Taking Steps Toward Financial Independence - Page 6 of 6

Taking Steps Toward Financial Independence

line of credit, which they tapped to pay off Michael’s car loan.

THE ADVICE: Maximize income. Put $150 in Michael’s mutual fund, the T. Rowe Price Capital Appreciation Fund, and $150 in the 529 college savings plan. Michael should bump up his 401(k) contribution to 15% of his salary (or the max). Both should get more aggressive in their investing options.
THE FOLLOW-THROUGH: The couple has bested the planner’s recommendations, increasing their contributions to the 529 plan to $200, instead of $150. Regina has increased her contributions from $80 to $220 a month. Furthermore, Michael receives 1% of his salary in company stock and is eligible for a pension completely paid for by the company.

THE ADVICE: Open up a second 529 plan. The gains are tax-free and the contributions provide a tax deduction to the plan owner. Revisit estate plan.
THE FOLLOW-THROUGH: They opened the second 529 plan and are saving $80 a month for their younger son’s education.

THE ADVICE: Purchase additional life insurance. Buy a minimum of $250,000 and acquire disability insurance.
THE FOLLOW-THROUGH: Michael and Regina have both beefed up their life insurance to $250,000, and are looking into disability insurance.