The Wall Street Journal
by Brett Arends

OK. So you want to save an extra $10,000 by next Thanksgiving. How can you do it?

You've heard the usual finger-wagging frugality lessons over and over. And you already do the obvious things, like cutting back on lattes, raising your insurance deductibles and steering clear of expensive stores.

But what else can you do if you really, really, really want to save? We tapped financial advisers, business contacts, friends and acquaintances to hear what they had done to save money.

Dumped the TV. "There's no need for a TV with the Internet," says Molly Ruben-Long, who works for a nonprofit in New Orleans. "You can watch most shows for free online." Savings: $600 a year.

Used loyalty programs aggressively to get discounts on car rental, air travel and other deals. Credit cards sometimes offer huge bonuses--like a free airline ticket--to new customers. Boston Realtor Steve Weikal used his BJ's Club Card to save over $1,000 on his Christmas car rental in Florida.

Switched banks and credit-card companies. It's not just about Occupy Wall Street and Bank of America. There is no such thing as "free banking," but a nonprofit credit union or a community bank may be cheaper. Gourmet foods entrepreneur Bonnie Shershow in Cambridge, Mass., saved at least $300 a year just in fees by moving credit cards to another bank.

Reset their weekly expenses to fortnightly. OK, so you won't give up your house cleaner or your mani-pedi. But cut the frequency in half, says Roseland, N.J., financial planner Debra Morrison. Her clients save at least $1,000 a year.

Dumped the car for a bicycle. "I save a small fortune in taxi and subway fares--plus untold hours sitting in traffic or on a subway platform--by riding my bike everywhere in Manhattan," says hedge-fund manager Whitney Tilson. "Plus, it's great exercise!" Savings: You name it, but at least $4,000 a year. (Plus, you can save on the gym.)

Axed the landline, and switched to a new Internet and phone provider. Companies have all those fixed costs, and they are desperate for your business. Freelance editor Jennifer Powell in Winthrop, Mass., says her family saved $1,700 a year.

Refinanced their home. Today's interest rates are absurdly low. New York financial communications consultant Brian Maddox paid $1,000 in upfront fees, for $4,448 interest savings over 15 years. "It's like finding $3,448 on the ground outside my house," he writes. Savings: $230 a year.

Teamed up with trusted friends or neighbors. Financial planner Ann Gugle in Charlotte, N.C., says some of her clients do this to make the most of warehouse clubs. After all, not everyone needs, or has room for, 200 frozen chicken legs. Clients make big bulk purchases together, then divide the spoils at home. Savings: at least $1,000 a year. Cincinnati financial planner Bob Seigmann has another trick. "My wife and I share a cellphone 'family plan' with another couple," he says. "AT&T has no problem with this." Savings: another $700 a year.

Didn't pay someone else to do what they could do themselves. Tax attorney Martin Shenkman in Paramus, N.J., says he went outside his "comfort zone" to do some home maintenance and repairs, including installing a garden shed and winterizing his recreational vehicle, but he saved $950.

Used eBay and Craigslist more. Boston-based security consultant George Gilpatrick says he and wife, Sandra, rarely throw anything out. Instead they sell it--or, sometimes, offer to trade it on Craigslist. Savings? "Hundreds of dollars a year," he says. Call it $300.

Cut back on new books. Fed up with paying $15 or more for the latest novels, even on your Kindle or Nook? Your correspondent likes to download classics from Gutenberg.org for free. And Amazon.com will sell you used paperbacks for about a dollar. Savings: $200 a year.

Got creative on vacations. Ms. Gugle says some clients get big savings by booking last minute through websites such as vacationstogo.com. Others do a house swap instead of paying for a hotel. And you could always use those frequent-flier miles! Total savings: $1,000.

Worked the system against the airlines. Flying direct? Try indirect flights instead. Sure it's a pain. But if you can save $300 taking a four-hour detour, that's earning $75 an hour, after tax! And check for refunds on airline tickets at yapta.com. Steve Weikal in Boston just got back $500 on two tickets for Christmas.

