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Adopting A Wealthy Attitude

new attitude about reducing his debt, Jones has created a positive, healthy, and profitable interaction with his money, says Kimberly A. Helm, a financial advisor with American Express Financial Advisors in Edina, Minnesota. BLACK ENTERPRISE had Jones consult with Helm to help him realize his short-term and long-term objectives. The following are her recommendations:


Based on a cash flow analysis of his expenses and income, Jones has about $825 in discretionary income each month.

Currently, his expenses are low. He needs to maximize his current living situation by saving as much as he can in cash reserves. He has $1,500 in checking and $8,400 in savings. He needs to salt away at least $10,000 (six months worth of living expenses). He should also put the $2,000 cash winnings from BE into his reserve, since he will more than likely have to tap into this fund for a down payment on a home. Once he makes the transition from an apartment to the two-unit dwelling, he needs to continue to maintain and minimize expenses by buying items in bulk, shopping with coupons, eating home-cooked meals, and conserving on energy use to reduce utility bills.

Jones needs to add a Roth IRA to the equation, which allows him to contribute a maximum of $3,000 a year. He is saving systematically, which is good, says Helm. Now it’s just a matter of making sure that he hits all sectors of the markets. He needs a more balanced portfolio of large-cap, small-cap, and value funds. In today’s volatile market, large-cap growth funds are taking a hit. Therefore he needs to diversify his portfolio so that his investments complement each other–when some stocks lose value, others increase in value. He should also consider investing in mutual funds to minimize risk. For Jones, mutual funds are a better investment than individual stocks right now.

Since one of his long-term goals is to retire at age 55, Jones needs to protect his current income by supplementing his employee insurance coverage with an individual disability income protection policy. Disability income protection makes sense for him because he still has 20 years of employment left. If during that time he were to get hurt and become disabled, his retirement target age would change. Whereas workers compensation pays for injuries sustained on the job or occupational illnesses, disability insurance covers injuries sustained anywhere–on or off the job, whether work related or not. Most people have disability insurance through their employers, but group plans generally only cover up to 60% of income. Single individuals should get an outside policy that covers up to 70%.

Jones doesn’t need to make any adjustments to his liabilities. His student loan is deferred while he is in school, therefore he should concentrate on paying off the remaining credit card debt. Once that is done, he should use one card for necessary purchases and pay off the balance every month. He has a two-year car

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