DIARY OF A BABY

vinay mohanty

NOT GETING SMS FROM LIAFI DEREGISTER

vinay mohanty

If you smoke your children will efect

vinay mohanty

well insurance means chalking out the right cover

vinay mohanty

now a days life insurance is most wanted

vinay mohanty

END is not the end

END is not the end ,in fact E.N.D is "Effort never Dies"

E - Effort
N- Never
D - Dies

and if you get no in an answer, then remember no is next opportunity' Always be positive.
 

vinay mohanty

Mediclaime Cashless and divisiona lavele dicenralised

vinay mohanty

BJP cautions UPA not to raise FDI limit in insurance

BJP leaders are of the opinion that standing committee on finance has already recommended 26%FDI 

Gyan Varma / New Delhi Sep 24, 2012, 11:09 IST

The United Progressive Alliance (UPA) government is on a spree to bring crucial economic reforms but the Bharatiya Janata Party (BJP) has cautioned the union government not to raise the limit of foreign direct investment (FDI) in the sectors related to insurance, banking and pension reforms and the government should follow the recommendations of the standing committee on finance. 

Senior BJP leaders are of the opinion that standing committee on finance has already recommended 26% FDI in Pension Fund Regulatory and Development Authority (PFRDA) Bill and Insurance Bill and the union government should not raise it to 49%

 cent because even the members of the Congress party, who are part of the standing committee on finance are of the opinion that the FDI limit should remain at 26% cent.

  “The standing committee on finance has sent recommendation on one pattern so that FDI limited remains at 26% but if the union government decides to change it that it would not be beneficial. The former finance minister Pranab Mukherjee had already 

 agreed to follow the recommendations of the parliamentary committee, so the government should not go back on the commitment,” said a senior BJP leader. 

 Senior leaders of the BJP are also hopeful that the two Bills will not be passed in the Parliament if the government decides to raise the limit of FDI from 26% to 49 per cent because the UPA doesn’t have the required numbers in the house. 

 West Bengal chief minister Mamata Banerjee has already threatened to ask for a debate in the Parliament on the issue of allowing FDI in multi-brand retail to further embarrass the UPA government. Although BJP led National Democratic Alliance (NDA) has 

 not made a similar demand yet, the party will support Banerjee’s demand so that it is able to put pressure on Samajwadi Party (SP) and Bahujan Samaj Party (BSP) to stand against the government on the floor of the house. Both the Uttar Pradesh based parties 

 are supporting the government but they are against allowing FDI in multi-brand retail.

LIAFI jindabad

vinay mohanty

Circular in relation to Mode of travel, DA,Incidental and advance of CM CLUB CONVENTION

vinay mohanty

Keep important documents handy while claiming health insurance reimbursement

A health insurance policy, which does not provide the facility of cashless claim, will require the insured to settle the hospital bills directly on undergoing medical treatment. The same will apply if the individual is covered under a cashless facility but has been treated in a hospital not covered under the facility, or if the cashless request is turned down by the third-party administrator (TPA). In all such cases, the individual has to settle hospital dues upfront and then claim the reimbursement from the insurer.

Reimbursement form

 A reimbursement claim form needs to be filled and submitted for processing to the insurance company if claims are processed in-house or are sent to the TPA. The form is usually is available with the TPA and insurer or can be downloaded from their websites.

Documents

 The duly filled form should be accompanied by documents supporting the claim. These include original hospital bills and receipts, prescriptions, doctor's note for tests and investigations, details of operation performed and surgeon's bill, receipt, etc.

Processing time

 The claim is processed only after the form and all documents are received. It usually takes about 15-21 days for verification of the claim, ascertaining the eligibility and processing. The reimbursement cheque is then sent to the customer.

Points to note

 1) Insurance companies may require intimation of hospital admission within the period specified.
 2) The insurer will specify the period after discharge within which the reimbursement claim has to be submitted.
 3) The company can deny the claim, fully or partially. In such a case, a letter giving the reason for the same is sent to the policyholder.



vinay mohanty

A must for wives - financial literacy

We see many articles where the family is suddenly on the streets or at the mercy of the relatives when the head of the family is no more. The primary reason for this is that the lady of the house is not aware of how her husband managed the finances and how much savings they have.

The Open Page has had articles on how men are struggling in the kitchen in the absence of wives or on husbands praising their wives for efficient handling of household work. It is heartening that there are husbands who acknowledge the effort their better halves are putting in in running the home efficiently.

But there is one aspect where the homemaker is not expected to be an expert or it can be said that our patriarchal society is happy that she is not even aware of it. This article is aimed at creating awareness of the area where most homemakers lag behind and why it is important for them as well as their husbands to ensure that they have the required knowledge of it. The area is financial literacy. Just as the husband faces a dilemma in the kitchen in the absence of his wife, the wife is at a loss when an untoward incident happens in the family like a medical emergency or the death of the sole breadwinner.

We see many articles in newspapers where the family is suddenly on the streets or at the mercy of relatives when the head of the family is no more. The primary reason for this is that the lady of the house is not aware of how her husband managed the finances, and how much savings they have. In some cases, there will be even loans taken, the particulars of which he may not have shared with his wife and she comes to know about the fact only when lenders start pestering her when the husband is no more. Society takes advantage of her ignorance in financial matters and she ends up facing a much worse dilemma in life than what her husband suffered in the kitchen in her absence.

So what is financial literacy? In simple terms, it is to know about the income and expenditure of the family. In practical terms, in today’s world one should know how to open a bank account. How to deposit and withdraw money. How to use the debit card in ATM. Husbands can go a long way in helping their wives be financially literate. They need to ensure that their wives are aware of the financial dealings. In addition, share the details of your income with them — what are your savings, what loans you have taken and what is the EMI for each of them. Also ensure that you nominate your wife for all your savings and let her know that also.

In addition, encourage your wife to take up some economic activity. Even if she does not want to be a full-time employee, she can choose many part-time options like tailoring which she can pursue once you go to office and the kids to school. Interacting with different people will make her a confident person and she will be in a better position to handle any emergency. Your family needs to live a life of dignity even in your absence and it is up to you to ensure that by making your wife financially literate and independent.

Insight on credit card charges

Credit card companies lure customers into buying a credit card by offering it free of cost. Customers, many a time believe that if there is not cost involved in buying it, why not have it? So even if I have a card(s) sufficient to take care of my needs, I will opt for another one just because there is not cost associated to it.

Here you stand corrected. There are various charges that come with a credit card usage let on alone the annual charges.

Joining and annual fee
In order to entice customers into buying a credit card, many credit card companies offer credit cards free of cost i.e. no joining fees and perhaps exemption from annual fee for a particular period say 1 year after which they will start charging an annual fee. The joining and annual fee could range from Rs. 1,000 – Rs. 3,000 depending on the type of card.

