Clean Our Your Financial Closet
02/03/2012 12:15 pm EST
Focus: ASSET PROTECTION
You shouldn’t start a financial plan without sitting down at your computer (or with pen and paper) and working out the basics, says Terry Savage, who also explains the next asset bubble that could pop soon.
Terry, you have been a fierce advocate for financial planning as long as I’ve known you. How do you get started? Where do you go for help?
Well, this is so important, and yet it’s such an intimidating topic that I’m sure people have turned off: "Well, I don’t want to think about financial planning." Don’t go away yet.
The first step in financial planning is simply getting organized. You know, if your closet is a mess and you can’t find anything to wear—and similarly if your financial life is a mess—you can’t get organized to get ahead in life.
So my very first step is to figure out where you are now. That means cleaning out all those drawers and setting up a system. Go to the container store and buy boxes or file boxes.
Or better yet, go online and start with Quicken. There’s nothing that competes with Quicken anymore, so go to Quicken.com and download the program. It’s not just about tracking your bill payments and your income, but it sets up that dreaded word "budget," or at least lets you know where you stand and tracks all your investments.
For those of you who are on smartphones, and have got to have it now anywhere, Quicken bought Mint.com, which is the application that lets you track all your finances anywhere. It even sends you e-mails or text alerts when you are about to go over your credit card limits, for example. So…getting organized is the first step.
You think I’m going to say get help next, but that’s not the next step. The Savage Truth on Money—no commercial, this is my latest book—is designed to give you the basics on every topic so that when you do get help you’ll know what you’re talking about.
You can’t blindly hand your finances over to someone, even a certified financial planner—and that’s where you do want to go—because until you know enough about it to know whether you’re getting a sales pitch or good advice, it starts with your own education.
On MoneyShow.com, we have all kinds of information on the Web site, and there is information free on the web all over. You need to do your homework. There is no way around it. Nobody cares as much about your money as you do.
And then it’s time to get financial planning. And the question is, how is this person being compensated? Only by commissions? They’re going to have you doing stuff, right? So, if you need a certified financial planner: CFPboard.org, Certified Financial Planner Board.org. Or you can go to feeonly.org, which is the fee-only financial planners.
And don’t just stop with one. If God forbid you had a diagnosis of an illness, you’d go and get a consultation from several doctors and trust your instincts. That’s the basis.
How do you get a grip in an uncertain market on things like that are important, like retirement planning, college planning, all of that?
Well again, that’s why I write books and write columns up at TerrySavage.com, because each world is a separate world. They’re all interrelated.
Let’s start with student loans. The biggest bubble coming next is the student loan bubble, which refuses to burst even though there is more than $1 trillion of student loans outstanding—more than there is credit card debt.
You know why? Because you can default on your credit card and go bankrupt, or on your mortgage and you are foreclosed, but you can never escape student loans. So, I tell parents who have high school seniors to be very careful now.
The job market is not robust. I know you don’t want to have your kids living at home for two more years—they don’t want to be there either—but how about two years at a community college to cut that cost dramatically, and then go on to the university? It’s something we all have to think about.
There are wonderful Web sites and resources up at TerrySavage.com for getting advice on student loans, both in the process of getting them and then the process of paying them down.
Let me make note of one great Web site: IBRinfo. There is a new federal program for repaying student loans called Income-Based Retirement Program. IBRinfo.org is the site where you can learn more about it.
So if you’re a graduate with debt and you can’t pay, don’t hide under the covers. Go work it out.
On the other end of the spectrum, long-term care insurance. Are you an advocate of that?
Oh, I’ve long been an advocate of long-term care insurance. I think this is particularly a woman’s issue, because even if you have a man in your life, the odds are since we live longer that he will need the care first. You’ll use up all of your resources and then be left with no money and no energy. So long term care insurance is a really interesting topic.
People bought it years ago thinking the prices would remain flat, and of course the insurance companies have raised premiums. Now would be the time to buy it. They have figured out that people never drop their long-term care policies.
And there are new policies. If you have money, you can combine it with life insurance or an annuity product so that if you don’t use the long-term care portion, you still have access to the money. I wrote a lot about that in The Savage Truth on Money.