Financial Planning Concepts for IBOs
OVERVIEW: “Most families spend substantially more time planning a vacation trip than they do their financial trip!”
-Robert Pierce, IBO and Financial Planner
Your Financial Plan (FP) should eventually include all of the following:
1. Your Emergency Fund: begin with a modest goal of setting aside $500-$1,000 with the overall goal of saving a minimum of 6-month’s monthly expenses.
2. Debt Management: begin by targeting the removal of your highest interest rate debts first. If you eliminate a 20% credit card debt you have just started investing in yourself with a return of 20%! Dream, imagine, picture the day when your debts will be only a mortgage and car loan, with their retirement on the horizon! How will that feel?
3. Budget Management: for IBOs who are building, only concentrate on two things:
a. controlling discretionary expenses in order to fund Business expenses such as tools, functions and books.
b. expanding and diversifying your income(s)
4. Risk Management Plan Via Insurances: generally Term Life insurance is the best coverage for younger families; the amount saved compared to “whole life, etc” policies can be invested, at a higher return, either in your Business and/or the stock and bond markets.
5. Investment Plan: apart from any Pension Plan(s) should follow this order:
a. Emergency Fund – starting with $500, invest in a money market Mutual Fund rather than a local Savings account for higher returns and equal liquidity
b. Once your Emergency Fund is $2,000 open, within the same Mutual Fund “family”, a Stock Fund and a Bond Fund
c. Learning how to chose a Stock Fund and a Bond Fund: there are hundreds of each of the two types of funds and there are dozens of reputable mutual fund companies. In the beginning pick just one “family” to begin your investments. Later you can switch or broaden the number of “families” to improve and/or diversify your portfolio. Every 6 months you will want to monitor each fund using the 4 Criteria shown next.
d. Find out these 4 Criteria for each fund being considered:
i. Overall Morningstar* rating (1 to 5 Stars – 4 and 5 are best)
ii. Overall Morningstar* Risk rating (Average or Below Average is best)
iii. Commissions: look for 0% Front Load and 0% Deferred Load
iv. Expense Ratio %: look for funds under 1.0%
e. Mix your funds between Stock and Bond mutual funds. Until a person becomes quite elderly they will want a larger percent in the Stock mutual funds. The elderly will want to lower their risk factor by moving more money into the Bond mutual funds.
6. Retirement Plan: to be discussed in a future article
7. Estate Plan: to be discussed in a future article
NOTE: is a respected source of independent analysis and rating each mutual fund with the 4 Criteria indicated above. You can ask over the phone any representative of a potential mutual fund, what are Morningstar’s ratings.
SOME MUTUAL FUND “FAMILIES” (with their URL links to the Internet)
You can look for mutual funds that concentrate on, for example, Real Estate, Technology, Health, Utilities, etc. or look for more diversified mutual funds that are grouped by “small cap, large cap, etc.
SAMPLING OF SOME STOCK FUNDS:
Janus http://quicktake.morningstar.com/Fund/Snapshot.asp?Country=USA&Symbol=JAGIX
For more help and specific answers:
All IBOs are required to first get permission from Tony Tefel through their Upline(s). All financial planning counseling will be of a personal nature for you and your family but will not include any Business counseling.
A comprehensive Personal Financial Plan is available for a fixed fee to be negotiated up front.
Robert H. Pierce completed his Certified Financial Planner (CFP) Professional Education Program in July 1991 after having completed his Masters and Bachelors Degrees in Business/Finance and Administration. He has over 40 years in the financial marketplace advising clients such as Sun Microsystems, Qualstand Corp., Interactive Inc., BLEGroup and GDF Management.
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