Duplicate Statement fee
While monthly statements are delivered free of cost to the address of the card holder, request for a duplicate statement in the physical form attracts charges which is typically a fixed sum. Some credit card issuers also charge for a duplicate e-statement. E.g. Rs. 100 for a bill over 3 months.

Interest/finance costs
This is a charge well know among credit card users. It is primarily the interest rate levied by the credit card company on the outstanding amount if it is not repaid before the expiry of the due date. This charge can range anywhere between 2.5%- 4% per month which in annualized percentage rate (APR) turns out to be as high as 30% – 48%.

Late payment charges
Every time you make a late payment, over and above the interest rate charged, credit card companies will charge a late payment fee which can either be a fixed sum or a certain percentage of the minimum outstanding balance with a minimum and maximum threshold. It varies from one credit card company to another. E.g. late payment charges could be 30% of the minimum outstanding amount subject to a minimum of Rs. 300 and a maximum of Rs. 600.

Cash withdrawal
Cash withdrawal is withdrawing money from the bank against your credit limit. Credit card companies charge individuals for cash withdrawal on the credit card. The charges could be a certain percentage of the transaction value or a fixed sum. E.g. 2.5% of the transaction value subject to a minimum of Rs. 250.


Overdraft Limit: Credit card companies charge an overdrawn fee if the customer exceeds his credit limit. This fee is normally a certain percentage of the overdrawn amount subject to minimum and maximum amount. E.g. 5% of the overdrawn limit subject to a minimum of Rs. 300 and a maximum of Rs. 600.

Outstation cheque fee
For the purpose of payment, if you have issued an outstation cheque, the credit card issuer will charge you a fee for it which is a certain percent of the cheque value subject to a minimum amount. E.g. 1% of the cheque amount subject to a minimum of Rs. 100.


Cheque Return/ ECS return charge: In case of a cheque bounce or a failure of ECS, a fixed amount is charged by the credit card issuer.

Foreign currency transactions
In case of transactions outside the country, the same is converted into Indian rupee at a rate suggested by the network infrastructure provider (Visa/Master). Credit card issuers charge a certain percentage of the transaction value subject to a minimum amount. E.g. 3.5% of the transaction subject to a minimum of Rs. 250.

Petrol Transaction and Railway Ticket Purchase Fee
Petrol transaction is levied as a particular percentage of the transaction value subject to a minimum amount. E.g. 2.5% of transaction value subject to a minimum of Rs. 10. In case of railway ticket purchase too, a charge is levied, which is a particular percentage of the transaction value, subject to a minimum amount. E.g. 2.5% of the transaction amount subject to a minimum of Rs. 30.

Service Tax
Expenses on the credit card are subject to service tax of 12.24% which is levied on the total value of the transaction inclusive of fees, interest and other charges.


At the time of issue of credit card, the issuer needs to provide a document containing the terms and conditions governing credit card operations. Before signing the agreement, make sure you go through the fine print with respect to all the possible charges that can be levied so that you understand the carefulness and caution with which you should use the card.

With inputs from BankBazaar.com, ET Bureau

CUSTOMER DEMANDING FOR COMMISSION how to ex-cap

Dear Friend,



There is no clear cut formula to handle this objection. Only thing you can do to avoid this problem is create credibility in the market by:
Providing the best possible service by developing an good infrastructure from keeping staff to having a computuerized office & being up-to-date with latest technology (from reminding clients of different policy events to helping them in execution like collection, deposit, & delivery of cheques, papers etc).
Unbiased advice for new policy & old policies (done by other agents) by keeping in mind your clients benefits instead of your commission structure (which we mostly don’t do).
Taking time & establishing yourself in the market.
Going to new developing areas.
Approaching more youngsters instead of old people (they don’t know much about commission, don’t worry about what if they come to know tomorrow).
Learning to say “NO” in a very strong manner (we surrender to our clients demands very easily because we become weak there).
Not selling policies (for winning competitions or branch’s targets) but the providing Solutions (combinations of different policies or various financial products based on what you are dealing into). For this, you will need to improve your knowledge which most of the rebating unprofessional agents don’t do.
Do a lot of marketing activities on a regular basis so that everybody is aware that you are dealing in your particular product.
Attend paid trainings on a regular basis as it keeps you up-to-date.
Last but not the least, maintain touch with the people who asked for rebate by wishing them on occasions & providing them reminders for their policies / financial producs, because I have seen many of them coming back if we are able to maintain touch (sometimes it might take 3-5 years but many come back).

vinay mohanty

happy ganesh chaturthi

vinay mohanty

too much ego

vinay mohanty

Visiting a place of choice along with family members

vinay mohanty

Private players chase premium

Life insurance sector has witnessed rapid growth in the past decade with private players entering the fray. Assets managed by the insurers have grown manifold in this period, even outpacing the mutual fund industry and the insurers have become a force to reckon with even in stock market. When the life insurance sector was opened up in 2000, the premium collected to the gross domestic product (GDP) was 1.77 per cent; this has risen to 4.6 per cent by 2009-10.

LIC, the only player in the life insurance sector in 1999-2000, collected Rs 34,897 crore that year. According to the Insurance Regulatory and Development Authority (IRDA), total premium underwritten by the life insurance sector was Rs 2,65,450 crore in 2009-10.

 Although the topline of the insurers grew at double-digit till 2009-10, the bottomline of several private insurers are in the red, despite a decade of operation. The total accumulated losses of private life insurers was over Rs 20,143 crore by March 2010. 

However, the silver lining is that according to the I–Save.com report, as many as 12 out of the total 23 insurers turned the corner and made profits for the year ended in 2010-11. 

Distribution

For any business, distribution is the key to success. Prior to 2000, LIC operated only through the tied agency (individual agents) model and individual agents continue to account for more than 90 per cent of the business currently. Private insurers too banked on individual agents to market their product, but over time they diversified their distribution channel to bancassurance (insurance sold through banks), brokers and corporate agents. Currently, tied agency accounts for just 50 per cent of the overall business of private players. 

This is likely to go down further mainly on account of the regulatory changes which rationalised the commission structure for the agents. Recent IRDA guidelines that came into effect from July 2011 stipulate that agents which fail to achieve a persistency rate of 50 per cent will lose their licences. Two years from now, agents will have to ensure that at least three fourth of their policies sold in the previous year are renewed to qualify for a licence renewal. 

This regulation will pave way for only serious agents to stay in the business. Going forward, the bancassurance channel is likely to contribute a chunk of new business premium. This, in turn, will reduce the operating expenses and may aid profitability for these companies. 

