Balanced Living Magazine - July - August 2004 - Financial Wellness by Maggie Busser

Financial stress is pervasive in our culture. No one is immune, and many of us feel its effects on a regular basis. Financial stress has been linked to depression, heart conditions, back problems and even periodontal disease. Matthew Bernstein, a financial advisor for AXA Advisors in Cleveland explains, “Proper financial planning leads to better overall wellness. It can solve problems before they become issues, and it provides insight into how economics affect our lives.”

Before venturing into analyzing your financial situation, begin with a healthy attitude toward money. You do not have to be an Olympian to have a healthy body, and you do not have to be rich to have healthy finances. With good organization, well-planned financial goals and an ongoing relationship with a financial professional, you will feel confident in the management of your expenses and less anxious when unforeseen events or major changes in your life occur. Bernstein explains, “Creating and regularly revisiting your financial plan can mean the difference between a solid savings discipline and financial despair.”

Financial planning is an ongoing process that you should begin early and expect to revisit regularly. “Soon after college graduation is a good time to start planning because retirement and insurance needs come into play early in adult life,” Bernstein says. “As your needs and goals evolve, it is important to determine how this affects your financial life.” He recommends that you develop a healthy relationship with a financial professional and expect to meet with him or her at least once a year.

“The process itself,” says Bernstein, “is nothing more than a series of harmonious financial strategies that do not necessarily need to be addressed all at once.” Individual strategies include retirement planning, education planning, risk management, estate planning and individual investing. There will be times when you will want to consider the big picture to ensure orchestration between the strategies. At other times, you will focus on one or two elements of the plan.

• The first step in organizing your personal finances is to gather up all the information about your income, savings, investments, monthly spending habits and debt.
• The next step is to consider your financial goal related to lifestyle, retirement and your children's education.
• Once you have all of this information together, it is time to seek out a financial professional who will analyze your data and construct a plan to meet your goals.

Finding the right financial professional is an integral part of the financial planning process. “This is a mutually agreeable relationship,” explains Bernstein, “and it is unfair for either party to be unaware of the expectations.” He recommends that you seek a comfortable connection in the same way you would seek compatibility with a health professional. After all, this person will become intimately familiar with sensitive information and private issues related to your finances. Explore your options and research recommendations from friends and coworkers. Interview the financial professional during your first meeting to discuss expectations about the relationship. Request that the planner educate you throughout the process so that you understand the recommendations that are made. Ensure that he or she will include you in the decision-making process and maintain a comfortable level of contact with you. Understand the fee structure, specifically inquiring about upfront changes, final costs and compensation for the planner.

The financial professional should offer you a broad range of options to suit your needs. Discussion will include budgeting, investment accounts, risk management and estate planning (see below). “Your values should never be compromised because of an investment,” Bernstein emphasizes. Socially Responsible Mutual Funds (SR) provide conscious alternatives that are environmentally friendly and avoid companies that cause health problems (such as tobacco). Unfortunately, SRs are small in number, so building a portfolio based solely on them may be challenging.

Financial planning leads to financial wellness. Financial wellness contributes to a healthy mind and body. You owe it to yourself and your family to get organized, evaluate your goals and create a sound financial plan.
Balanced Living Magazine, LCC

Matthew Bernstein is a Registered Representative with AXA Advisors. For more information, he can be reached at AXA Advisors by calling (216) 615-8109. He would be happy to answer any of your questions.

Retirement Savings Accounts (also known as Qualified Accounts)

Individual Retirement Account (IRA): Allows money to be put away on a pretax basis for the purpose of retirement. Money grows tax-deferred, and income tax is paid on the money as it is withdrawn during retirement.

Roth IRA: Post-tax dollars grow tax-free and can be withdrawn tax-free after age 59 ½.

401(k): An employer-sponsored plan that allows employees to contribute pre-tax dollars via salary reduction into an investment account. Money grows tax-deferred, and income tax is paid on the money as it is withdrawn during retirement.

Savings Account: After-tax dollars grow via an interest rate. Tax is paid on the growth of the savings.

Brokerage Account: Allows investment of after-tax dollars in individual stocks, mutual funds, bonds, fixed income investments or cash. Tax is paid on the growth of the investment, but there is no income tax implication when money is withdrawn.

Life Insurance: Protection against the loss of another human being. Term insurance covers a person for a fixed period, permanent life covers a person's whole life, and group term covers a person for as long as he/she is part of a group.

Annuities: A tax-sheltered savings vehicle that is a combination of investments and insurance products. Allow owners to receive money in fixed amounts for the rest of their life.

Wealth Management: The management of assets for the purpose of avoiding large tax consequences while still keeping the wealth growing and viable.

Estate Planning: The preparation of everything owned to be transferred most efficiently to heirs and beneficiaries. A trust is a separate entity that is set up for favorable tax benefits and estate planning.