You can make your own decisions.
Like many Americans, you know you should educate yourself about financial matters, but you're not sure where to turn, whom to believe. Sure, there's more financial information available today than ever before, but it's not necessarily useful to the novice. So you do what many people do. You react.
When a stockbroker calls with a hot tip, you buy some stock. When your insurance agent calls and says your coverage is inadequate, you buy a new policy or add more coverage to an existing one. A colleague quotes a glowing report about a hotshot mutual fund and you decide to follow his lead and get into the fund.
The vast array of information about financial products can be bewildering, and much of it may not be what you need.
"A lot of publications deal with what's of interest right now rather than what you need to know in the long term," says Andrew M. Wray III, a financial planner in Memphis, Tennessee. "Magazines put out so much information about which products are available that people get bogged down and can't make a decision."
The best thing to do is step back from the information overload. Figure out what you need to know to do a good job of financial planning. Once you have the information you need, following through is easy. "Successful money management is just applying good common sense to your pocketbook," notes Larry Elkin, a certified public accountant and financial planner in Hastings-on-Hudson, NY.
Look at six areas: budgeting and cash flow, risk management and insurance, investments, tax planning, retirement planning, and estate planning. Here are some good resources on each.
* If you feel that your spending is out of control, or you can't get a handle on where your money goes, consider a software program called Quicken, a bookkeeping program that helps the most disorganized people mend their ways.
You can order the program from Intuit for the list price of $69.95 or get it retail for about half that price.
* If you need a basic primer on insurance, check your public library for a copy of How To Get Your Money's Worth in Home and Auto Insurance, by Barbara Taylor (McGraw-Hill, 1991).
Life Insurance: A Consumer's Handbook (Indiana University Press), written by Joseph M. Belth, a professor at Indiana University and a frequent critic of the industry, is a good guide to buying life insurance.
So is the hefty The Individual Investor's Guide to Low-Load Insurance Products (International Publishing Corp.), written by Glenn Daily, an insurance consultant in New York.
Expect to spend some time with these books. Life insurance is a complex topic.
* For basic investing advice, try Charles Ellis' Investment Policy: How To Win the Loser's Game (Business One Irwin). It's only 80 pages long, but investment pros swear by it.
"You can read it in a couple of hours, but it's better than a whole shelf of books on the subject," says Harold Evensky, a financial planner in Coral Gables, Florida, who specializes in investments.
* If you want information that deals specifically with mutual fund investing, the best source is Morningstar Mutual Funds, a rating service report that provides comprehensive data on 1,240 different funds. More and more libraries are carrying this book.
For serious mutual fund investors, Morningstar also publishes an investment newsletter called The Five-Star Investor. A year's subscription costs $65. Unlike many investment newsletters, which offer advice on how to time the market, this one provides good, basic advice on mutual funds.
"This is the only newsletter our firm uses, because it's educational," Evensky said.
* For tax information and planning, you might want the current edition of The Ernst & Young Tax Guide or The Guide to Income Tax Preparation published by Consumer Reports Books. These aren't light reading. You won't read them from cover to cover.
But when you have a question about taxes--such as which medical expenses are deductible--it's helpful to have a guide on hand that provides the answer.
* For retirement planning, get a copy of the T. Rowe Price Associates software program called the Retirement Planning Kit (800/541-4041, $15). You can expect the kit to plug the mutual funds offered by T. Rowe Price. Overlook that portion if you like.
More important, the kit walks you through the basic concepts you need--like the relationship between risk and reward, the effects of inflation on savings, and the importance of investing early and regularly.
The kit then helps you calculate what you'll need--and what you'll have--at various ages approaching retirement.
* A good primer on how to write a will and other basics of estate planning is Eugene J. Daly's Thy Will Be Done (Golden Age Books). Or you can look for The Beneficiary Book, which is assembled in a three-ring binder. This workbook provides spaces where you can fill in all the information about yourself and your business affairs that your family will need.
It doesn't give estate planning advice, but it will save your survivors hours and hours of headaches by pulling everything together in one place.
It's available by mail order only, for $30 plus $3 shipping and handling by writing to P.O. Box 188059, Carlsbad, CA 92009.
There are also some good books that lead you through life cycle changes, such as the birth of a baby or the death of a mate. Two good ones published recently are Long Distance Caregiving: A Survival Guide for Far Away Caregivers, by Angela Heath (800/356-9315) and On Your Own: A Widow's Passage to Emotional and Financial Well-Being, written by the highly-regarded financial planner Alexandra Armstrong and Mary R. Donahue (Dearborn Financial Publishing, Inc.)
Finally, an excellent source of information on all aspects of financial planning is the American Association of Individual Investors.
For an annual membership of $49, you receive the monthly AAII Journal. And, as a member, you're entitled to attend seminars on financial topics such as insurance, estate planning, and investing. This group is dedicated to objective investment advice, and that's what you'll get.
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|Title Annotation:||Personally Speaking|
|Date:||Sep 15, 1993|
|Previous Article:||A column of tips - and a new online service.|