Regulatory changes

Unit-linked insurance products or ULIPs are perhaps the most widely discussed and written about financial product. After their launch, the insurance industry witnessed phenomenal growth. However, IRDA has brought about many regulatory changes in this product. 

Till the 2008-09 equity market crash, ULIPs accounted for more than 90 per cent of the products sold by some insurers, but due to stiffer regulation, volatile equity markets, cut in the agent commission and cap on charges for the ULIPs, the industry has been forced to reduce its dependence on ULIPs and it currently accounts for 55-60 per cent of the overall sales. Now, the product mix is slowly drifting in favour of traditional insurance products, which are yet to face the scrutiny of the regulator. 

Profitability

After chasing the new business premium for several years, insurers have recently turned their focus on profitability rather than topline growth. The major reason for poor profitability was the higher operating expenses of life insurers. Agent commissions, generally perceived to be the lion's share of expenses, accounted for 6.85 per cent of the premiums collected while the other operating expenses accounted 10.85 per cent. 

Life insurance companies' operating efficiency is measured by the ratio of operating expenses to gross premium income. According to the IRDA, in 2009-10, operating expenses of private life insurers was down to 20.86 per cent of the premium collected against 25.99 per cent incurred in 2008-09. Although the operating expenses moderated, the ratio remains in the band of 15-30 per cent for individual insurers. 

Private insurers which have focussed on building distribution channels, branch offices and other infrastructure have had to bear higher expenses. Among the private players, SBI Life's operating expenses is among the lowest at 6.3 per cent. 

In contrast to private sector insurers, LIC's operating cost was 6.58 per cent of premium in 2009-10 which is far lower than the international standard of 10-15 per cent. However with an average cost ratio of 21 per cent, other Indian private insurers are a long way off from meeting international norms.

By reducing operating costs, already eight of the 23 private players such as SBI, ICICI Prudential, Bajaj Allianz, Max New York Life and Aviva India have turned profitable in 2009-10. However, the sustainability of profits depends on persistency. Persistency is the per cent of policies that are continued for a specified period that varies between 13 months and 25 months. Persistency is denoted in conservation ratio. 

The conservation ratio (renewal premium collected current year to total new business premium plus the renewal premium of last year) of top five private life insurers is, however, not encouraging and according to I–Save.com 2011 report, SBI Life's conservation ratio is at 47.9 per cent, Birla Sun Life's 56.3 per cent and ICICI Pru's, HDFC Life's and Bajaj Allianz's were all below 70 per cent. 

Way forward

 For life insurance companies, having multiple offices in metros is unnecessary since customer footfalls occur mainly for paying renewal premiums. After spending huge money on office infrastructure, several insurers are now moving towards rationalisation of the offices. 

In the last two years, offices of the private insurers have decreased to 8,768 from 8,785. Since opening up of the sector in 2000, this is the first time that negative growth was observed in the number of branch offices.

 Consolidation is visible in the insurance industry in the form of private players ceding stakes to foreign partners. The Bharti group has already reached agreement to sell its business to Reliance Industries. 

On the other hand, Reliance Capital sold a 26 per cent stake in its insurance arm to Nippon Life for over Rs 3000 crore. Max New York Life sold 4 per cent stake to Axis Bank and had a marketing tie up.

After witnessing double-digit growth for most part of last decade, the industry witnessed negative growth in the early part of 2011. But the changes that will have the greatest impact on cost are the use of technology to offer products online and expanding the products mix by launching health insurance products. 

Non-life insurance, which currently accounts for 0.6 per cent of GDP, offers great potential for life insurance companies. 

With cost consciousness and divergent distribution channels, more insurers are likely achieve profits and the industry may head for brighter days ahead.

Keywords: cost-consciousness, divergent distribution channels, insurers, fife insurance sector, private players

opening up of retail and insurance sectors will generate lakhs of additional jobs in India.

Global Human Resource Consultancy, Mercer has said that opening up of retail and insurance sectors will generate lakhs of additional jobs in India.

According to the firm, labour statistics continue to be positive in the country, although not as positive as a year and a half ago.

In insurance, passage of the bill amending the act would result in new companies setting up their business. The amendment bill also allows foreign reinsurers to start operations in India. This will also result in creation of a new industry.

Mercer also said that India continued to be seen as high growth market in terms of jobs. India has huge demographic advantage, which will result in attracting lot of investments. Although growth in India is less than what was expected, but still it is better than most other markets.

As per Mercer, in India hiring is expected to be industry specific. In sectors like life insurance, some of the large companies have reduced their staff but general insurance industry is bouncing back into profitability and is expanding.

Going ahead, challenge for companies will be, how to keep young employees motivated, as the choices before them will only increase.

Pension Market Set to Revive in Next Two Quarters

It is expected that pension market which took a huge beating in last two years will revive in next one or two quarters.

At present only Life Insurance Corporation of India (LIC) is offering pension plan.

As per insurers, pension product should be targeted to a young population and it has to be incentivised. There is a need to have separate window of relief for pension, so that it can give incentive to those who invest in it.

In January 2012 Insurance Regulatory and Development Authority (IRDA) has said that pension products will have to guarantee an assured benefit in the form of a non-zero rate of return that would be disclosed upfront. Earlier this it was mandatory for insurers to offer 4.5% guaranteed return.

These new regulations lead to slower approval of pension product, as a result of which there is a dearth of pension products in the market.

However, now insurers believe that pension market is on the verge of revival.

Earlier pension use to account for 25% of the industry which now has come down to mere 1%. The Reason behind this decline is that guarantees which were expected were far too onerous over a long term horizon and with instruments which were not supporting it. Hence, no insurer filed any pension product.

But now, it has come down to capital guarantee and hence, insurers have started filing new products.

LIC Must Be Granted Relaxation in Investment Norms in Measured Doses

There is a case for giving more headroom to Life Insurance Corporation of India (LIC) in its investment decisions provided they are open to greater public scrutiny.

LIC wants to be allowed to take equity stake of up to 25% in a company.

Insurance Regulatory and Development Authority’s (IRDA) existing norms on prudential investment require that all insurers should cap such exposure at 10% of their fund value or 10% of an investee company’s equity, whichever is lower.

There is a case of giving LIC more headroom through a policy of linking such flexibility to the size of funds managed, although the extent of liberalization should be pegged at a level lower than the 25% limit sought by LIC.

Currently, LIC manages roughly Rs 200,000 crores of equity assets which is more than the sums managed by the entire mutual fund industry in India. Therefore LIC is justified in seeking greater leeway in making investments. While, its sheer size renders the 10% ceiling computed on the total investible funds and irrelevant criterion, the alternative cap of 10% on the paid-up equity capital of an investee company would be breached in practically in every listed company. Already, LIC, by virtue of its position built up over years, has been in the breach of the regulator’s investment cap, in terms of percentage of Investee Company’s capital.

