Taking Steps Toward Financial Independence

Our 2003 financial fitness contest winners are reaching their goals with solid fiscal planning

have to do the same with a traditional mortgage).
THE FOLLOW-THROUGH: The Jacksons refinanced the mortgage on their own home and the home equity loan. They plan to refinance their first mortgage again when they rent it out and will get an interest-only mortgage as recommended.

THE ADVICE: Use positive cash flow to increase savings. Reducing the mortgage payments will give the couple positive cash flow to increase their savings, not only for an emergency fund and retirement but also for their daughter’s college education.
THE FOLLOW-THROUGH: The Jacksons are using the extra $330 a month from the refinancing to apply to the down payment on their new house. They also hired a financial planner to assist them with reallocating their retirement plans. Kim has 30% of his holdings in an S&P 500 Class I Fund, 40% in International Small Company Fund, and 30% in Bond Fund-High Income Portfolio Class A. Jacqueline’s assets are similarly reallocated. Their retirement plans have grown from $27,611 to over $60,000. Jacqueline’s company’s stock options are now worth more than $13,000. Kim will open a Roth IRA, to which he will contribute $55 a month. The couple is considering opening a joint mutual fund and have $90 monthly allocated toward their daughter’s 529 savings plan.

THE ADVICE: Restructure insurance. Get a combination of permanent and term life policies.
THE FOLLOW-THROUGH: The Jacksons have purchased $250,000 term and $100,000 permanent life insurance on Jacqueline, and Kim’s application is pending for $1 million term and a $100,000 permanent life policy. They plan to increase the amount of permanent life insurance and reduce term coverage annually.

THE ADVICE: Draft living will and other legal documents. In order to avoid probate and its inherent financial costs (court costs, legal fees, travel expenses, and time off from work), have an attorney prepare: a pour-over-will, which identifies any assets outside of the trust; a living will, which outlines wishes should you be placed on life support; and a durable power of attorney for healthcare and durable power of attorney for assets, which designate medical and financial decisions for you.
THE FOLLOW-THROUGH: Top on the to-do list in the next month or so, is finalizing their will and estate planning documents.

MAY WINNER Tiffany Hall
Tiffany Hall used to read articles about people who earned less money than her, but seemed to be better off financially. These days, she likes her own story. For one thing, she paid off her Lexus RX300 SUV six months ago. She had nearly $20,000 left on her loan, and started paying $2,000 a month to help it disappear. By the time she was down to $8,000, Hall charged the balance to a zero-interest credit card and kissed it goodbye. While she still owes $5,000 on that credit card, she incurs no interest until September 2005, by which time there will be so little left that she’ll withdraw money from her savings to pay it off. The $125 she pays on the credit card bill is a far cry from the $415 car payment. She

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