What to do When..?
Financial Planning at Every Life Stage

by David Fox, V-President, Smith Barney Inc- Miami

The Boy Scout motto of 'be prepared' applies to more than just long hikes in the wilderness. It's never too early to plan ahead and take steps to prepare yourself and your loved ones for unforeseen circumstances.

Consider your future financial security. What steps have you taken to provide for yourself and your family down the road?

Let's recall the steps you take your personal financial plan. At each stage of your life, there are specific planning decisions you'll need to make and most of them revolve around the family unit. Traditionally, financial planning was age- based and involved mortgage payments and raising kids in your 20's and 30's, sending the kids to college in your 40's and focusing on estate planning and grandchildren in your 60's.

But today, tradition isn't always the best guide. Except for your retirement, today's financial planning decisions are influenced, less by your age and more by the age of your children and parents. Not everyone gets married in his 20's or 30's. The basic rules, however, haven't changed. You still need to balance current lifestyle with future needs.

At each life stage, consider these three issues: how to invest, how to adequately insure yourself and what you'll leave behind. Here are some basic guidelines for "What to do when."

You've moved out of your parents' house and started a new job. You'll be earning a steady salary. All the things you should do now are probably secondary to those you want to do. But these are the years for developing good habits of spending, saving, borrowing and investing that will stay with you the rest of your life.

What about savings? A common mistake made by many people ages 24- 35 is living "paycheck to paycheck." Try to have an emergency fund equal to three to six months' living expenses. And pay off your credit cards every month. There are few things more frustrating than paying off last month's credit card bills with this month's paycheck. Then consider your future goals - a first home for example, or retirement.

Your retirement fund Invest for growth. Since you have at least 30 years before retirement, in which your money grows tax- deferred. Take advantage of your company- sponsored retirement plan, which not only helps you save for retirement, but also lowers your taxable income. Since you're investing for the long term, choose investments with growth as your objective. Consider stocks of rapidly expanding companies - or mutual funds that invest in these stocks.

Avoid the "invincibility trap" At twenty- something you probably think that nothing can harm you. Disability insurance may be the farthest thing from your mind. But disability insurance can be a good safeguard against the unexpected. If you don't have coverage at work, get some, or if you're only minimally covered, get more. And don't forget renter's insurance. Even, though you may not own your home, your possessions are still at risk in the event of fire, theft or flooding.

By age 35, you should be a master at the basics of managing your money. Settled down with a mortgage and spouse, you're now realising there's an even greater challenge to meet - raising a family. Without question, children are expensive. When they arrive, so do the bills ..... child care, clothing, groceries, medical costs and, eventually, college tuition. What investments should you consider? Although you shouldn't ignore aggressive growth stocks as you enter your forties, sturdy growth and income funds invested in large blue- chip companies offer a more conservative alternative for building wealth. Finally, if you have children, or plan to, buy life insurance and get started on drawing up your will. You can't afford to skimp on the future financial security of your dependents.

They say these are the years you've got things in order. Your kids are grown and you're comfortably saving for retirement. Unfortunately, you may also find yourself "sandwiched" between the demands of your children and your aging parents - a three- way tug of war between their needs and yours. College tuition costs and long- term care of convalescing parents can easily deplete savings. If you haven't saved enough, either refinancing your home or perhaps a home equity loan at a relatively low interest rate could be good sources of funds. Long- term care insurance policies are another alternative.

What will I leave my heirs? By the time you reach your 50's, estate planning becomes critical. Focus on taking steps to reduce estate and land tax, which could range between 37% and 55% of everything you own over $600,000. This could involve creating trusts for your surviving spouse and children. Since trusts can be complicated, we suggest you speak with your financial consultant and your tax advisor to explore all your options before making any decisions. Your financial plan is as unique as you are. However, at every significant juncture in life, we all need to make some very basic decisions to ensure our future financial well- being and that of our dependents. A professional can offer valuable guidance all along the way, from investing to saving to preserving wealth for your heirs. Talk to a financial consultant today.

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