April 2005

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5 strategies to build your personal wealth

What do you think when you hear the words financial planning? Investing in the stock market?

The personal financial planning process reaches far beyond the buying and selling of stocks and mutual funds. In fact, investment management represents only one of the many steps required to reach short- and long-term financial goals. While no simple answers will call depreciated securities to rebound, certain strategies can help you offset the pain of declining portfolio values.

For starters, consider the following five planning strategies.

• Take advantage of your retirement plan. Are you eligible to contribute to a 401(k) or 403(b)? If so, contribute as much as you can. Contributions to these plans are made on a pre-tax basis. This translates to an immediate tax savings.

And if your practice matches a portion on employee contributions, the combination of tax savings and employer matching results in an immediate return on your money, regardless of market conditions.

• Refinance your mortgage. Given today’s low interest rates, refinancing your mortgage may be a smart move. In particular, if you have a variable mortgage, now may be a prime time to lock in a low fixed fare. Lower interest rates can reduce your monthly payments and increase your disposable income. This extra income can be used to meet day-to-day living expenses, especially if you are dependent on investment income or saving toward additional short- or long-term goals.

• Get properly insured. If you recently married, had a child, or incurred sizable personal debt, consider revisiting your insurance coverage. The premature death or disability of a breadwinner can crumble even the most thorough financial plan.

In addition to a death benefit, whole life policies offer a savings element called a cash value. Interest credited to your account grows tax-deferred each year.

• Save for your children’s college education. Many tax-advantaged vehicles are available today to help you save for your children’s college education. A Section 529 college savings plans is one of them. Section 529 plans offer tax-deferred growth and special estate-planning benefits. Regardless of whether your underlying investments are conservative or aggressive, the tax benefits of these plans make your money work harder than would comparable savings or investment accounts.

• Prepare a will. A will is a legal document that specifies how your possessions will be distributed and who will manage your estate upon your death. If you die without a will, state laws determine how your estate will be divided between your surviving spouse, children, grandchildren, and others.

Rarely, if ever, will state law match what you would have wished. In addition, if both parents die without a will designating who will be the guardian of a minor, the courts will make that decision for you. In light of these issues, even if you do not anticipate owing estate taxes, you should consider preparing a will.

Financial planning is more than investing in the stock market; it’s investing in your — and your family’s — future. With a little effort and the help of your tax and legal advisors and financial consultant, you can be well on your way to developing a total financial plan.

Jeremy Bardon is a financial planning specialist and consultant and partner with the High-Bardon Group at Smith Barney in Appleton, Wis. He can be contacted at 877-907-3286.

Disclaimer: Smith Barney does not provide legal or tax advice. Please consult with your tax and/or legal advisor for such guidance. Smith Barney is a division and service mark of Citigroup Global Markets Inc. Member SIPC.

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