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Financial Independence (Getting to Point X): An Advisor's Guide to Comprehensive Wealth Management

Financial Independence (Getting to Point X): An Advisor's Guide to Comprehensive Wealth Management

John J. Vento

ISBN: 978-1-118-57095-1 April 2013 384 Pages

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Discover the ten key issues to achieving your financial goals and how to use them to realize your dream of financial independence

From saving to purchase a first car, to putting kids through college to planning for retirement, to preserving your estate for your loved ones, our financial goals change from one stage of life to the next. While those goals and the challenges we face in achieving them may differ, all of them have certain things in common. Saving, budgeting, managing debt, minimizing taxes and living within your means. These are a few of the 10 Key Wealth Management Issues which come into play (to varying degrees) when working toward specific financial goals. But there's one goal for which success relies on all ten keys coming together in perfect harmony: financial independence, also known as "Point X." No matter how you define it—whether it's a retirement income of $25,000 a year, or an estate worth $250 million—your future financial independence requires that you deal effectively with all ten key issues. And now this book shows you how to get it done, along with the guidance of a trusted advisor.

  • Supplies you with a complete roadmap for arriving at "Point X," financial independence with key milestones and important twists and turns clearly defined
  • Identifies the 10 key wealth management issues and offers priceless advice and guidance on negotiating each on your road to financial independence
  • Provides you with both success and failure stories so you can learn from others' real life experiences
  • Provides you with tax planning facts and strategies within the wealth management issues that will show you how to minimize your most significant expense and at the same time maximize your savings on the road to your "Point X"

Preface: Living the American Dream xiii

Acknowledgments xvii

Introduction Getting to Point X xix

Financial Literacy and the New Norm xx

Point X: Our Fundamental Financial Goal xxi

Ten Key Issues to Comprehensive Wealth Management xxii

Our Biggest Expense xxiii

Take a Financial Planning Checkup xxiv

The Power of This Book xxvii

Chapter 1 Committing to Living within Your Means 1

The American Dream Becomes the American Nightmare 1

Living within Your Means: The Essential Step 2

Simple Saving 6

Chapter 2 Understanding Taxes 11

A Brief History of the U.S. Tax System 12

Organizing and Retaining Your Records 15

Tax-Preparation Services 16

Accumulating Wealth through Tax Planning 18

Chapter 3 Determining Your Financial Position 23

Figuring Your Financial Net Worth 24

Case Study: How One Couple Learned They Were Spending More Than They Earned 24

Making Sense of Cash Flow 35

Establishing Your Financial Goals 57

Finding Trusted Advisors 61

Chapter 4 Managing Debt 67

Case Study: How Two Doctors Went Bankrupt in Only a Few Years—What Not to Do 67

Basic Principles for Managing Debt 71

Good Debt versus Bad Debt 73

Credit-Card Debt 74

Auto Loans 80

Student Loans 81

Home Mortgage Loans 82

Business and Investment Loans 86

Understanding Credit 87

Your Credit Report and Your Credit Score 89

Preventing Identity Theft 93

Analyzing Your Debt 94

Chapter 5 Insuring Your Health and Life 99

Choosing a Health Insurance Plan 100

Long-Term Care Insurance 111

Disability Insurance 118

Life Insurance 122

Buying Insurance Policies 128

Chapter 6 Protecting Your Property with Insurance 133

Case Study: How a Lack of Insurance Wiped Out One Woman’s Life Savings 134

Homeowner’s Insurance 136

Automobile Insurance 140

Umbrella Liability Insurance 144

Buying Insurance Policies 147

Chapter 7 Paying for College 153

Case Study: How Not Saving for Your Child’s Education Can Ruin Your Finances—and Your Child’s 156

Conducting a “Needs Analysis” for Your Children’s College Educations 160

Strategies for Saving Money for College Education 162

Education Tax Deductions and Credits 179

Chapter 8 Planning for Retirement 187

Case Study: Saving versus Not Saving for Retirement: The $1.7 Million Difference 187

Retirement Equation: Calculating Your Personal Point X 191

The High Cost of Waiting to Save for Retirement 193

What You Can Expect to Receive from Social Security 196

Qualified Retirement Plans 198

The Difference between Traditional IRAs and Roth IRAs 203

Fixed and Variable Annuities 209

Retirement Funding: “Needs Analysis” 212

Chapter 9 Managing Your Investments 221

Analyzing Your Risk Tolerance 222

Stocks, Bonds, Mutual Funds, and Exchange-Traded Funds 226

Diversification and Modern Portfolio Theory 234

Asset Allocation and Rebalancing 237

Dollar-Cost Averaging 243

Inflation and Taxes: The Biggest Drains on Investment Return 245

Medicare Surtax on Net Investment Income 246

Chapter 10 Preserving Your Estate 251

The Federal Gift and Estate Tax System 252

Legal Documents to Consider for Estate Planning 252

The Probate and Administration Process and Why You May Want to Avoid It 257

Using a Planned Gifting Strategy 261

Ownership of Property and How It Is Transferred 262

Reasons for Creating a Trust 265

Benefit from a Family Limited Partnership 277

Estate Tax Planning and Life Insurance 278

Chapter 11 The Time Value of Money 285

The Rule of 72 286

Appendix A: Selecting a Trusted Advisor 301

Appendix B: 101 Ways to Save $20 or More per Week 311

Appendix C: Basic Concepts and Definitions of Various Types of Taxes 321

About the Author 341

Index 343