper to buy through the Internet.  You can get the same product through a local agent, and have the benefit of being able to call him/her if you have any problems with your policy. If you buy through the Internet, who are you going to call, and will they care?

Disability Insurance – This is an area of planning that is often neglected, and that is very unfortunate. I would see what type of coverage your employer provides you with, and if the answer is nothing then consider buying your own policy.  One advantage of buying your own policy with after tax money is that if you do become disabled the benefit payments are completely tax free. This is not the case if you have the premiums withheld from your paycheck pre-tax.

Property & Casualty Insurance – Review your deductibles. Since most of us are scared to actually use our coverage for minor incidents consider raising your deductible.  I am a big fan of the $1,000 deductible.

Cash Management and Savings

Maximizing your rainy day fund (Emergency Fund). I am always shocked to see that prospects and clients have thousands of dollars locked away at the local bank that are earning very little if any interest. This is crazy because there are many great options that will help you earn a nice return on your cash holdings. I personally like Emigrant Direct (click here) it pays 5.05% and there are no fees and no account minimums. The other great thing is that you do not have to change your banking relationship because all you do is connect your current checking account to your Emigrant Direct account and then transfer money back and forth through the Internet. I have used this for family members and clients and it works beautifully. By the way they are FDIC insured.

I was once that guy who kept every receipt and input all of my cash and credit card transactions into Quicken (I must have been crazy). At the time it seemed reasonable, so that I could print annual reports to review what I was spending money on and how much I was saving. Thank God there is now a better alternative and it is Paytrust. I have been using this service for at least the last 5 years and I love it. 

For those wondering what in the world Paytrust is I will explain. Paytrust is a comprehensive Bill Pay Service. I have all of my bills (and I mean all) sent to South Dakota. Paytrust scans the bills into their system and emails them to me to let me know that I have a bill waiting to be paid. On the site you have the ability to pay bills and send checks to anyone or any business and here is the best part…. you can balance your check book automatically with their SmartBalance feature that syncs up with your bank through the Internet to see what payments have cleared.  What makes this better than your bank’s online bill pay is that you still get the advantage of having a float (meaning that it may take a few days for a payment to clear the account, and you can earn additional interest during that time), and also if you change your banking relationship it is no big deal since your Bill Paying service is separate. I also get a CD (compact Disc) at the end of the year will all of my bills for the year. This is tremendous so that I can run cash flow reports and it especially comes in handy during tax prep time. You can also setup instructions for automatic payments (example if my phone/Internet bill is less than $90 then Paytrust pays it automatically 5 days before it is due). This service will ensure that none of your bills slip your mind and you end up with late charges.

Retirement Planning – I am going to keep this simple. I think that with the decline of employer pensions and the joke of social security you need to be saving 15-20% of your gross wages (before taxes and with-holdings). If you can do this you will be greatly rewarded when it is time to enjoy the fruit of your discipline and hard work.

Investment Planning – Obviously since I have been doing multiple investment podcasts I am not going to spend too much time here (go listen to my past and future podcasts). I would recommend that you focus on how much you are spending on fees and expenses. I would also take advantage of the following advice when trying to determine how to allocate your investments between different investment accounts:

Taxable Accounts – Since long-term capital gains and dividends are taxed at 15% (Federal) I would focus on investing in large cap equities since they provide dividends and long-term capital appreciation opportunities. I would also consider buying my international holdings in a taxable account, so that you get the tax saving opportunity to take a credit for foreign taxes paid.

ROTH accounts (ROTH IRAs and ROTH 401ks) – load these up with appreciating assets like equities since everything within these accounts will grow completely tax free.

Traditional Retirement Accounts – Allocate your Fixed Income (Bonds) and Hedge Funds to your retirement accounts since their income is taxed at ordinary income rates.


Only $29/year provides you with a quarterly guide to make the best financial decisions and keep you up to date with the changing investment world. All proceeds directly help offset the cost of the podcast.

Since we are about to be in the 3rd Quarter I will make a special offer for everyone that signs up during the month of July.  If you sign up in July I will go ahead and send you a complimentary copy of the 2nd Quarter “Wealth Report”. This allows you to get a free quarter of great financial information since your subscription is listed in the system as beginning in the 3rd Quarter.

This 2nd Quarter’s Wealth Report covers the following topics:
**How Mismanaged 401(k)s Put Many Retirees in Jeopardy
** An Analysis of Variable Annuities (Buyer Beware)
** Important planning changes in how to handle Retirement Beneficiaries
** Five Economic Indicators to Watch Now
** A Checklist of Estate Planning Essentials


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