Stopped wasting water. Jenn Powell's husband, Al, who works in the Harvard University communications office, installed aerators on their faucets and showerheads, low-flow toilets and a front-loading washing machine. Savings? "$400 to $600 a year," she says.

Volunteered. A recent jazz festival in New Orleans cost $40 a day. Instead, Molly Ruben-Long volunteered to work at the event for three mornings and got in for free. Savings: $120.

Got smart about dining out. Katie Ross of American Consumer Credit Counseling in Newton, Mass., says one technique that works is to make one meal completely "off limits" for eating out. Breakfast is easiest, but lunch will have the biggest impact. As for dinner? Debra Morrison, the New Jersey financial planner, says she sometimes meets friends for drinks and hors d'oeuvres at happy hour instead. Total savings: At least $1,000 a year.

Returned sanity to the holidays. You can save hundreds of dollars a year just by setting a Christmas/Hannukah budget and sticking to it.

Emily Harris, a mother of two, in Charlotte, N.C., goes further. "For the past three years, my husband and I, along with our siblings and their partners, have all agreed to just exchange Christmas ornaments for the holidays. We still do presents for the kids, but it's been a big cost savings (not to mention, perhaps even more valuable, a big stress savings!) to just exchange something pretty for our holiday trees." Total savings: $300 a year.

The ideas can go on. You won't like them all. And some will overlap--competing deals on phones or air tickets, for example. But the total money saved here topped $15,000. Saving $10,000 should be a piece of cake.

Write to Brett Arends at brett.arends@wsj.com

Article URL: http://online.wsj.com/article/SB10001424052970204323904577040101565437734.html?mod=WSJ_PersonalFinance_PF2

SCHWAB TALK BLOG
Posted by Joan Cusick

It was huge, with a record 4,000-plus financial advisors, exhibitors, media and Schwab employees in attendance.

It was educational, with inspiring keynote speakers and 82 different educational sessions.

It was news-making, with CNBC broadcasting live from the Expo floor and daily coverage in more publications than I can count.

Most of all, IMPACT 2011 was the place to talk with other first-timers like me.

Schwab's Chief Marketing Officer Laurine Garrity was also attending her first conference. "My biggest takeaway was how strong the relationships are between Schwab and the Registered Investment Advisor community," she said. "I thought the mood was amazing. There was high energy, strong engagement, and lots of networking."

That's precisely what I found with the college contingent 54 students and faculty representing Golden Gate University, Texas Tech, Virginia Tech and two University of California locations. Last Wednesday, I met Virginia Tech undergrads Samantha Pickering and Chad Weinkoff in the Schwab Center. They were easy to pick out of a crowd, since both wore maroon shirts with an orange VT logo.

"The shirts help us a lot," Chad admitted. "A lot of people seek us out and want to talk to us."

"IMPACT offers a great opportunity for networking," Samantha added.

While I couldn't find an educational session for "Networking 101," many topics sounded like they came from a college syllabus. Consider the "Master Class on Commodities" or "Strategies for Preparing for Your Next Exam." Texas Tech master's candidate Cassie Humphreys was most interested in a session on real estate assets. That's her particular passion, and she was "pleasantly surprised" to see the topic covered at IMPACT.

One of her fellow Texas Tech students, James Nevers, graduates in May and was quick to give reasons why advisors should consider hiring a college graduate rather than an advisor in transition. "It's hard not to look at the bottom line," he said. "Obviously, an existing broker can bring his own book of business, but you also have to look at potential risks. Students can adapt and plug in immediately."

As James was talking, financial planner Ann Gugle joined our conversation. This first-time IMPACT attendee has been working with her husband John for the past year as a principal at Alpha Financial Advisors in Charlotte, N.C. The husband-and-wife team plan to hire their first additional employee, and Ann was seeking the advice of other IMPACT attendees on how to ensure a good fit.