But any relaxation must be granted in measured doses, with safeguards to make sure it does not get used to the detriment of the policymakers. For that Irda must insist on much greater transparency and accountability from LIC on its portfolio, investment choices and performance of equity assets.

Regulatory caps of how much an insurer or mutual fund may invest in individual stocks, business groups or sectors are meant to protect the investors against the risk of concentration. The 10% investment cap was imposed only after the dotcom crash of 2000, when many mutual funds lost money investing up to half of their portfolio in one or two technology stocks.

These limits also curtail fund managers from misusing their discretionary powers to favour any particular company or group.

Hence, if LIC wants special exemption from prudential investment norms then it has to adopt better disclosure practices and demonstrate to the regulator and policyholders that it is making optimal risk-return trade-offs.

This is specially so in the light of its recent record of bailing out the government, whenever government has chosen to raise fund through disinvestment. Such rescue acts have raised the question of whether LIC’s investment decisions are dictated more by its policyholder’s interest or needs of its exchequers. Now it is up to LIC to put to rest to such apprehensions.

IRDA Mulling to Introduce New Tax Exemptions Separately for Life Insurance Policies

Insurance Regulatory and Development Authority (IRDA) is mulling to make insurance policies more investor friendly by introducing tax exemptions on insurance policies.IRDA has backed a move to introduce separate tax exemption limit on life insurance policies. This move will help in promoting insurance as a tax saving instrument.Life insurers have been seeking separate income-tax exemption limit of Rs 50,000 for premiums.At present, investments in instruments like Insurance Policies, Pension Plans, Provident Fund, National Saving Certificates are eligible for combined deduction of Rs 1 lakh.The budget proposed that all Insurance Policies, except Pension Plans, would have to offer a cover of at least ten times the annual premium to be eligible for Tax Benefits under Section 80C and Section 10 (10D) of Income Tax Act.Insurers say that though insurance policies offer low returns in comparison to other products, both the regulator and the finance ministry is trying to make it more investor-friendly by allowing tax exemptions.But insurers say that protection was the first goal of an insurance policy and investment came later. Hence, investors have to be clear about what they want. If investors want pure investment then insurance might not be the best bet for them.But proposal for introducing new tax exemptions separately for life insurance policies will definitely help in increasing the penetration of life insurance in the country.

aopyare sath hamare

vinay mohanty

planing for surprise

vinay mohanty

Bharti Axa Life Launched a New Traditional Plan

Bharti Axa Life insurance company has launched a new traditional plan by the name ‘Bharti Axa Life Secure Savings plan’ that offers guaranteed returns with life cover.

The plan provides guaranteed additions of up to 10 % of each year’s cumulative base premium paid.

Bharti Axa Life is 74:26 joint venture between Bharti Enterprises and Axa, an International Financial Protection and Wealth Management Firm.

attitude of advisior

vinay mohanty

Saving for retirement and a child's education at same time

Saving for retirement and a child's education at  same time

You want to retire comfortably when the time comes. You also want to help your child go to college. So how do you juggle the two? The truth is, saving for your retirement and your child's education at the same time can be a challenge. But take heart--you may be able to reach both goals if you make some smart choices now.

KNOW WHAT YOUR FINANCIAL NEEDS ARE

The first step is to determine what your financial needs are for each goal. Answering the following questions can help you get started:

For retirement:

• How many years until you retire?
• Does your company offer an employer-sponsored retirement plan or a pension plan? Do you participate? If so, what's your balance? Can you estimate what your balance will be when you retire?
• How much do you expect to receive in Social Security benefits? (You can estimate this amount by using your Personal Earnings and Benefit Statement, now mailed every year by the Social Security Administration.)
• What standard of living do you hope to have in retirement? For example, do you want to travel extensively, or will you be happy to stay in one place and live more simply?
• Do you or your spouse expect to work part-time in retirement?

For college:

• How many years until your child starts college?
• Will your child attend a public or private college? What's the expected cost?
• Do you have more than one child whom you'll be saving for?
• Does your child have any special academic, athletic, or artistic skills that could lead to a scholarship?
• Do you expect your child to qualify for financial aid?

Many on-line calculators are available to help you predict your retirement income needs and your child's college funding needs.

FIGURE OUT WHAT YOU CAN AFFORD TO PUT ASIDE EACH MONTH

After you know what your financial needs are, the next step is to determine what you can afford to put aside each month. To do so, you'll need to prepare a detailed family budget that lists all of your income and expenses. Keep in mind, though, that the amount you can afford may change from time to time as your circumstances change. Once you've come up with a dollar amount, you'll need to decide how to divvy up your funds.

RETIREMENT TAKES PRIORITY

Though college is certainly an important goal, you should probably focus on your retirement if you have limited funds. With generous corporate pensions mostly a thing of the past, the burden is primarily on you to fund your retirement. But if you wait until your child is in college to start saving, you'll miss out on years of tax-deferred growth and compounding of your money. Remember, your child can always attend college by taking out loans (or maybe even with scholarships), but there's no such thing as a retirement loan!

IF POSSIBLE, SAVE FOR YOUR RETIREMENT AND YOUR CHILD'S COLLEGE AT THE SAME TIME

Ideally, you'll want to try to pursue both goals at the same time. The more money you can squirrel away for college bills now, the less money you or your child will need to borrow later. Even if you can allocate only a small amount to your child's college fund, say $50 or $100 a month, you might be surprised at how much you can accumulate over many years. For example, if you saved $100 every month and earned 8 percent, you'd have $18,415 in your child's college fund after 10 years. (This example is for illustrative purposes only and does not represent a specific investment.)

If you're unsure how to allocate your funds between retirement and college, a professional financial planner may be able to help you. This person can also help you select the best investments for each goal. Remember, just because you're pursuing both goals at the same time doesn't necessarily mean that the same investments will be appropriate. Each goal should be treated independently.

