Comprehensive personal financial planning software is needed to develop a fully personalized family financial strategy

This free “financial freedom guide” on how to invest is just a part of our web site about how to develop a personal family financial plan

The personal finance plan essays on this free site supply important ideas to individuals and families about financial planning program and financial strategy subjects that should taken into consideration. These postings help in understanding how to establish a life time personal finance planning strategy. Also, to generate a really useful long-term money management strategy depends upon you using the top personal financial planning software with a high quality investment financial calculator and the leading financial planning software features.

Also, our financial freedom web site enables you to find the top all-in-one financial planning software program for home PC use, and it includes the top retirement investment calculator tool, the best personal budgeting software, and high quality investment calculators for your personally customized life long financial planning.

Personal investing seems incredibly complex, but the best investment strategy also tends to be a more simple investment strategy

This complexity is driven by the nature of investing in securities of highly uncertain and unknowable future values. This complexity is greatly exacerbated by the proliferation of investment products and services aggressively promoted by a securities and financial services industry that purports to serve your best interests. However, this proliferation of complex investment products very often seems only to serve the financial interests of the securities industry itself. Averaged across all retail investors, the high fees of the financial service industry dramatically reduce rather than help to increase retail investors’ net assets.

Personal investing can be simplified greatly by focusing only on valid strategies that have support in the investment research literature. This personal investment planning summary is intended to help you to understand that you can manage your investments using strategies that have a demonstrated basis in the research literature. When one pursues strategies that are designed to focus solely on the fiduciary interests of individual investors, the vast majority of investment products promoted by the industry can simply be eliminated from consideration. They cost far more than they are worth.

Once you have committed to a durable long-term investment strategy, you can manage by yourself relatively easily the details of investment implementation. You do not need to pay high costs for something you can do yourself.

You can build an easy-to-manage, do-it-yourself, lifetime investment strategy based upon these principles:

• To improve your long-term investment returns, move fully toward the completely passive, globally diversified, and extremely low cost end of the investment securities products spectrum. Invest only in a variety of passive, very broadly diversified, and low cost investment funds.

• Understand better your investment risk tolerance relative to the larger population of investors and decide how much you are willing to be exposed to investment risk. Your investment risk tolerance leads to your asset allocation strategy, which sets the balance of overall expected investment risk and return in your personal portfolio.

• Get invested and stay invested in the global securities markets according to your asset allocation — through thick and thin. Never attempt to second-guess the markets or to time the markets by moving assets around hoping to beat the markets. The academic research shows clearly that nobody really knows how to time the markets and jumping in/out when you are confident/scared usually leads to inferior results.

• Buy and hold and hold and hold. When you own broadly diversified, passive index investment funds, professional investment portfolio managers will make all the needed adjustments within these funds for you over time.

• Maintain your asset allocation within the percentage policy variance that you have pre-determined. Do so in as low cost a manner as is reasonably possible. Use asset purchases during your accumulation periods and asset sales during your divestment periods to maintain your target asset allocation. This reduces the need to make changes and incur costs solely to maintain your asset allocation.

• Only buy investment mutual funds from mutual fund companies that deal directly with the public. Only buy exchange-traded funds (ETFs) through discount brokers. Never pay any broker or any other commissioned financial advisor another dime during your lifetime to tell you what funds you should buy. They do not know what will happen to future asset values, because they have no information to make such judgments. Instead, their high advisory costs will be extracted from your assets up front and along the way. Purchasing investment funds through an advisor is far more likely to reduce rather than increase your wealth. Investment cost are not “just a few percent.” For the average investor, average investment costs consume about one-third of average annual investment returns — year after year after year after year. The cumulative losses to even average investment costs are huge and simply horrendous.

• Improve your overall net investment portfolio returns by consciously managing the asset “tax location” of your investment assets, which can reduce the investment taxes that you pay. Federal capital gains investment tax rates vary by holding period and different types of assets have returns that are treated differently under the federal tax code. Take advantage of the opportunities that you have to arrange your assets for minimal taxation.

• Focus the time that you spend on financial affairs during your lifetime on increasing your income and/or managing your consumption to increase your savings rate. In addition to reducing your investment costs, saving more is the single most effective way to accumulate assets for retirement and other personal finance goals.

• Enjoy your life and resist the compulsion to act as an amateur investment portfolio manager. By ceasing their amateur investment management activities, most people can free up substantial amounts of time to spend on far more pleasurable activities.