Ann also took heart in the prevailing sentiment at IMPACT. "One of the biggest things I'll take away from here is a positive outlook. It's been refreshing because the financial news has been so dismal."
 

Ann Gugle
of Alpha Financial Advisors

James Behne, an MBA candidate from UC-Irvine, echoed the upbeat attitude. He cited the closing statement from keynote speaker Tony Blair, former prime minister of the U.K., who reminded Americans that we have something others want: liberty. "This remark provided positive energy and hope for the future of the United States, despite the economic, financial and political chaos experienced recently," James said.

I have to admit, after talking to so many first-timers at IMPACT, the future seems a little bit brighter.

Web Link: http://www.aboutschwab.com/press/blog/first_timers_share_their_views_of_impact_2011/
 

Wall Street Journal
by Jonnelle Marte

Los Angeles couple Chantay and Conrad Bridges watched the price of gold rise for years but never invested, afraid they would be buying at too high a price. But recently, as gold notched new highs, they--like many investors--changed their minds. "The dollar is losing its value and if we're going to do it we might as well do it now," says Chantay, a real estate agent.

The market upheaval of recent weeks has even the most skeptical investors rethinking their strategies, and gold's relentless climb--it closed yesterday at $1,888.70 per troy ounce, up another 2.15%--has been fueled in part by these new believers. "We've got mom-and-pop investors making a mad dash," says Tom Roseen, a senior analyst at Lipper.

Online brokerage E*Trade says its clients traded three times more shares of the biggest gold exchange-traded fund in August, compared to the same period in July, with more people buying than selling. And Scott Carter, chief executive officer of Goldline International, a gold retailer in Santa Monica, Calif., says his company has seen sales of coins, bullion and other physical forms of gold rise about 20% since Standard & Poor's downgraded U.S. government debt on Aug. 5.

For many experts, of course, this is the ultimate contrarian indicator, a sign that gold prices have neared the top. When retail investors rush in, the thinking goes, the market has entered bubble territory. "People are racing to get into it regardless of the price, just because everyone else is," says John Gugle, a financial adviser in Charlotte, N.C.

Gold's reputation as a safe haven burnishes its allure, especially when stocks and bonds look unstable, as they do now. But the metal is hardly immune from its own peaks and crashes. After hitting an inflation-adjusted high of $2,400 per ounce in 1980, gold prices fell more than 50% over the following two years; it has yet to return to that inflation-adjusted high. More recently, other supposed safe-haven assets have suffered setbacks. After peaking at $49 per ounce in late April, the price of silver fell 30% in about a week.

Already gold may be showing early signs of weakness. Last week, institutional investors pulled back slightly, says Mr. Roseen, in the first week of outflows for gold funds since early July.

Yet because gold tends to perform well during extended economic downturns or inflationary periods, which are both still real possibilities in the U.S., some predict gold will continue its upward march this year. Analysts from J.P. Morgan Chase Bank say gold could hit at least $2,500 an ounce by the end of the year, which would be a new record in nominal and inflation-adjusted terms.

For investors getting into gold for the first time, Phillip Streible, a senior market strategist for MF Global, recommends a slow but steady strategy. Consider moving 0.5% of your overall portfolio each month out of other sectors and into gold or precious metals ETFs, says Mr. Streible, with a maximum exposure of 10%.

Write to Jonnelle Marte at jonnelle.marte@wsj.com

Article Link

AdvisorOne
by Joyce Hanson

Wild markets mean advisors are doing a lot more to reassure clients about their investments.

The market's wild ride in the last few weeks has created extra work for advisors--who have spent a lot of time reassuring panicky clients about their investments.

What are advisors and other finance professionals advising clients to do?

Fund managers such as Brian Lazorishak, senior portfolio manager for the Chase Mid-Cap Growth Fund (CHAMX) and Chase Growth Fund (CHASX), are calming fears by shifting toward less economically sensitive stocks with more predictable and defensive earnings patterns.

