04/17/98

The Benefits from Financial Planning

Financial planning is neither mysterious nor overly complex or time consuming. However, taking the few hours it does require can give assurance that your short & long-term financial priorities are being addressed. It will also affirm that you are taking the absolute best path to meet your financial goals.

Are you a candidate for financial planning?

Absolutely. If you have never had your financial situation reviewed by a professional or if you haven't done so in over a year -- you could benefit from the analysis. A review of your finances can save you money, create the potential for greater investment returns, put you on the right track to meeting your future goals, and reduce risks that could lead to monetary problems for you or your family. Most of all, there is a peace of mind that comes from financial planning because you are taking action to meet your goals. This provides a sense of control and comfort as you look towards your financial future.

Areas Covered by a Financial Plan

Investments -- a review of your current investments ( the rate of return you have been getting, the fees your paying, the balance of your portfolio); an assessment of how to position your portfolio; recommendations on future investments based on an analysis of much you'll need when you need it.

Retirement -- how much income will you need/want for retirement? What is your target retirement age? Will your current retirement plan and investments along with pension plans and social security provide you that level of income? If not, how much more do you need to save and at what rate of return to make your goal? Should you convert IRA's over to Roth IRA's? Is your 401k properly invested? A financial plan will answer all of these retirement planning questions.

Insurance -- a thoughtful look at how much life or disability insurance you need (what resources need to be protected) -- resulting in having the right type of insurance, the right amount of insurance (not too much or too little), for the right price. (A review of current policies will determine if you are over insured, are paying too much or have a poor product.)

Education Funding -- Some of the relevant issues, here, are easy: How many kids? How many years to save before they reach college? How much support do you want to provide? -- 100 % of costs at a private institution, 50% of a state university? With this information we can determine how much you need to invest. We can also advise you on what investment instruments to use including custodial accounts, educational IRA's, and more.

Cash/Emergency Funds -- Emergencies (everything from car repairs to out-of-pocket medical expenses) that require liquid cash reserves are an important part of your financial plan. You want to have adequate cash reserves and to hold them in an appropriate place. Many people let their savings account grow too large and do not take advantage of better interest rate returns in money market accounts and bond accounts with check writing privileges.

Estate Planning - if you have a sizable estate or projections show that your estate will outstrip your unified estate tax credit(s), you should have an estate plan developed. A financial plan is the first step towards showing you the need for more extensive estate planning. A proper estate plan will save you from paying a large amount of otherwise avoidable estate taxes. You may also need to explore long term care insurance to protect loved ones and preserve the estate for your heirs.

The Process

It's easy to start the planning process because you already know the answers to key questions -- How much do you make? What do you plan for the kids? How long to retirement?

The initial meeting with a financial advisor will last between 1 - 1 ½ hours depending on the complexity of your financial situation. The plan presentation, usually provided 1 to 2 weeks later, will take the same amount of time. Waddell and Reed offers two financial plans: (1) a complete financial plan, which will cover all of the topics addressed above; and (2) a more simplified plan.

Please contact me today to receive your initial consultation for free. When calling, make sure you tell me that you read the benefits of financial planning on the SNET Internet Web site. Don can also be reached at: (203) 281-7018.

Please send questions or comments to dcoffin46333@wradvisors.com.