Intermediate Plan

1. Weigh the opportunity costs when making important financial decisions such as paying off debt vs. investing in retirement accounts like a 401(k) or a Roth IRA. Consider the interest rate on your debt when considering paying extra. If the rate is low, 3% or less, it would be wise to take extra money and put it toward retirement accounts. If it is between 3% and 6%, you could consider either option as being a reasonable approach. If the rate is over 6%, strongly consider taking extra money (after getting any matching money from a retirement plan at work) and put it toward the debt before investing further. Weigh your options carefully as you look at your own particular situation.


2. Focus on catastrophe only when buying insurance products. This means staying away from the small policies like credit card insurance, phone insurance, and extended warranties for example, and sticking to health, home, and vehicle. Life and disability should be considered after reviewing the need (does someone rely on your income to survive) and after reviewing your social security survivor and disability benefits. Go to and print off your social security statement. Review carefully as you identify the benefits that apply to you and your family.


3. When investing, stick with no-load index mutual funds that diversify you all over the world at a very low cost. Start with your retirement plan at work, a Roth IRA outside of work and taxable accounts when the retirement accounts are “maxed” out for the year. If no index funds are offered at work, identify the lowest cost managed funds while demanding more inexpensive options. When investing outside of work, consider . Always consider your tax situation and income level when making these decisions (for example deciding between pre-tax investing in a traditional account and post tax investing in a Roth account). Read What Color is the Sky, by Mike Finley to further your education on the crazy world of investing.


4. Consider all types of risk when making financial decisions with your money. Event risk, interest rate risk, market risk, default risk, and inflation risk are a few. Pay special attention to inflation risk. That is the quiet monster that eats your money while you sleep. Be mindful of these risks and more as you plan and prepare for your future. This explains the value of owning income producing stocks, bonds, and real estate in large pooled investments called no-load index mutual funds. Diversify, diversify, diversify! The informed investor knows this. Make sure that is YOU.


5. Keep expanding your knowledge beyond the basics (start understanding the nuances that go with many of these subjects) from more independent sources. There is much to learn if you hope to make it to the advanced level. Here are a list of books that will continue to help you down that path: Making the Most of Your Money, by Jane Bryant Quinn, A Random Walk Down Wall Street, by Burton Malkiel. Winning the Loser’s Game, by Charles Ellis. All About Asset Allocation, by Rick Ferri, and  Get What’s Yours, by Laurence Kotlikoff and Philip Moeller.

Check out the other plans!