"The reason we have a disciplined approach is to offset the ego and emotion that's involved in the market," said Lazorishak (whose firm, Chase Investment Counsel Corp. of Charlottesville, Va., is unaffiliated with JPMorgan Chase & Co.).

"Even sophisticated investors can panic and pull out at the wrong time. We tell clients that we stay process-driven without getting too caught up in the economic news. We also remind them that they've set equity ranges based on their risk tolerances," says Lazorishak, noting that stocks across a wide range of sectors and asset classes have been "highly correlated with each other." In other words, he says, a mid-cap U.S. consumer stock like Dollar Tree is seeing the same market movements as a European bank during this period of volatility.

And wealth management firms such as Genworth Financial Wealth Management have launched full-scale special communications programs that include panel calls for advisors.

"The goal of the panel call with advisors was to frame how our platform is positioned to help them manage their clients, but then to also offer them access to portfolio managers or strategists to provide insight on the global economy and markets," said Mike Abelson, Genworth's senior vice president in charge of asset allocation strategies.

As for the members of the fee-only National Association of Personal Financial Advisors, NAPFA advisors serving both institutional and individual investors also are urging clients to stay calm and to remember that their portfolios are planned to withstand the storms of market volatility.

Based on a round-up of NAPFA members' emailed responses that AdvisorOne received this week in an informal poll, here's what advisors say they are doing to advise their clients during this time of turmoil:

Donald Askey, certified financial planner, Provident Advisory Group, Newburyport, Mass.

Askey said his firm sent two e-messages to its 100-plus clients this past Friday and the Thursday before. The messages urged clients not to act on emotion, and reminded them that Provident is taking small steps to strengthen allocation at this time of low prices. No selling would be done without a sit-down and re-evaluation of the client's big picture, he said.

In one of the messages, Provident told clients: "As your financial adviser, we are not only sensitive to your concerns about recent turmoil in the market but we are also responsible for providing you objective advice.... If you believe that your investments are inappropriate for you for whatever reason and that you are no longer on the course we charted together for you, then we urge you to come in and we'll spend the time you deserve and determine whether a course correction is in your best long-term interests right now."

Rett Dean, principal, Riverchase Financial Planning, Lewisville, Texas

"Proactivity is the key," Dean said. "We called and spoke with all clients last week while the markets were so volatile.

"We reminded them of a couple of things: 1) This is why we diversity holdings. 2) Because we do not do dollar-based retirement planning but rather goals-based planning we could stay focused on what was most important to the client. 3) Time Frame. Many clients see reaching retirement as the finish line, when in fact it's really just the beginning. We have to keep clients well allocated so that the years of retirement are not impacted long term by making emotion based short term moves."

John Gugle, principal, Alpha Financial Advisors, Charlotte, N.C.

Normally, Gugle sends a client letter the first of every month, but with the recent events in global investment markets, he "felt it was imperative to get my thoughts out to all of my clients" and sent a letter on Aug. 11.

"My advice is that this is not a repeat of 2008 and that we are simply experiencing a slight slowdown in growth, but not a full-fledged recession," Gugle said. "I point to continued M&A activity as well as a report last week that insider buying was at its highest level since March 2009. I also laid the blame for the extreme volatility on the high-frequency computer trading programs. That is what was causing huge intraday shifts, which undermines retail investors' confidence, much like the flash crash of May 2010.

"When investors cannot comprehend what is going on in the markets, they blame the system and become convinced that the investment markets are rigged. Sadly 2008 was such an extreme event in the market that many of my clients are skeptical of the recovery and seem to get anxious over the slightest bad news."

For younger investors, Gugle noted, he has been advocating this pullback as an excellent buying opportunity if they have excess cash available for investment.

Rick Kahler, president, Kahler Financial Group, Rapid City, S.D.

"The challenge for financial planners is to reassure clients that the roller coaster is safer than it was last time," Kahler said. "For the past two years, I've promised my clients markets with greater volatility and another crash. I've also discussed ways for them to prepare for it."