HELP! I CAN'T MEET BOTH GOALS

If the numbers say that you can't afford to educate your child or retire with the lifestyle you expected, you'll have to make some sacrifices. Here are some things you can do:

• Defer retirement: The longer you work, the more money you'll earn and the later you'll need to dip into your retirement savings.
• Work part-time during retirement.
• Reduce your standard of living now or in retirement: You might be able to adjust your spending habits now in order to have money later. Or, you may want to consider cutting back in retirement.
• Increase your earnings now: You might consider increasing your hours at your current job, finding another job with better pay, taking a second job, or having a previously stay-at-home spouse return to the workforce.
• Invest more aggressively: If you have several years until retirement or college, you might be able to earn more money by investing more aggressively (but remember that aggressive investments mean a greater risk of loss).
• Expect your child to contribute more money to college: Despite your best efforts, your child may need to take out student loans or work part-time to earn money for college.
• Send your child to a less expensive school: You may have dreamed your child would follow in your footsteps and attend an Ivy League school. However, unless your child is awarded a scholarship, you may need to lower your expectations. Don't feel guilty--a lesser-known liberal arts college or a state university may provide your child with a similar quality education at a far lower cost.
• Think of other creative ways to reduce education costs: Your child could attend a local college and live at home to save on room and board, enroll in an accelerated program to graduate in three years instead for four, take advantage of a cooperative education where paid internships alternate with course work, or defer college for a year or two and work to earn money for college.

CAN RETIREMENT ACCOUNTS BE USED TO SAVE FOR COLLEGE?

Yes. Should they be? Probably not. Most financial planners discourage paying for college with funds from a retirement account; they also discourage using retirement funds for a child's college education if doing so will leave you with no funds in your retirement years. However, you can certainly tap your retirement accounts to help pay the college bills if you need to. With IRAs, you can withdraw money penalty free for college expenses, even if you're under age 59½ (though there may be income tax consequences for the money you withdraw). But with an employer-sponsored retirement plan like a 401(k) or 403(b), you'll generally pay a 10 percent penalty on any withdrawals made before you reach age 59½ (age 55 in some cases), even if the money is used for college expenses. You may also be subject to a six month suspension if you make a hardship withdrawal. There may be income tax consequences, as well. (Check with your plan administrator to see what withdrawal options are available to you in your employer-sponsored retirement plan.)

Life insurance at various life stages

Life insurance at various life stages

Your need for life insurance changes as your life changes. When you're young, you typically have less need for life insurance, but that changes as you take on more responsibility and your family grows. Then, as your responsibilities once again begin to diminish, your need for life insurance may decrease. Let's look at how your life insurance needs change throughout your lifetime.

FOOTLOOSE AND FANCY-FREE

As a young adult, you become more independent and self-sufficient. You no longer depend on others for your financial well-being. But in most cases, your death would still not create a financial hardship for others. For most young singles, life insurance is not a priority.

Some would argue that you should buy life insurance now, while you're healthy and the rates are low. This may be a valid argument if you are at a high risk for developing a medical condition (such as diabetes) later in life. But you should also consider the earnings you could realize by investing the money now instead of spending it on insurance premiums.

If you have a mortgage or other loans that are jointly held with a cosigner, your death would leave the cosigner responsible for the entire debt. You might consider purchasing enough life insurance to cover these debts in the event of your death. Funeral expenses are also a concern for young singles, but it is typically not advisable to purchase a life insurance policy just for this purpose, unless paying for your funeral would burden your parents or whomever would be responsible for funeral expenses. Instead, consider investing the money you would have spent on life insurance premiums.

Your life insurance needs increase significantly if you are supporting a parent or grandparent, or if you have a child before marriage. In these situations, life insurance could provide continued support for your dependent(s) if you were to die.

GOING TO THE CHAPEL

Married couples without children typically still have little need for life insurance. If both spouses contribute equally to household finances and do not yet own a home, the death of one spouse will usually not be financially catastrophic for the other.

Once you buy a house, the situation begins to change. Even if both spouses have well-paying jobs, the burden of a mortgage may be more than the surviving spouse can afford on a single income. Credit card debt and other debts can contribute to the financial strain.

To make sure either spouse could carry on financially after the death of the other, both of you should probably purchase a modest amount of life insurance. At a minimum, it will provide peace of mind knowing that both you and your spouse are protected.

Again, your life insurance needs increase significantly if you are caring for an aging parent, or if you have children before marriage. Life insurance becomes extremely important in these situations, because these dependents must be provided for in the event of your death.

YOUR GROWING FAMILY

When you have young children, your life insurance needs reach a climax. In most situations, life insurance for both parents is appropriate.

Single-income families are completely dependent on the income of the breadwinner. If he or she dies without life insurance, the consequences could be disastrous. The death of the stay-at-home spouse would necessitate costly day-care and housekeeping expenses. Both spouses should carry enough life insurance to cover the lost income or the economic value of lost services that would result from their deaths.

Dual-income families need life insurance, too. If one spouse dies, it is unlikely that the surviving spouse will be able to keep up with the household expenses and pay for child care with the remaining income.

MOVING UP THE LADDER

For many people, career advancement means starting a new job with a new company. At some point, you might even decide to be your own boss and start your own business. It's important to review your life insurance coverage any time you leave an employer.

Keep in mind that when you leave your job, your employer-sponsored group life insurance coverage will usually end, so find out if you will be eligible for group coverage through your new employer, or look into purchasing life insurance coverage on your own. You may also have the option of converting your group coverage to an individual policy. This may cost significantly more, but may be wise if you have a pre-existing medical condition that may prevent you from buying life insurance coverage elsewhere.

Make sure that the amount of your coverage is up-to-date, as well. The policy you purchased right after you got married might not be adequate anymore, especially if you have kids, a mortgage, and college expenses to consider. Business owners may also have business debt to consider. If your business is not incorporated, your family could be responsible for those bills if you die.

SINGLE AGAIN

If you and your spouse divorce, you'll have to decide what to do about your life insurance. Divorce raises both beneficiary issues and coverage issues. And if you have children, these issues become even more complex.

If you and your spouse have no children, it may be as simple as changing the beneficiary on your policy and adjusting your coverage to reflect your newly single status. However, if you have kids, you'll want to make sure that they, and not your former spouse, are provided for in the event of your death. This may involve purchasing a new policy if your spouse owns the existing policy, or simply changing the beneficiary from your spouse to your children. The custodial and noncustodial parent will need to work out the details of this complicated situation. If you can't come to terms, the court will make the decisions for you.

YOUR RETIREMENT YEARS

Once you retire, and your priorities shift, your life insurance needs may change. If fewer people are depending on you financially, your mortgage and other debts have been repaid, and you have substantial financial assets, you may need less life insurance protection than before. But it's also possible that your need for life insurance will remain strong even after you retire. For example, the proceeds of a life insurance policy can be used to pay your final expenses or to replace any income lost to your spouse as a result of your death (e.g., from a pension or Social Security). Life insurance can be used to pay estate taxes or leave money to charity.

Merging your money when you marry

Merging your money when you marry

Getting married is exciting, but it brings many challenges. One such challenge that you and your spouse will have to face is how to merge your finances. Planning carefully and communicating clearly are important, because the financial decisions that you make now can have a lasting impact on your future.

