Chad Warner's Reviews > Kiplinger's Practical Guide to Your Money: Keep More of It, Make It Grow, Enjoy It, Protect It, Pass It On

Kiplinger's Practical Guide to Your Money by Kiplinger's Personal Finance
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Aug 18, 2011

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bookshelves: finance, non-fiction
Read in August, 2011

I love Kiplinger’s Personal Finance magazine, so I was disappointed by this book. It provides details about a dizzying array of financial options and investment vehicles, but doesn’t adequately explain how to use them. I wanted more advice on evaluating the options and selecting those appropriate for various scenarios and life stages. I would have liked more specific guidelines on assembling a portfolio, with tips on asset allocation and location.

Topics include saving, credit, banking, home ownership, car ownership, college savings, insurance, investing, real estate, retirement, and estate planning.

This book isn’t for the uninitiated; you must be somewhat financially literate, because it skips the basics and dives right in. I found the chapters on insurance especially boring, but they are detailed. I yawned during the chapter on bonds, but I liked the chapter on mutual funds. There are several times where the book tells what not do to and what not to invest in.

My fiancée thinks it’s strange that I read personal finance books for fun, but I truly enjoy learning about frugality and investing. Personal finance is a game where improving your skills wins you more money!

Homes
Reasons to own your home
Mortgage interest and property taxes are tax-deductible.
A large amount of home sale profits are tax-free.
Home equity can be used for tax-sheltered loans.
The leverage of owning an appreciating asset using borrowed money.
Home values generally rise faster than inflation, providing an inflation hedge.

The longer you’ll be paying a mortgage, the more sense it makes to pay points. Calculate and compare the numbers.

Reasons to rent
Freedom to move.
Ability to invest money saved on mortgage and home ownership costs.

Cars
Drive your car until it breaks down. Old cars are cheaper to run overall than new.
Carry as much liability coverage as you can comfortably afford. Carry bodily-injury coverage of at least $100,000 per person, and $300,000 per accident, and property-damage coverage of $50,000, or a minimum $300,000 on a single-limit policy.
Raise deductibles to the highest you can afford.
Consider dropping collision and comprehensive coverage for cars older than 5 years.
Consider paying for small losses yourself to avoid premium hikes, but still report accidents in case the other party seeks damages later.

Marriage
Each spouse should own credit cards for credit history.
Get disability insurance covering ⅔ of current income.
Write 2 wills.
Own life insurance policies on each other’s lives.
Own cars separately to limit asset vulnerability.
It’s usually better to file taxes jointly, but compare to filing separately to be sure.

College
For college savings, use a 529 plan or Coverdell ESA. If you can afford more than the Coverdell ESA maximum, put additional funds in a Roth IRA.

Life insurance
Married without kids: modest amount for both parents
Married with kids: insurance for both parents
To calculate how much life insurance you need, subtract survivors’ estimated expenses from survivors’ estimated income.
Term life insurance gives the most protection for the cost.
Consider whole life insurance as another investment vehicle if you’re maxed out on tax-sheltered savings and investments.
Choose an insurance company that’s rated A++ or A+ by Best, B or above by Weiss, or at least AA by S&P, Moody’s, or Duff & Phelps.

Insurance for the self-employed
Join a group plan.
Consider an HSA.
If you’re healthy, get a high-deductible policy and put the premium savings in an HSA.

Saving and investing
For short-term savings (2-3 years) use CDs or other sure bets. For the long-term, use stocks.
When selling mutual fund shares, sell those with the highest basis.
Bond funds greatly simplify bond investing.

Real estate
There are many tax advantages to owning real estate.
If you don’t own real estate, use REITs instead.

Retirement
You’ll need about 80% of pre-retirement income in retirement.
Make IRA contributions as early in the year as possible.

Long-term (20+ years) retirement portfolio
mostly aggressive growth stocks
zero coupon bonds (especially in tax-sheltered accounts)
real-estate
other long-term investments

Retirement accounts for the self-employed
SIMPLE IRA: higher contribution limits than Keogh or SEP; up to 100% of income; excellent for part-time freelancers.
SEP: simpler than Keogh; good for part-time freelancers.
Profit-sharing Keogh: good for part-time freelancers with variable income.

Estate
Write a living will, health care proxy, and durable power of attorney.
Always have a will, and always have a lawyer write or review it to ensure legality. Always have a lawyer make any changes.
Parents should consider using trusts for assets that should go to their kids.
Execute a durable power of attorney.
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