If a client took appropriate action the last time the markets crashed and didn't panic, they--like perhaps 90% of investors--are in better shape than ever to weather this crash better than the last, Kahler said. Why? Because portfolios are slightly more conservative, investors have already gone through, and survived, two market crashes since 2000, they've created a cash cushion, and taken advantage of the recovery of the past two years to diversify their portfolio among asset classes.

Lisa Kirchenbauer, president, Omega Wealth Management, Arlington, Va.

It was "much ado about nothing," Kirchenbauer has told clients, given that the market has recovered back to where it was before Aug. 5.

"I had prepared my clients for a volatile summer in our Q3 letter and I have told them in the past that the markets can often get very volatile in the middle of the summer only for us to end up exactly where we were when the summer began," she said.

"At this point, the main message is hold the course, expect more volatility, maybe even through the elections next year, and be grateful for your bond investments. This is also a time to be thoughtful and conscious about your spending since we really have no idea what to expect from the markets in the next few months."

Troy Sapp, certified financial planner, Commencement Financial Planning, Tacoma, Wash.

Sapp is telling clients four main thoughts during the market turmoil:

On measures of fundamental valuation, equities are now trading very near what has been the historical mean. Equities appear to be fairly priced.

"If we want to buy low and sell high we need to ask ourselves what the world would look like during each of those times, then develop processes to effect that goal."

Equities have always been volatile, and long term investors have been rewarded for taking on this risk.

"I have developed Investment Policy Statements (IPS) for each of my clients. The IPS identifies risks, then identifies strategies to hedge against each of them that we can. Anxious clients often want to revert to cash, but the one thing I am certain of is that cash will be worth less in the future than it is today, especially since countries have historically tended to inflate their way out of debt problems like most of the world is facing now."

Robert Siegmann, chief operating officer, Financial Management Group, Cincinnati, Ohio

"With the market volatility and what we perceive as an emotional disconnect between investment decisions and the underlying economic fundamentals, we are advising clients to invest idle cash and rebalance portfolios to purchase equities on sale now," Siegmann said. "While equities could get cheaper in the short run, we are comfortable committing long-term investment dollars to equities today."

ARTICLE LINK

Wall Street Journal

By Veronica Dagher

Financial advisers worry that their younger clients are playing it too safe with their money

Many of Andy Tilp's Generation X and Y clients live for the adrenaline rush they get from outdoor sports like snowboarding and white-water rafting.

When it comes to their money though, many of those younger clients--roughly age 45 and below--aren't seeking any thrills. They're opting for what they see as safe investments, such as certificates of deposit and savings accounts.

Among those who do venture into some of the more traditional portfolio assets--stocks, bonds, real estate and commodities--many are shying away from equities and are more concerned about protecting their principal than growing their money.

"They're leaning toward really conservative portfolios--similar to some retirees," says Mr. Tilp, a financial planner based in Portland, Ore.

Such risk aversion is understandable, given the two nasty bear markets already this century and the current depressed job market. Many Generation X and Y investors have watched plunging financial markets destroy their parents' retirement plans.

But many advisers are concerned that the low risk tolerance of some of these investors may ruin their retirements too, by leaving them short of funds when they get there. These advisers are encouraging young investors to rethink their views.

A recent survey by Bank of America Merrill Lynch found that 59% of affluent investors ages 18 to 34 who responded sought relatively low risk when choosing investment strategies, and that a higher percentage were risk-averse than in all other age groups, including investors their grandparents' age.

Investors of all ages may have been spooked by the most recent market downturn in particular. "When you've been burned and there is great uncertainty, it's a natural inclination to withdraw," says Yuval Bar-Or, an expert on decision-making and an adjunct professor of finance at Johns Hopkins University's Carey Business School.

But that inclination may be tempered among investors who have weathered previous bear markets--a perspective that many younger investors don't have. If investors haven't been in the market long enough, Mr. Bar-Or says, they may not see the "wisdom" of investing for the long term and therefore may shy away from what they perceive as higher-risk investments.

