Henry K. (Bud) Hebeler

9/24/02

1. Make an annual plan that projects the future. It's a mistake not to do this. Involve your spouse. Keep a file. See how you did versus last year's plan. Redo the plan every year so it’s consistent with the savings you’ve accumulated to date. Plan on a realistic retirement age where you’ll have enough resources to provide for all those years without a job. Don’t arbitrarily pick a retirement age and assume you’ll have the means to cope with the future. If you are already retired, use the plan to determine how much you can spend so your money will last till death.

2. Use automatic paycheck deposits to retirement savings. Then adhere to a strict budget while trying to save for more than retirement and eliminating all credit card debt. The simplest budget method is to use one of my free programs, but if you don't mind getting married to your computer, Quicken is OK. Fact: This country is drowning in debt with record levels in government, business, and personal debts. Earn interest, not pay interest!

3. Have some kind of allocation discipline for all long-term investments. Don’t buy an investment that is not in line with your allocation strategy. I keep my stocks in an age-dependent corridor. Stick with it. If you are a holder of laddered bonds with high coupons, wait until they mature to convert to stocks if necessary to meet your allocations.

4. Pay attention to financial costs such as money manager’s fees, mutual fund costs, broker’s commissions, etc. They can kill you. (There's an article I just read that said American Express charges up to 3% of your assets every year. Wow!) After you subtract costs, taxes and inflation, your real growth can easily be negative. Don’t believe those estimates based on sustained growth over 10% each year. The financial industry and the government have ways to take much of that growth from you.

5. Learn from other’s financial mistakes: Avoid partnerships of any kind. Don't even think about collectibles or commodities. Never buy options. Don't maintain a credit card debt. Never buy securities on margin. Never borrow from a 401(k). Don't try to pick stocks. Buy index funds instead. If you have enough money, buy laddered bonds rather than bond mutual funds.

6. Keep reserves for known replacement items and emergencies. Example replacement item: If you save an amount each year equal to the cost to buy a new car divided by the number of years you’ll use it, you’ll someday be rich because you won’t have to buy your next car with a loan.

7. Most people think their home is their best investment. Unless you live in an oversized castle, don't count your home as a retirement resource. Instead, consider it your last reserve for unknown events very late in life. Downsize quick if you think you need a home for retirement funds and invest the gain in a retirement account.

8. Get some financial education. Read books by people like Jonathan Clements, John Bogle (or his speeches on www.vanguard.com), Charles Ellis, William Schultheis, Lynn O'Shaughnessy, William Bernstein, and Henry Hebeler. Review the free papers on www.analyzenow.com. Subscribe to The Wall Street Journal or Business Week for good economic perspective. I like the retirement related articles in Kiplinger’s publications, but I dislike magazines that advertise they will make you rich by picking the latest hot stocks. Listen to CNBC with the understanding that every guest is trying to sell something. Several radio financial talk programs are excellent: Ray Lucia’s On The Money, The Clark Howard Show, Paul Merriman’s programs, etc.

9. Lack confidence? Get some professional financial help from a fee-only planner (www.napfa.org), not your broker or insurance agent. CPA’s with a PFS degree (www.cpafps.org) are often excellent.

10. Prepare for the worst. Get a will, durable power of attorney, living will, and a good set of files for your financial information. The Retirement Decision Assistant from www.analyzenow.com will get you going in the right direction.

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