DISCUSS YOUR FINANCIAL GOALS

The first step in mapping out your financial future together is to discuss your financial goals. Start by making a list of your short-term goals (e.g., paying off wedding debt, new car, vacation) and long-term goals (e.g., having children, your children's college education, retirement). Then, determine which goals are most important to you. Once you've identified the goals that are a priority, you can focus your energy on achieving them.

PREPARE A BUDGET

Next, you should prepare a budget that lists all of your income and expenses over a certain time period (e.g., monthly, annually). You can designate one spouse to be in charge of managing the budget, or you can take turns keeping records and paying the bills. If both you and your spouse are going to be involved, make sure that you develop a record-keeping system that both of you understand. And remember to keep your records in a joint filing system so that both of you can easily locate important documents.

Begin by listing your sources of income (e.g., salaries and wages, interest, dividends). Then, list your expenses (it may be helpful to review several months of entries in your checkbook and credit card bills). Add them up and compare the two totals. Hopefully, you get a positive number, meaning that you spend less than you earn. If not, review your expenses and see where you can cut down on your spending.

BANK ACCOUNTS--SEPARATE OR JOINT?

At some point, you and your spouse will have to decide whether to combine your bank accounts or keep them separate. Maintaining a joint account does have advantages, such as easier record keeping and lower maintenance fees. However, it's sometimes more difficult to keep track of how much money is in a joint account when two individuals have access to it. Of course, you could avoid this problem by making sure that you tell each other every time you write a check or withdraw funds from the account. Or, you could always decide to maintain separate accounts.

CREDIT CARDS

If you're thinking about adding your name to your spouse's credit card accounts, think again. When you and your spouse have joint credit, both of you will become responsible for 100 percent of the credit card debt. In addition, if one of you has poor credit, it will negatively impact the credit rating of the other.

If you or your spouse does not qualify for a card because of poor credit, and you are willing to give your spouse account privileges anyway, you can make your spouse an authorized user of your credit card. An authorized user is not a joint cardholder and is therefore not liable for any amounts charged to the account. Also, the account activity won't show up on the authorized user's credit record. But remember, you remain responsible for the account.

INSURANCE

If you and your spouse have separate health insurance coverage, you'll want to do a cost/benefit analysis of each plan to see if you should continue to keep your health coverage separate. For example, if your spouse's health plan has a higher deductible and/or co-payments or fewer benefits than those offered by your plan, he or she may want to join your health plan instead. You'll also want to compare the rate for one family plan against the cost of two single plans.

It's a good idea to examine your auto insurance coverage, too. If you and your spouse own separate cars, you may have different auto insurance carriers. Consider pooling your auto insurance policies with one company; many insurance companies will give you a discount if you insure more than one car with them. If one of you has a poor driving record, however, make sure that changing companies won't mean paying a higher premium.

EMPLOYER-SPONSORED RETIREMENT PLANS

If both you and your spouse participate in an employer-sponsored retirement plan, you should be aware of each plan's characteristics. Review each plan together carefully and determine which plan provides the best benefits. If you can afford it, you should each participate to the maximum in your own plan. If your current cash flow is limited, you can make one plan the focus of your retirement strategy. Here are some helpful tips:

• If both plans match contributions, determine which plan offers the best match and take full advantage of it
• Compare the vesting schedules for the employer's matching contributions
• Compare the investment options offered by each plan--the more options you have, the more likely you are to find an investment mix that suits your needs
• Find out whether the plans offer loans--if you plan to use any of your contributions for certain expenses (e.g., your children's college education, a down payment on a house), you may want to participate in the plan that has a loan provision

Six keys to successful investing

Six keys to successful investing

A successful investor maximizes gain and minimizes loss. Here are six basic principles that may help you invest more successfully.

LONG-TERM COMPOUNDING CAN HELP YOUR NEST EGG GROW

It's the "rolling snowball" effect. Put simply, compounding pays you earnings on your reinvested earnings. The longer you leave your money at work for you, the more exciting the numbers get. For example, imagine an investment of $10,000 at an annual rate of return of 8 percent. In 20 years, assuming no withdrawals, your $10,000 investment would grow to $46,610. In 25 years, it would grow to $68,485, a 47 percent gain over the 20-year figure. After 30 years, your account would total $100,627. (Of course, this is a hypothetical example that does not reflect the performance of any specific investment.)

This simple example also assumes that no taxes are paid along the way, so all money stays invested. That would be the case in a tax-deferred individual retirement account or qualified retirement plan. The compounded earnings of deferred tax dollars are the main reason experts recommend fully funding all tax-advantaged retirement accounts and plans available to you.

While you should review your portfolio on a regular basis, the point is that money left alone in an investment offers the potential of a significant return over time. With time on your side, you don't have to go for investment "home runs" in order to be successful.

ENDURE SHORT-TERM PAIN FOR LONG-TERM GAIN

Riding out market volatility sounds simple, doesn't it? But what if you've invested $10,000 in the stock market and the price of the stock drops like a stone one day? On paper, you've lost a bundle, offsetting the value of compounding you're trying to achieve. It's tough to stand pat.

There's no denying it--the financial marketplace can be volatile. Still, it's important to remember two things. First, the longer you stay with a diversified portfolio of investments, the more likely you are to reduce your risk and improve your opportunities for gain. Though past performance doesn't guarantee future results, the long-term direction of the stock market has historically been up. Take your time horizon into account when establishing your investment game plan. For assets you'll use soon, you may not have the time to wait out the market and should consider investments designed to protect your principal. Conversely, think long-term for goals that are many years away.

Second, during any given period of market or economic turmoil, some asset categories and some individual investments historically have been less volatile than others. Bond price swings, for example, have generally been less dramatic than stock prices. Though diversification alone cannot guarantee a profit or ensure against the possibility of loss, you can minimize your risk somewhat by diversifying your holdings among various classes of assets, as well as different types of assets within each class.

SPREAD YOUR WEALTH THROUGH ASSET ALLOCATION

Asset allocation is the process by which you spread your dollars over several categories of investments, usually referred to as asset classes. These classes include stocks, bonds, cash (and cash alternatives), real estate, precious metals, collectibles, and in some cases, insurance products. You'll also see the term "asset classes" used to refer to subcategories, such as aggressive growth stocks, long-term growth stocks, international stocks, government bonds (U.S., state, and local), high-quality corporate bonds, low-quality corporate bonds, and tax-free municipal bonds. A basic asset allocation would likely include at least stocks, bonds (or mutual funds of stocks and bonds), and cash or cash alternatives.

There are two main reasons why asset allocation is important. First, the mix of asset classes you own is a large factor--some say the biggest factor by far--in determining your overall investment portfolio performance. In other words, the basic decision about how to divide your money between stocks, bonds, and cash is probably more important than your subsequent decisions over exactly which companies to invest in, for example.