A recent MFS Investment Management survey found that only 39% of Generation X and Y investors who responded had a primary investing goal of growing assets, and respondents in that age range had only 34% of their investments in U.S. equities and kept 30% in cash.

Cash Concerns

The stock market isn't the only thing that's making these young investors jittery. After seeing friends get laid off or getting fired themselves, some Generation X and Y investors may be keeping more cash on hand in case of an extended period of unemployment.

"Generation X and Y see their careers as more tenuous than their boomer parents," says Rand Spero, a Lexington, Mass.-based certified financial planner.

After landing a job at a promising tech start-up, a 28-year-old client of Mr. Spero's didn't focus on his potential stock options. Instead, he wanted to talk about a backup plan if the venture didn't work out. The more conservative mind-set is a big shift from what Mr. Spero heard from boomer clients in the '80s and '90s. "The boomers wanted to focus on the upside," he says.

Mr. Spero also works with a boomer father and his Generation X daughter who are both doctors. The daughter is concerned about her income potential, her ability to pay back her student loans and the future of the health-care field. As a result, she's more risk-averse then her retired father and wants to keep 50% of her portfolio in fixed-income investments.

The Risk of 'Safety'

Some young clients are also spooked by the situation they find their parents in.

Several of Nicholas LaVerghetta's Generation X and Y clients have seen their parents delay retirement and scale back their spending partly because they took on too much risk in their portfolios.

The younger clients don't want to find themselves in the same position 20 to 25 years down the road, so they're opting for what they perceive as safe investments and lower-than-recommended equity exposure, says the Ramsey, N.J., certified financial planner.

But some younger investors may not be considering the risks of that approach, Mr. LaVerghetta says. To give them what he considers a more balanced view of risk, he shows them how holding too much cash, for example, can put them at risk of running out of money later on. He also relays long-range market history to broaden their frame of reference, and encourages them to look beyond the surface numbers of changes in asset values. "It's important for them to consider the impact of inflation and taxes," he says.

For clients opposed to owning stocks entirely, certified financial planner John Gugle may partly recommend a mixture of bonds and real-estate investment trusts. And while the Charlotte, N.C., planner makes sure clients understand the risks associated with each of those asset classes, he says they're bound to be a better strategy in the long term than staying out of the markets entirely.

In the end, Mr. Bar-Or says, Generation X and Y investors may simply need time to feel more confident in the markets.

"When they realize the world didn't come to an end again, and they see others around them participating fully in financial markets, they'll gradually take more risk," he says.

Ms. Dagher is a reporter for Dow Jones Newswires in New York. She can be reached at veronica.dagher@dowjones.com.

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Physicians should view life insurance as the base foundation upon which they can build their financial plans, according to a North Carolina certified financial planner.

"If you have that in place, you know that you can move forward with your other dreams, goals and aspirations," said John T. Gugle, a principal for Alpha Financial Advisors LLC in Charlotte, N.C. "It takes the fear of the unknown, the uncertainty, out of the equation."

Yet many physicians don't think about obtaining life insurance when they've completed medical school, financial experts said.

"While no one can blame a younger physician for wanting the trappings of success, it is critically important early in their career that younger physicians get life insurance, pay down debt and save for emergencies," Gugle said.

Early career physicians are the ones who have the greatest need for life insurance, particularly if they're married and have young families.

"My professional opinion is that the younger physician needs the most coverage possible because if she or he died, there would be a large amount of future income lost, not to mention that the debts owed by the surviving spouse would cripple them financially," Gugle said. "Creditors will come looking to be repaid. ... They may put a lien against the estate."

In addition, the grieving family will have to adjust to a dramatic lifestyle change.

"Many times (the surviving spouse) is a stay-at-home spouse and the doctor is the one providing for the family," Gugle said. "Not too many jobs are going to pay like a doctor's would."

