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Your Money

Reassess Your Financial Situation at the Mid-Point of Y2K

Aired July 8, 2000 - 7:00 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JOHN METAXAS, HOST: It's half-time for the year 2000, and that means it's time for a financial checkup. We'll tell you about a sure way to organize yourself and your financial life.

And certified financial planner Al Gobo joins us with some great tips on how to reassess your financial situation. He'll also answer some of your personal finance questions.

Plus, if you're ready to break out of the mold and start your own business, we've got some tips for you.

That's ahead on YOUR MONEY.

ANNOUNCER: This is YOUR MONEY with John Metaxas.

METAXAS: Hello, everybody. I'm John Metaxas. Welcome to YOUR MONEY, where our goal is to help you make more, save more, and do more with your money.

We begin today with a look forward. Now that we're halfway through 2000, it's as good a time as any to reassess your financial life, reexamine your goals, make new goals, and get a handle on your finances.

A good way to start is by getting organized. For many of us, we procrastinate when it comes to organizing our lives, cleaning out the closets, uncluttering the garage, and filing the financial paperwork. But there is help available to take care of those chores.

In fact, an increasing number of people are enlisting the help of so-called professional organizers.

Casey Wian looks at what they do and how much they'll cost you.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): L.A. bass player Billy Sheehan writes music and plays in two bands, leaving little time for anything else, including taking care of his household finances.

BILLY SHEEHAN, MUSICIAN/BASS PLAYER, MR. BIG/NIACIN: When I come in and open my wallet and I have all my MasterCard things, and all my mail comes in, and all my checks and bills and everything, that all gets put in one giant pile. WIAN: For $65 an hour, Sheehan has hired this professional organizer to get his life organized.

CYNDI SEIDLER, PROFESSIONAL ORGANIZER, HANDYGIRL PROFESSIONAL ORGANIZING: On a weekly basis, it's more like we do his finances and make sure that everything is put into the computer. And each week we organize the papers in his office so that it's tidy. And sometimes errands are run for him.

WIAN: But her skills don't stop there. She has helped other clients do their shopping, reorganize their rooms and closets, find a landscaper, and has even trained a housekeeper.

SEIDLER: I can offer any of the things that a person would need to assist them personally that they can't do themself.

WIAN: Professional organizers like Seidler are springing up everywhere, charging anywhere from $25 to $150 an hour. You can get a list of organizers in your area by contacting the National Association of Professional Organizers at NAPO.net.

There is no certification required to be a professional organizer, so experts say, make sure you ask for references, and always work with the organizer on a contract basis.

SEIDLER: An agreement of some sort, job order, whatever it is, it should be in writing, what that professional organizer's going to do for you and what's going to be done.

WIAN: In many cases, you can get discounts on the hourly fees if you buy their time in blocks or if you work with them on a long-term basis.

SHEEHAN: It just frees my life to live and do my thing for not too exorbitant a profit at all.

WIAN: That's YOUR MONEY. Casey Wian, CNN Financial News, Los Angeles.

(END VIDEOTAPE)

METAXAS: If you don't have a professional organizer, we have some do-it-yourself tips to help you get your finances in order. Most financial planners recommend reassessing your portfolio and finances at least once a year.

Joining me now with more on how to revisit everything from your investment strategy to a estate planning is Altair Gobo, certified financial planner.

And Al, welcome to the program.

ALTAIR GOBO, CERTIFIED FINANCIAL PLANNER, U.S. FINANCIAL SERVICES: Thank you very much.

METAXAS: Is there any advantage in doing this reassessment at the halfway mark as opposed to the end of the year?

GOBO: Well, I think certain categories of financial planning certainly lend themselves to looking at more than others. For example, taxes. You want to take a look at your tax situation probably midyear, because that's something that if you wait till the end of the year, you won't have any options, and you won't be able to do anything with.

METAXAS: Now, what are you talking about, with the amount of withholding you have, perhaps, and how much in tax you're going to owe the government by the end of the year?

GOBO: Well, let's break it down into two categories. Number one, the W2 wage earner, yes, withholding. Am I withholding too much or too little? Do I anticipate any kind of bonus, any kind of salary increase? Did I just buy a house? Whatever. The self-employed or the consultant, that's a 1099 wage earner, OK, Am I paying enough in quarterly estimates? Am I putting enough away in my pension plan, my SETH (ph) IRA, or whatever?

METAXAS: What about taxes on your investments? We hear so much about tax law selling at the end of the year. Should that activity be performed at this time of year?

GOBO: Well, I always take a look at tax law selling during the year. I don't wait till the very end, because if you wait till the very end, you're doing tax planning in the 11th hour. I like to do it during the year. It gives me more opportunity and more options. So if I'm in a stock or a fund that I don't think has the potential that I once thought it did for the rest of the year, and I have a loss, I might want to get out of that and into something else now.