The vast majority of people waste time on investment activities, tactics, and strategies that are more likely to reduce rather than increase their investment portfolios.

Professional, low cost index fund managers can manage your money far more efficiently in terms of better returns, lower taxes, and far less time than you can ever realistically hope to achieve as a personal investment portfolio manager. If you simply cannot resist the temptation to play investment portfolio manager, then understand clearly that this is a hobby, which is highly likely to cost you money through inferior returns, and this hobby is extremely likely to waste a significant amount of your valuable time in life.

Despite these factors, some people just cannot resist the personal investment management game. If you want to do this, then never play with the rent money and baby’s milk money. Never allocate more than 10% of your overall investment assets to this hobby. Invest the remaining 90+% in accordance with the investment methods summarized above. In addition, learn how to track accurately your investment performance relative to appropriate passive benchmarks, so that you do not fool yourself into thinking you have more skill than you actually do. Academic research clearly demonstrates that individuals usually achieve sub-optimal investment results.

You investments should work for you rather than you working for them. Avoid all the financial industry games designed to make money off of your assets. Instead, simplify your investment program, and use your financial assets to enrich and protect your life and the lives of those you love.

OK — So How Does One Go About Doing This?

Here are some ideas to get you going:

1) On the “Personal Finance Software” front page of this website, you can read about VeriPlan, which is an automated personal financial planning software tool that individuals and families can use to do their own lifetime financial plans. VeriPlan is the most sophisticated and high quality financial planning software that you can buy at a great bargain price. VeriPlan automates all of the tedious calculations needed to do fully integrated lifetime financial planning in a manner that is customized to reflect your particular financial situation, all your financial resources, and all your financial life goals and objectives.

Furthermore, VeriPlan also provides very extensive and absolutely objective personal financial planning documentation that helps you to understand the lifetime financial planning process. While VeriPlan hides the complexity of millions of inter-related financial projection calculations, it also treats you like an adult! VeriPlan was designed with the firm belief that smart, well-educated adults need and want well-designed financial decision support tools. If you are going to invest the time needed to plan your family’s financial future, you need a financial planning software “power tool” to help you. It must be highly functional and robust, while it also provides useful and entirely objective financial information.

2) In parallel with checking out VeriPlan, you might also want take a look at this “Financial Planning Reading List.” This reading list compiles the top 60 or so personal financial planning and personal investment management articles from the many hundreds that the designer of VeriPlan has published on various personal finance websites across the web. All of these “Financial Planning Reading List” articles were personally researched and written by the designer of VeriPlan. If you want to judge whether VeriPlan could be right for you, then these articles might help you with your decision. Furthermore, the more articles on this reading list that you read, the better prepared you will be to manage your own family financial planning and personal investment portfolio over your lifetime.

Personal financial planning tools are recommended to generate a thorough plan for your financial freedom

This free “steps to financial freedom” information site has info concerning how to develop a personally customized family financial plan

The personal finance plan essays on this free web site give important ideas to families and individuals about financial planning program strategy subjects that they should consider. These write-ups help in producing a life time family financial planning strategy. Also, to establish a fully personalized plan for your financial freedom demands that you use an excellent financial calculator with a high quality investment calculator and the top home financial software.

In addition, our free financial freedom information site helps you find the best ALL-IN-ONE financial planning software program home software product with a high quality retirement investment calculator tool, the top personal budgeting software, and the leading investment calculators for your personally customized life long family financial planning.

Guard Your Credit in the Event of Financial Identity Theft

Without becoming a victim of identity theft, you can get a free credit report from each of the three credit reporting agencies once a year. Federal law requires the three major credit reporting agencies to provide these free reports annually. To satisfy their obligations, Equifax, Experian, and TransUnion jointly have established www.annualcreditreport.com, where you can order your free credit reports.

You can also call them at 1-877-322-8228 or write to them at Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Because the material in your credit reports is usually largely redundant across these three companies, stagger your requests over the year and rotate between the three firms. If there is any problem with your credit report, it usually will show up on any of your reports from these three firms.

