Taking Steps Toward Financial Independence

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

took the planner’s advice and opened a tax-exempt money market account, to which she applies the difference of what she would have paid — $290, monthly.

Hall is also feeling good about her salary. With the cost of living increases and step raises, the contract attorney’s moved up from $70,260 to about $80,000. The jump has given her saving power. Hall increased her contribution to her 403(b) from 5% to 10%, and is putting in a total of $1,000 a month into her money market account.

“Having that car paid off is a big thing off my back. I’ve found that I’m a good saver and I’m pretty much debt free now,” she says proudly.

Since we last talked to Hall, her mother has changed her mind about wanting to move to a condo and will stay in her own home. Consequently, Hall, 33, is now focused on saving for a home of her own instead of buying her mother’s. The fact that she only pays $400 rent to her mother will give her the ability to build funds quickly. “I’m not going to rush; I want to move out in style — do it right.”

THE ADVICE: Establish a business, and shelter taxable income. Get a tax ID number and set herself up as a consultant, which will allow her to deduct business-related expenses — supplies, travel, and entertainment for conferences. She could also take advantage of an existing SEP-IRA.
THE FOLLOW-THROUGH: Though she didn’t formally set up a business, Hall has pursued different streams of income, such as the mystery shopping the planner suggested, doing everything from test-driving cars, to eating at restaurants, for example. She’s also taken a class to become a travel agent and has handled travel bookings, where she splits the commission with an agent who has the required license.

THE ADVICE: Increase streams of income. Aim for having five avenues of income outside of the 9-to-5 gig.
THE FOLLOW-THROUGH: H
all plans to explore freelance legal writing, as she has seen how a few hundred dollars here and there adds up.

THE ADVICE: Take over mortgage payments. Put name on deed, take over the house note and taxes, thereby reducing tax liability, as mortgage interest and taxes are deductible.
THE FOLLOW-THROUGH: Since her mom is no longer moving, Hall is simply saving for her own home.

THE ADVICE: Build up assets. Change to a tax-free money market account and keep the interest earned. Put the $2,000 contest winnings in the tax-free money market account. Reallocate government securities and fixed-income investments in 403(b) plan to more growth-stock vehicles as the market starts to rebound.
THE FOLLOW-THROUGH: Hall did open the tax-exempt money market account, put the $2,000 contest winnings in it, and has been steadily adding to it monthly. She has also changed her 403(b) allocation to a variety of large, small, mid-cap, and international stock funds.

THE ADVICE: Create an estate plan. Set up wills and trusts for mother and daughter. In the event of an untimely death, the state would automatically assume Hall’s assets, not her mother or

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