Second, by dividing your investment dollars among asset classes that do not respond to the same market forces in the same way at the same time, you can help minimize the effects of market volatility while maximizing your chances of return in the long term. Ideally, if your investments in one class are performing poorly, assets in another class may be doing better. Any gains in the latter can help offset the losses in the former and help minimize their overall impact on your portfolio.

CONSIDER LIQUIDITY IN YOUR INVESTMENT CHOICES

Liquidity refers to how quickly you can convert an investment into cash without loss of principal (your initial investment). Generally speaking, the sooner you'll need your money, the wiser it is to keep it in investments with comparatively less volatile price movements. You want to avoid a situation, for example, where you need to write a tuition check next Tuesday, but the money is tied up in an investment whose price is currently down.

Therefore, your liquidity needs should affect your investment choices. If you'll need the money within the next one to three years, you may want to consider certificates of deposit or a savings account, which are insured by the FDIC, or short-term bonds or a money market account, which are neither insured or guaranteed by the FDIC or any other governmental agency. Your rate of return will likely be lower than that possible with more volatile investments such as stocks, but you'll breathe easier knowing that the principal you invested is relatively safe and quickly available, without concern over market conditions on a given day.

Note: If you're considering a mutual fund, consider its investment objectives, risks, charges, and expenses, all of which are outlined in the prospectus, available from the fund. Consider the information carefully before investing.

DOLLAR COST AVERAGING: INVESTING CONSISTENTLY AND OFTEN

Dollar cost averaging is a method of accumulating shares of stock or a mutual fund by purchasing a fixed dollar amount of these securities at regularly scheduled intervals over an extended time. When the price is high, your fixed-dollar investment buys less; when prices are low, the same dollar investment will buy more shares. A regular, fixed-dollar investment should result in a lower average price per share than you would get buying a fixed number of shares at each investment interval.

Remember that, just as with any investment strategy, dollar cost averaging can't guarantee you a profit or protect you against a loss if the market is declining. To maximize the potential effects of dollar cost averaging, you should also assess your ability to keep investing even when the market is down.

An alternative to dollar cost averaging would be trying to "time the market," in an effort to predict how the price of the shares will fluctuate in the months ahead so you can make your full investment at the absolute lowest point. However, market timing is generally unprofitable guesswork. The discipline of regular investing is a much more manageable strategy, and it has the added benefit of automating the process.

BUY AND HOLD, DON'T BUY AND FORGET

Unless you plan to rely on luck, your portfolio's long-term success will depend on periodically reviewing it. Maybe your uncle's hot stock tip has frozen over. Maybe economic conditions have changed the prospects for a particular investment, or an entire asset class.

Even if nothing bad at all happens, your various investments will likely appreciate at different rates, which will alter your asset allocation without any action on your part. For example, if you initially decided on an 80 percent to 20 percent mix of stocks to bonds, you might find that after several years the total value of your portfolio has become divided 88 percent to 12 percent (conversely, if stocks haven't done well, you might have a 70-30 ratio of stocks to bonds in this hypothetical example). You need to review your portfolio periodically to see if you need to return to your original allocation. To rebalance your portfolio, you would buy more of the asset class that's lower than desired, possibly using some of the proceeds of the asset class that is now larger than you intended.

Another reason for periodic portfolio review: your circumstances change over time, and your asset allocation will need to reflect those changes. For example, as you get closer to retirement, you might decide to increase your allocation to less volatile investments, or those that can provide a steady stream of income.

Insurance needs in retirement

Your goals and priorities will probably change as you plan to retire. Along with them, your insurance needs may change as well. Retirement is typically a good time to review the different parts of your insurance program and make any changes that might be needed.

STAY WELL WITH GOOD HEALTH INSURANCE

After you retire, you'll probably focus more on your health than ever before. Staying healthy is your goal, and that may require more visits to the doctor for preventive tests and routine checkups. There's also a chance that your health will decline as you grow older, increasing your need for costly prescription drugs and medical treatments. All of this can add up to substantial medical bills after you've left the workforce (and probably lost your employer's health benefits). You need health insurance that meets both your needs and your budget.

Fortunately, you'll get some help from Uncle Sam. You typically become eligible for Medicare coverage at the same time you become eligible for Social Security retirement benefits. Premium-free Medicare Part A covers inpatient hospital care, while Medicare Part B (for which you'll pay a premium) covers physician care, laboratory tests, physical therapy, and other medical expenses. But don't expect Medicare to cover everything after you retire. For instance, you'll have to pay a large deductible and make co-payments for certain types of care. Medicare prescription drug coverage is only available through a managed care plan (a Medicare Advantage plan), or through a Medicare prescription drug plan offered by a private company or insurer (premiums apply).

To supplement Medicare, you may want to purchase a Medigap policy. These policies are specifically designed to fill the holes in Medicare's coverage. Though Medigap policies are sold by private insurance companies, they're regulated by the federal government. There are 12 standard Medigap plans, but not all of them are offered in every state. All of these plans provide certain core benefits, and all but one offer combinations of additional benefits. Be sure to look at both cost and benefits when choosing a plan.

What if you're retiring early and won't be eligible for Medicare for a number of years? If you're lucky, your employer may give you a retirement package that includes health benefits at least until Medicare kicks in. If not, you may be able to continue your employer's coverage at your own expense through COBRA. But this is only a short-term solution, because COBRA coverage typically lasts only 18 months. Another option is to buy an individual policy, though you may not be insurable if you're in poor health. Even if you are insurable, the coverage may be very expensive.

DON'T OVERLOOK LONG-TERM CARE INSURANCE

If you're able to stay healthy and active throughout your life, you may never need to enter a nursing home or receive at-home care. But the fact is, many people aged 65 and older will require some type of long-term care during their lives. And that number is likely to go up in future years because people are increasingly living longer. On top of that, long-term care is expensive. You should be prepared in case you do need long-term care at some point.

Unfortunately, Medicare provides very limited coverage for long-term care. You may be covered for a short-term nursing home stay immediately following hospitalization, but that's about it. Other government and military-sponsored programs may help foot the bill, but generally only if you meet strict eligibility requirements. For example, Medicaid requires that you exhaust most of your assets before you can qualify for long-term care benefits. Even a good private health insurance policy will not offer much coverage for long-term care. But most long-term care insurance (LTCI) policies will.

LTCI is sold by private insurance companies and typically covers skilled, intermediate, and custodial care in a nursing home. Most policies also cover home care services and care in a community-based setting (e.g., an assisted-living facility). This type of insurance can be a cost-effective way to protect yourself against long-term care costs--the key is to buy a policy when you're still relatively young (most companies won't sell you a policy if you're under age 40). If you wait until you're older or ill, LTCI may be unavailable or much more expensive.

