Taking steps toward financial independence: our 2003 financial fitness contest winners are reaching their goals with solid fiscal planning

Black Enterprise, Dec, 2004 by Sheryl Nance-Nash

THE ADVICE

Use positive cash flow to increase savings

Reducing the mortgage payments will give the couple positive cash flow to increase their savings, not only for an emergency fund and retirement but also for their daughter's college education.

* THE FOLLOW-THROUGH

The Jacksons are using the extra $330 a month from the refinancing to apply to the down payment on their new house. They also hired a financial planner to assist them with reallocating their retirement plans. Kim has 30% of his holdings in an S&P 500 Class 1 Fund, 40% in International Small Company Fund, and 30% in Bond Fund-High Income Portfolio Class A. Jacqueline's assets are similarly reallocated. Their retirement plans have grown from $27,611 to over $60,000. Jacqueline's company's stock options are now worth more than $13,000. Kim will open a Roth IRA, to which he will contribute $55 a month. The couple is considering opening a joint mutual fund and have $90 monthly allocated toward their daughter's 529 savings plan.

THE ADVICE

Restructure insurance

Get a combination of permanent and term life policies.

* THE FOLLOW-THROUGH

The Jacksons have purchased $250,000 term and $100,000 permanent life insurance on Jacqueline, and Kim's application is pending for $1 million term and a $100,000 permanent life policy. They plan to increase the amount of permanent life insurance and reduce term coverage annually.

THE ADVICE

Draft living will and other legal documents

In order to avoid probate and its inherent financial costs (court costs, legal fees, travel expenses, and time off from work), have an attorney prepare: a pour-over-will, which identifies any assets outside of the trust; a living will, which outlines wishes should you be placed on life support; and a durable power of attorney for healthcare and durable power of attorney for assets, which designate medical and financial decisions for you.

* THE FOLLOW-THROUGH

Top on the to-do list in the next month or so, is finalizing their will and estate planning documents.

WINNER

Tiffany Hall

THE ADVICE

Establish a business, and shelter taxable income Get a tax ID number and set herself up as a consultant, which will allow her to deduct business-related expenses--supplies, travel, and entertainment for conferences. She could also take advantage of an existing SEP-IRA.

* THE FOLLOW-THROUGH

Though she didn't formally set up a business, Hall has pursued different streams of income, such as the mystery shopping the planner suggested, doing everything from test-driving cars, to eating at restaurants, for example. She's also taken a class to become a travel agent and has handled travel bookings, where she splits the commission with an agent who has the required license.

THE ADVICE

Increase streams of income

Aim for having five avenues of income outside of the 9-to-5 gig.

* THE FOLLOW-THROUGH

Hall plans to explore freelance legal writing, as she has seen how a few hundred dollars here and there adds up.

THE ADVICE

Take over mortgage payments

Put name on deed, take over the house note and taxes, thereby reducing tax liability, as mortgage interest and taxes are deductible.