Mike McCann, president of Perspective Financial Services LLC in Phoenix, Ariz., said financial planners generally advise people to obtain life insurance coverage that is 10 times their annual earnings.

But he believes new-to-practice physicians can benefit from as much as 20 times their yearly salary because of their earning potential over the course of their careers.

"If you're just coming out of residency, it's possible your income will grow dramatically in six to 12 years, so you start with a higher factor than most people would," said McCann, a certified financial planner and accredited investment fiduciary.

Gugle said physicians should get the maximum amount of coverage they can afford.

"Figure out what your needs are, look at income replacement and decide what you would want to be there if, God forbid, something were to happen to you," he said. "If you can get up to $2 million, go for the $2 million. It's a small price to pay to have peace of mind."

Physicians can choose from a whole life policy, which provides coverage over the course of a person's lifetime, a term life policy, which provides coverage for a particular time period, and variations within each of those two categories.

"Evaluate not only the amount of insurance, but the investment in the insurance product and the costs of that insurance," McCann said.

There are pros and cons to each type of policy, the experts said.

"If you talk to most people like me, almost universally they will say put your money into a term life policy with a well regarded, highly rated insurance company," Gugle said. "You will pay far less and get more coverage, dollar for dollar, than you would with whole life policies."

Term life policies don't always come with a guarantee that they'll be renewed at the end of the term, however.

"If you're buying term, look at how many years the rate is guaranteed for," McCann said.

Regardless of the type of policy a physician chooses, experts agreed they should obtain coverage from highly rated companies.

"You want to be sure an insurance company is going to be around to pay a claim," McCann said.

Physicians should also consider whether they want to be in a group policy, such as those offered by employers, or have an individual policy.

"If you lose your employment, though, you lose your coverage because you're no longer part of that group," Gugle said. "That's the downside."

But group policies can be less expensive alternatives to individual policies with the added bonus of an employer offering to pay one or two times your salary, he said.

"More and more hospitals and larger practices will offer some type of life insurance that is portable," McCann said. "That means when they leave that firm or hospital, they can take that with them."

For physicians who are weighing multiple job offers, he said it's worth asking whether an employer offers portable life insurance.

Because the need for life insurance decreases with age, experts recommend physicians reevaluate their needs for it annually.

"A lot of people are trying to sell you life insurance, but they have a financial incentive to do so," Gugle said. "Be very mindful of that."

Wall Street Journal
by Veronica Dagher

Financial advisers offer parents and students suggestions for getting the biggest bang from their education bucks

As college acceptance letters start to roll in, parents will soon have a better idea of their children's educational options for the years ahead.

But before students select a college and head off to school, financial advisers say there are a few things many families need to consider about how to handle the costs, get the most for their money and protect themselves against unexpected developments.

Below, five advisers share their words of advice for parents and their college-bound children.

1. THE ADVICE: Encourage your child to select a career first, and then a school.

THE REASON

Many parents and children approach college as a time to sort things out, to delve into a lot of areas and see which ones the child finds most inspiring. Greg Gilbert, an Atlanta-based financial adviser, sees it differently.

College, he says, is preparation for a career. But children often first think about what school they want to attend and then determine what career they will pursue. That can result in wasted time and money.

Thinking first about career options "helps children focus their college experience instead of hopping around from school to school," says Mr. Gilbert. It also may help cut down on costly extra classes in college and reduce or eliminate the need to retrain in the future, he says.

Of course, many high-school students have no idea what kind of work they want to do after college. Mr. Gilbert recommends that clients have their children work with a professional career counselor who can walk them through career options. In addition, he recommends that children shadow or at least visit with their parents' friends or other professionals in their field of interest and try to get volunteer or paid experience in the given field as early as possible.

"The key is not just saying 'Oh, I want to do this,' but instead, really actively vetting out the [career] idea to see if it's the right choice," he says.