WEIGH YOUR NEED FOR LIFE INSURANCE

If you're married, you want to make sure that your spouse will have enough money when you die. You may also have children and other heirs you want to take care of. Life insurance can be one way to accomplish these goals, but several questions arise as you near retirement. Should you keep that existing policy in place? If so, should you change the coverage amount? What if you don't have any life insurance because you lost your group coverage at work (though some employers let you keep the coverage at your own expense)? Should you go out and buy some? The answers depend largely on your particular circumstances.

Your life insurance needs may not be as great during retirement because your financial picture may have improved. When you're working and raising a family, the loss of your job income could be devastating. You often need life insurance to replace that income, meet your outstanding debts (e.g., your mortgage, car loans, credit cards), and fund your kids' college education in case something happens to you. But after you retire, there's usually no significant job income to protect. Plus, your kids may be grown and most of your debts paid off. You may even be financially secure enough to provide for your loved ones without insurance.

It may make sense to go without life insurance in these cases, especially if you have term life insurance and your premium has increased dramatically. But what if you still have financial obligations and few assets of your own? Or what if you're looking for a way to pay your estate tax bill? Then you may want to keep your coverage in force (or buy coverage, if you have none). If you need life insurance but not as much as you have now, you can always lower your coverage amount. It's best to talk to a professional before making any decisions. He or she can help you weigh your needs against the cost of coverage.

TAKE A LOOK AT YOUR AUTO AND HOMEOWNERS POLICIES

If you stay in your home after you retire, your homeowners insurance needs may not change much. But you should still review your liability coverage to make sure it's sufficient to protect your assets. If you're liable for an accident on or off your premises, claims against you for medical bills and other expenses can be substantial. For additional protection, you might consider buying an umbrella liability policy. It's also a good idea to review the coverage you have on your home itself and the property inside it. Finally, if you plan to buy a second home, find out if your insurer will cover both homes and give you a discount on your premium.

Auto insurance raises some similar issues. Review your policy to make sure your coverage limits are high enough in each area. Again, having the right amount of liability coverage is especially important--you don't want your assets to be put at risk if you cause an auto accident that injures other people or damages property. Weigh your need for any coverages that are optional in your state. Finally, look into ways to save on your premium now that you're retired (e.g., discounts for low annual mileage or senior driving courses).

Investing for major financial goals

Investing for major financial goals

Go out into your yard and dig a big hole. Every month, throw $50 into it, but don't take any money out until you're ready to buy a house, send your child to college, or retire. It sounds a little crazy, doesn't it? But that's what investing without setting clear-cut goals is like. If you're lucky, you may end up with enough money to meet your needs, but you have no way to know for sure.

HOW DO YOU SET GOALS?

The first step in investing is defining your dreams for the future. If you are married or in a long-term relationship, spend some time together discussing your joint and individual goals. It's best to be as specific as possible. For instance, you may know you want to retire, but when? If you want to send your child to college, does that mean an Ivy League school or the community college down the street?

You'll end up with a list of goals. Some of these goals will be long term (you have more than 15 years to plan), some will be short term (5 years or less to plan), and some will be intermediate (between 5 and 15 years to plan). You can then decide how much money you'll need to accumulate and which investments can best help you meet your goals.

LOOKING FORWARD TO RETIREMENT

After a hard day at the office, do you ask, "Is it time to retire yet?" Retirement may seem a long way off, but it's never too early to start planning--especially if you want your retirement to be a secure one. The sooner you start, the more ability you have to let time do some of the work of making your money grow.

Let's say that your goal is to retire at age 65 with $500,000 in your retirement fund. At age 25 you decide to begin contributing $250 per month to your company's 401(k) plan. If your investment earns 6 percent per year, compounded monthly, you would have more than $500,000 in your 401(k) account when you retire. (This is a hypothetical example, of course, and does not represent the results of any specific investment.)

But what would happen if you left things to chance instead? Let's say you wait until you're 35 to begin investing. Assuming you contributed the same amount to your 401(k) and the rate of return on your investment dollars was the same, you would end up with only about half the amount in the first example. Though it's never too late to start working toward your goals, as you can see, early decisions can have enormous consequences later on.

Some other points to keep in mind as you're planning your retirement saving and investing strategy:

• Plan for a long life. Average life expectancies in this country have been increasing for many years. and many people live even longer than those averages.
• Think about how much time you have until retirement, then invest accordingly. For instance, if retirement is a long way off and you can handle some risk, you might choose to put a larger percentage of your money in stock (equity) investments that, though more volatile, offer a higher potential for long-term return than do more conservative investments. Conversely, if you're nearing retirement, a greater portion of your nest egg might be devoted to investments focused on income and preservation of your capital.
• Consider how inflation will affect your retirement savings. When determining how much you'll need to save for retirement, don't forget that the higher the cost of living, the lower your real rate of return on your investment dollars.

FACING THE TRUTH ABOUT COLLEGE SAVINGS

Whether you're saving for a child's education or planning to return to school yourself, paying tuition costs definitely requires forethought--and the sooner the better. With college costs typically rising faster than the rate of inflation, getting an early start and understanding how to use tax advantages and investment strategy to make the most of your savings can make an enormous difference in reducing or eliminating any post-graduation debt burden. The more time you have before you need the money, the more you're able to take advantage of compounding to build a substantial college fund. With a longer investment time frame and a tolerance for some risk, you might also be willing to put some of your money into investments that offer the potential for growth.

Consider these tips as well:

• Estimate how much it will cost to send your child to college and plan accordingly. Estimates of the average future cost of tuition at two-year and four-year public and private colleges and universities are widely available.
• Research financial aid packages that can help offset part of the cost of college. Although there's no guarantee your child will receive financial aid, at least you'll know what kind of help is available should you need it.
• Look into state-sponsored tuition plans that put your money into investments tailored to your financial needs and time frame. For instance, most of your dollars may be allocated to growth investments initially; later, as your child approaches college, more conservative investments can help conserve principal.
• Think about how you might resolve conflicts between goals. For instance, if you need to save for your child's education and your own retirement at the same time, how will you do it?

INVESTING FOR SOMETHING BIG

At some point, you'll probably want to buy a home, a car, maybe even that yacht that you've always wanted. Although they're hardly impulse items, large purchases often have a shorter time frame than other financial goals; one to five years is common.

Because you don't have much time to invest, you'll have to budget your investment dollars wisely. Rather than choosing growth investments, you may want to put your money into less volatile, highly liquid investments that have some potential for growth, but that offer you quick and easy access to your money should you need it.