sister-that is, when she wasn’t in and out of foster homes. “I assumed such an adult role as a kid. But I realize that I’ve not really been as responsible as an adult,” she admits. “I just looked up and one day I was 40-something,” she says.
Although Giannetti’s bills currently average roughly $600 a month and she has avoided being burdened with the credit card debt that afflicts many Americans, she acknowledges being in a precarious financial position. “I live on the edge every month. But it doesn’t even bother me anymore,” she says. “Now I just have faith that (my finances) will be taken care of.”
But Giannetti is now looking toward the future. She would like to travel and, most of all, leave something of value to her 27-year-old son. Other than helping him, “I feel like I have very little goals with regard to financial planning.”
To meet those goals she will need to develop a solid financial plan-now.
MAKING THE RIGHT MOVES
Bryant, the fund manager, offers some general advice for those like Boyce, who’ve already begun to save and invest for the future, as well as others like Giannetti, who have started late. First, he recommends that people age 40 and older write down three financial goals and rank those objectives in order. Stay away from “fuzzy goals” such as “I want to be comfortable” or “I want to be rich.” Instead, he advises clients to quantify what “comfortable” or “rich” means to them.
Next, set up a small worksheet, indicating the time period in which you want to achieve each goal and the total amount of money it’ll take to reach it (see Pages 152-154 for worksheets). Be sure to include in the grid how much money you have to start with, and how much you can afford to put toward your goal each month. What’s left is the annual rate of return
required to reach the target-a reasonable rate of no more than 12% or so. If the rate of return is unachievable, then make adjustments, such as lengthening the time horizon or increasing monthly savings. The bottom line: be realistic about your expectations.
GETTING PREPARED-BEFORE YOU INVEST
LeCount Davis, a fee-only certified financial planner for L.R.D. Management Group in Chevy Chase, Maryland, says he frequently encounters people who come into several thousand dollars in “extra cash” and are immediately ready to jump into the stock market. But these people haven’t yet got their fiscal house in order-in terms of whittling debt down to a manageable size or taking an honest look at their spending patterns.
The biggest oversight tends to be setting up a contingency fund, or a so-called rainy day account. Pros say this fund should consist of anywhere from three to six months’ basic living expenses in order to tide you over in the event you unexpectedly lose your job or become unemployed for a long period of time. Even people who have done quite a bit of financial planning and have invested in the stock market often