2. THE ADVICE: Don't promise your child you'll pay the entire tuition.

THE REASON

It isn't that you don't intend to do it when you say it. But, warns Bob Goldman, a Sausalito, Calif., financial planner, "when the time comes, the parents may not be able to pay it." Being realistic, he says, will help the student make better-informed decisions.

The promise has become even more difficult for some of his clients to live up to after they have lost their jobs or suffered some other financial setback, he says. "The parents may now have to wrestle with [the choice between] paying for college or saving for retirement, and that makes for infinite pressure and pain on both sides," he says.

Mr. Goldman recommends skipping the promise, no matter how well-meaning and heartfelt, and instead have an honest talk with the child about the financial realities of the situation. He suggests parents might say, "I can pay X amount. If you want to go to a more expensive school, you'll have to borrow the money."

3. THE ADVICE : When deciding between an in-state public university on the one hand and a private university or out-of-state public university on the other, make your child responsible for at least some of the costs of choosing the more expensive option.

THE REASON

This takes away the "blank check" mentality when students weigh their education options, says John Gugle, a certified financial planner based in Charlotte, N.C. He also believes students are more likely to value their education when they bear some responsibility for the financial impact of their decision.

He recommends parents say the following to their children: "If you choose to go to the in-state public university, then we will pay all four years. However, if you choose to go to the private or out-of-state public university, then we will pay for three years and you will be responsible for one year."

Also, if the child goes to school beyond four years, the child should have to fund that additional cost, Mr. Gugle says.

This makes the child think "long and hard" about what they can afford, he says. Many of his clients have taken his advice, he says, and it has helped defuse a "thorny" decision-making process.

"Unfortunately money issues will often influence the college choice," Mr. Gugle says. "Parents and children need a way to balance the costs with the future benefits."

4. THE ADVICE: Make a deal with your child: Underperform and you're out.

THE REASON

"The whole concept is to promote responsibility and help the children understand this is a very important financial endeavor," says Donald Duncan, a certified financial planner based in Downers Grove, Ill.

Going to college should be considered the child's first real job, says Mr. Duncan, and job success should be defined by the child's GPA.

"If their GPA isn't satisfactory, they get fired from the job," he says. That means finding a less expensive option, perhaps a different college or a trade school.

If the parents are footing the bill, they should agree with the student on a certain minimum GPA before the child starts college. If the child is going away and the parents anticipate an extended adjustment period, the agreement might allow a certain amount of time for the student to make the grade. But the parents need to enforce the agreement if the child doesn't live up to the bargain, Mr. Duncan says.

In that case, a good community college may be a better value for the parents until the child is mature enough to realize the financial burden of a college education on the parents and is dedicated enough to make the cost worthwhile.

5. THE ADVICE: Help children protect their health and finances from uncertainty and risk.

THE REASON

Once a child turns 18, parents no longer have the legal authority to access the child's medical records or make health or financial decisions for the child, says Laura Mattia, a Fair Lawn, N.J., certified financial planner.

That loss of control over a child's care "is a hard thing for a parent to hear," she says, but families need to create a "game plan" to address the unexpected.

It should include three documents--a health-care directive, a HIPAA release and power of attorney--which together allow parents to access a child's medical records and make decisions on the child's health care and finances if necessary.

Ms. Mattia gave this advice to a client whose child was going to study in London for a semester. The client initially was shaken by the realization that she could no longer make crucial decisions on her daughter's behalf without taking legal action, Ms. Mattia says.

But it prompted a conversation between mother and daughter that brought into the open the anxiety they were both feeling about being so far apart and introduced the daughter to the importance of financial and estate planning. It also prompted the mother to take another look at her own estate plan.

"It was an empowering discussion for both the mother and daughter," Ms. Mattia says.

Ms. Dagher is a reporter for Dow Jones Newswires in New York. She can be reached at veronica.dagher@dowjones.com.

Charlotte Observer

by Alan M. Wolf and Christina Rexrode
 

Read more: http://www.charlotteobserver.com/2011/01/02/1947871/investment-tips-for-2011.html