(Avoid using any of those obnoxious free credit report copycat companies, such as “freecreditreport.com,” that advertise on TV, but will only supply “free” credit reports, when you pay a lot for their other supposedly valuable premium services. Also, if you are a woman, you probably have already figured out these freecreditreport.com TV advertisers are not to be trusted. Incredibly cluelessly, their TV ads always blame the bride’s bad credit for young guitar playing slacker hubby having to work at a pirate themed fast food job. What a clueless company marketing department to insult the female half of their target audience with their advertising budget! Have they written off women because women shop and are too smart to pay for something that is supposed to be free? Free credit reporting my keister! This is another confirmation that the Federal Communications Commission is dead at the wheel with respect to consumer protections. Companies can get away with confusing people, screaming “free, free, free,” and then charging people for something that they have a legal right to get for free, if they just knew the correct web address.}

Identity Theft Events Provide Opportunities to Lock Down Reporting about Your Credit

While identity theft is a large and growing problem and can be very costly and inconvenient to you, it is just a business cost and headache to financial and retail firms, who also have benefited greatly from the proliferation of easy credit.

One way to protect yourself is to put restrictions on your credit records with the three major credit reporting agencies, Equifax, Experian, and TransUnion. These credit reporting companies have made profitable businesses on both sides. They charge fees to business firms who may not always treat your financial information carefully, and they charge you fees when you want to restrict access to your financial information in their data bases.

For some, these credit information access restriction fees go away when you become an identity theft victim. Whether or not you lose money, if you become a victim of identity theft, this may actually be an opportunity for some of you. In some states, like California, identity theft victims can get long-term locks put on their accounts without having to pay fees to the three credit bureaus.

California Residents Can Get a Free Fraud Alert for Seven Years Following Even a Minor Fraud Event

If you live in California and have become a victim of identity theft, you have rights under California law as an identity theft victim to have your credit files frozen for seven years without paying fees to the credit reporting agencies for such a long-term “fraud alert.” For example, if your credit card shows suspicious charges that you did not make and even if your credit card company takes them off your statement, you still can make an identity theft report to your local police and get a police report. With this police report and by writing to the appropriate addresses and following the procedures, the three credit reporting agencies are obligated legally to put long-term fraud alerts on your credit reports.

The downside of locking your credit report is that you cannot yourself apply and be approved immediately for instant credit. The good news is that nobody else can do the same for seven years, as well. (Note that if you do need to apply for a credit card or refinance a mortgage, you still can do so, but the credit lock on your account just creates a delay. You have to proactively contact the credit bureaus to inform them of the validity your efforts to apply for more credit.)

Lock Up Your Credit at the Credit Reporting Agencies

The upside to locking your credit report is that new attempts to establish credit in your name are blocked without your permission. Not only does that mean that criminals cannot open new credit cards in your name, it means that you have greater protection from other kinds of credit related crimes. For example, the credit crisis has spawned a crime wave of mortgage and real estate line of credit frauds.

Criminals have opened credit lines in home owners names and then have quickly drained the credit lines of their funds. In addition, homes have been sold without the home owners knowledge and sometimes the knowledge even of the “buyer” who also had his or her identity stolen and was an unwitting participant in the transaction.

Obviously, it is better to prevent costly situations like these than clean them up. In addition, pay close attention to any document sent to you by your county registrar. Because of increasing real estate fraud some county registrars, including Los Angeles County, now send notices to the address of record whenever any deed or other records change is filed with them.

<<<<< Go back to the previous part: Protect Your Financial Security

Sophisticated Roth IRA calculator tools are necessary to produce a sound plan for your retirement financial freedom

This free financial freedom resources website provides essays concerning how to develop a self-directed family financial plan

Family financial plan postings on this free site provide families and individuals with vital information about personal finance planning issues to take under consideration. Our publications help you in producing a full life personal financial planning strategy. Also, to produce a fully personalized plan for your financial success in life depends upon you using a high quality financial planning tool with the best financial investment software and first-rate personal finance tools.

Also, our free financial freedom website enables you to find a really superior ALL-IN-ONE financial planning tools, including the top retirement planning calculator, the top personal budget spreadsheet planner, and the best investing calculator for your self-directed full life personal financial planning.

Deciding between traditional retirement plan contributions and Roth retirement plan contributions

Whether or not to make investments into “traditional” tax-advantaged employer accounts and IRAs versus investing in “Roth” tax-advantaged employer accounts and personal IRAs is not always a straightforward decision. The decision on the trade offs happens to be one of the most complex aspects of lifetime personal financial planning.

A broad array of factors can influence whether a traditional retirement plan account contribution or a Roth retirement account contribution decision would be optimal. Given the significant importance of this decision on your lifetime financial plan and the build-up of your retirement savings, it would be worth taking a closer look at this decision. For most people’s lifetime circumstances, making deposits in traditional accounts is the preferred decision, when those contributions would be deductible against current income taxes.

