Top 20 Tips from 20 Years


by David D. Holland



Over the last two decades, I’ve seen investors do some pretty unique things with their money. Some strategies have worked and some haven’t. Whether you are in retirement or still preparing for it, here are some tips you may find helpful:



Financial Plan


1. Establish and build an emergency fund you can access in 24 hours if necessary. Three to six months living expenses, plus deductibles on all your insurances, isn’t a bad place to start. Compare that number to 5% of your total assets and use the larger. Maintain this fund and use it only for emergencies. A new kitchen is not an emergency; a fire that destroys the kitchen is.


2. Your insurance needs change with your age and stage of life. Health, disability, and term life insurance are needed more on the front end, while long-term care, Medicare supplements, and annuities may be more important on the back end. Ask an experienced, independent agent to guide you.


3. Develop a realistic plan to pay-off debt. Make the minimum monthly payment on all obligations and then apply any extra funds against the highest interest debt. Once the first debt is paid off, apply the extra funds and first debt’s monthly minimum payment to the next highest interest debt. Work through all the non-deductible interest debt first, then focus on home debt.


4. Carefully consider your personal situation when deciding whether to pay off equity lines and mortgages. Many questions need to be asked, including: What is the interest rate? Is it variable or fixed? Is the interest deductible on your income taxes (do you itemize and/or are you subject to the phase-out of you deductions)? What are your investment alternatives if you don’t pay-off the debt? What could those investments earn? How long do you plan to stay in the home? And, what are your re-financing options? There’s no magic formula but, armed with these answers, a prudent financial decision can be made.


5. Before you retire, move a portion of your nest egg to income-producing investments. Be very careful not to draw money from investments that could fluctuate significantly in value (like the stock market), especially if you are drawing more than the interest and/or dividends. If you are liquidating and drawing from your principal, poor investment performance could deplete your funds prematurely. Seek low-risk for your principal and reliability for income.


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