Apps from Chapters 9 – 12

Chapter 9: Investment Audit

Most of the information you’ll need to complete this exercise should already be together from the Personal Balance Sheet exercise in Chapter 3, but if not, pull together the most recent holdings information that you have for your various investment accounts.  If you have online access to these accounts, it will be as easy as printing out the page with your current holdings.  If not, pull together each of the most recent statements for all of your investment accounts.

Aggregate your holdings using the form we’ve made available for this exercise online.  Segregate them between investments that are inside of retirement accounts (like your 401ks, 403bs, IRAs, etc.) and nonretirement accounts.  For any mutual funds, you’ll want to have the name of the fund and the five-letter symbol.

Now, navigate your web browser to  With the tools here, you’ll be able to use that final column of your Investment Audit to fill in the Manager Category column.  (You can examine your mutual fund managers with the tools on Morningstar using the basic service at no cost.  Another good, free resource for the analysis of stocks and mutual funds is Yahoo’s Finance web site

Plug the symbol of each of your mutual funds into the “Quotes” field on Morningstar.  The main page for each fund will show you a 10-year chart with a graphical depiction of your fund’s performance alongside its benchmark.  Just below the chart, you’ll see a tool that will allow you to click and drag the timeline backwards to see a longer fund history if it’s available.  You can also hit the “Performance” tab and select the “Expanded View” to see even more detail about the fund’s numerical performance.

Using the tips in this chapter, you should now be able to classify each of your funds.  In the Action column on the right hand side of the worksheet, check any of the Return Chasers and Index Huggers for additional review.  Again, Return Chasers should be well understood, carefully monitored, and dumped if misunderstood.  Index Huggers should be replaced.

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Chapter 10: Annuity Audit

It is my hope that this is an extremely brief exercise for you, but many people who have long-term relationships with folks in the insurance, brokerage, or banking industries have a lifetime of annuities built up.  If that is your scenario, it is very important that you do this exercise to get a handle on where your money is and what it is doing (or not doing).

When you did your Personal Balance Sheet or Investment Audit, you probably pulled together the statements for any annuities you own.  These statements often lack the information you’ll need for this exercise, so I also want you to pull together each of the contracts you received at the inception of your annuity policy.  Then, using the worksheet in the Tools section of our web site, fill in the information cataloging the following: owner, annuitant, beneficiary, contract value, surrender value, cost basis (the sum of your contributions), and the surrender schedule.  Some of this will be on your statement, but the remainder will be in your policy contract. You may have to do some digging.

Once you’ve collected the information, the analysis should start with a diagnosis of the investment value.  If it is a fixed annuity, you’ll know very quickly if the rate is competitive with today’s rates.  If it is a variable annuity, examine how it has performed versus the various benchmark indices.  If it is an equity indexed annuity, the chances are very good that it is not a phenomenal investment, but it also probably has a very long and steep surrender charge.

If you determine you’d prefer to be out of an annuity contract, here are the questions to ask:

What, if any, surrender charge exists?

Is the surrender charge cost prohibitive?

How much longer will the surrender charge last?

How much have you contributed (what is your cost basis)?

How substantial would the tax impact be (would you have to pay a lot in taxes)?

Is there a gain on which you would have to pay a penalty if you are under age 59½? 

Again, remember to make these decisions slowly because there are many moving pieces with annuities.

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Chapter 11: Tax Myths and Rules

Put your own tax acumen to the test by reviewing each of the Tax Myths and Rules to see how they apply to your financial life.

With the aid of a chart provided on our web site, you’ll be able to examine your own posture toward each of the five tax myths and rules.  You can then determine what actions you can take to avoid letting tax implications lead instead of follow in your financial planning.

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Chapter 12: Family Education Policy and Savings Plan

If you’re starting from scratch, the following application steps will provide a great starting point; if you’re re-evaluating, this will be a great opportunity to hone your approach.

Create your family education policy.  If you are one of two parents, put your minds together.  If you’re a single parent or loner in your educational quest, your policy may be even more important.  It may be helpful to pull out your Personal Money Story exercise, which likely includes some good or bad experiences you’ve had surrounding the cost of your own education.  Then, review your Personal Principles before articulating your educational savings goals.  Utilize the Family Education Policy worksheet to concrete your family’s plan, and then, at the appropriate time, share it with your children.

From that policy should spring your education savings plan.  Use the calculator we provide to help you determine what your monthly savings should be and how much of that should be going into a 529.

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