Factors favoring Roth plan contributions over traditional plan contributions

Many people struggle with the traditional versus Roth contribution decision for their personal financial and investment planning. The trade-offs over a lifetime are very complex. Rules-of-thumb, back-of-the-envelope calculations, and simple retirement planning spreadsheets cannot model all the important personal financial factors.

The decision is not simply about present versus future tax rates and whether rates might be higher or lower. Instead, the decision requires a personalized and comprehensive projection and valuation of an investor’s lifetime income, expenses, debts, net assets, and taxes. (Look here for a sophisticated Roth IRA and Roth 401k calculator tool that fully automates the traditional versus Roth analysis.)

Also, be clear in noting that this discussion focuses ONLY on situations where an investor has the choice of making a CURRENTLY TAX-DEDUCTIBLE traditional IRA, 401k, etc. contribution VERSUS a CURRENTLY NON-TAX DEDUCTIBLE Roth IRA, 401k, etc. contribution. For most people, this is often they case, because they have not maxed-out their current opportunities to make tax-deductible traditional retirement plan account contributions.

If under the U.S.’s incredibly complex tax-advantaged retirement account rules, an investor does NOT have any further opportunities to make currently tax-deductible retirement account contributions, then a Roth contribution is the choice to make. Since an investor cannot take a current tax-deduction and since Roth account contributions avoid future taxation of asset appreciation in retirement, that is why such Roth contribution would be preferred over traditional retirement account contributions, under these limited circumstances of non-deductibility.

Whether or not a person or family will save enough and invest efficiently across a lifetime dominates the Roth retirement plan versus currently deductible traditional retirement plan contribution decision.

If an investor does not earn sufficiently high income, does not save aggressively, does not control investment costs, and/or does not grow a sufficiently substantial investment asset portfolio retirement nest egg, then that investor will not have to worry about being in high tax brackets in retirement — whether or not state and federal income tax brackets had moved up or down in the interim. If an investor will not have substantial assets and income in retirement, then the current tax savings an investor could get from contributing to a traditional tax-advantaged retirement savings plan will tend to be much more economically advantageous over a lifetime.

For an investor to justify making current Roth contributions in lieu of currently deductible “traditional” contributions, here are eight personal circumstances, taken together, that might reverse the average person’s preference for traditional tax-advantaged plan contributions.

Roth retirement plan contributions might be more advantageous over currently deductible traditional retirement plan contributions, when a retirement investor:

1. has a long time for her assets to appreciate before and during retirement.
2. is likely to earn high enough taxable income over her working lifetime to have a realistic chance of amassing enough assets to cover her retirement expenses easily and still build up financial assets.
3. is more likely to have increasing earned income that is expected to continue to rise in real dollar terms across a working life cycle, enhancing that investor’s ability to feed her investment program through increasing savings.
4. saves at sufficiently high percentage rates across her working lifetime. (This means consistently saving at rates that are well in excess of 10% of gross earned income.)
5. will fully fund either traditional and/or Roth tax-advantaged accounts up to maximum annual contribution limits.
6. may have proportionately higher front-loaded itemized deductions (e.g. mortgage interest and real estate taxes) and lower earned income that effectively lowers an investor’s nearer term federal, state, and local marginal ordinary income tax rates compared to her more distant retirement years.
7. will adopt a very low-cost investment strategy to improve her chances of capturing higher asset appreciation rates.
8. will maintain an investment asset allocation that is skewed heavily toward equities, and when her financial assets continue to grow at rates that are similar to long-term historical rates of return on equities.

Given all these factors, an investor may find that her assets in traditional tax-advantaged accounts would grow to be so substantial that when they are distributed under the mandatory distribution rules after age 70 and 1/2, she is pushed into much higher marginal tax brackets. If her traditional tax-deferred assets are sufficiently large, then ordinary income taxes on these mandatory distributions COULD wipe out the value of the tax shield assets that an investor gained by making traditional account contributions that reduced her taxable earned income in earlier years. This is the crossover point where Roth contributions become more desirable on a present value basis compared with currently deductible traditional retirement new investments. Again, the majority of those saving for retirement are less likely to be in this position and should therefore prefer reducing their currently taxable income through traditional retirement plan contributions.

<<<<< Go back to the previous part: Tax-Advantaged Retirement Investment Planning