METAXAS: What about reassessing your portfolio holdings?

GOBO: Well, I like to reassess portfolio holdings at least annually, but sometimes we look at it in the middle of the year. For example, if we once thought we should be in an 80 percent stock, 20 percent bond portfolio, well, after what happened in the first six months of this year, that might not look the same as when we first started. So you might want to do some adjustments.

An interesting thing happens when you do that. You're selling high and you're buying low.

METAXAS: Tell us about insurance.

GOBO: Well, risk management is interesting. I think you look at your various insurance plans ranging from homeowners, automobile, and any kind of other liability policies you have. And make sure you have enough. Take a look at your life and disability insurance policies, make sure the beneficiaries are who you want them to be, and make sure they're, again, the amounts that you think you need.

METAXAS: In calculating your retirement, now, is this something you should do on an annual basis? GOBO: Well, in calculating retirement, depending how old you are, I mean, someone 25 years old may not want to look at it minute to minute. Someone a little older might want to look at it more than just annually. But I think what we do is, when we look at retirement, we set some goals and objectives, and we need to use benchmarks and see if we're reaching those benchmarks. And the semiannual period seems to be like a holiday. It's a tickler for us to take a look at things.

METAXAS: All right, finally, your will and your estate planning. What should you be doing about that?

GOBO: Well, estate planning's interesting. You know, the laws seem like they might be changing, and they certainly have changed over the years. I like to look at estate plans periodically. I like to have wills revisited at least every five or six years. But things change in our lives. People get married, people get divorced, new children, whatever. Any event that triggers a change should trigger you looking at your will and your trust.

And you should also take a look at the various laws as far as the exemption amounts, retitling of property, anything that would give you the advantage to pay little or no estate tax.

METAXAS: And it's not just the will. Those IRA beneficiary forms are very important if you have a new child that's been born.

GOBO: Absolutely. All of the beneficiary forms are critical in planning.

METAXAS: All right, Al Gobo, thanks very much for joining us.

Al will be back with us later in the program to answer some personal finance questions from our viewers.

But first, up next, we'll take a look at some of the thousands of financial Web sites that you could use to get organized. Plus we'll look at the world of investing beyond Wall Street.

It's YOUR MONEY.

(COMMERCIAL BREAK)

METAXAS: Consumers can now choose from thousands of financial Web sites with services ranging from stock tracking to retirement planning. But as Kitty Pilgrim reports, not all Web sites are created equal.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Whether it's a popular site like Yahoo! Finance or a women's Web site such as Oxygen.com, Internet users can get access to financial advice and tools for free.

FIONA SWERDLOW, ANALYST, JUPITER COMMUNICATIONS: They offer a lot of great tools such as calculators. You know, how much am I going to have to save for my child's college education? What is my 401K really going to be worth when I'm going to retire? So it's calculators, it's tools, it's advice.

PILGRIM: These free financial sites, say some analysts, benefit individuals who are new to investing and want to learn the basics on how to manage their money. Some sites even offer tailored information for a select group. For instance, iVillage.com offers financial advice for widowers or divorcees.

But for more in-depth and personalized long-term financial planning, one Internet expert recommends clicking onto more sophisticated sites, such as Directadvice.com, or Financialengines.com.

DAN BURKE, ANALYST, GOMEZ ADVISORS: To participate in these programs, what individuals do is, they enter a wealth of information about their financial situation. They enter everything from income to their real estate holdings or to their tax returns to other income they may hold somewhere outside one or two brokerage accounts.

So it's a very holistic look at an individual's financial picture.

PILGRIM: Cost of these services varies, depending on the level of advice and guidance users receive. Directadvice.com charges $75 a year, while Financialengines offers advice and help on 401Ks for $15 a quarter.

These sites also store users' information and allow them to make adjustments to their investment plans if there is a change in their financial situation.

But don't worry, the information is kept confidential.

That's YOUR MONEY. Kitty Pilgrim, CNN Financial News, New York.

(END VIDEOTAPE)

METAXAS: Another informative financial Web site is www.worldlyinvestor.com. It offers in-depth coverage of investing overseas.

And with volatility continuing to rattle the U.S. stock market, perhaps it is a good time to look beyond Wall Street. According to Lipper, the best-performing mutual fund year to date is one that invests primarily in European stocks.

Lauren Thierry takes a look at the risks and rewards of investing overseas.

(BEGIN VIDEOTAPE)

LAUREN THIERRY, CNN CORRESPONDENT (voice-over): Of the best- performing mutual funds so far this year, one is made up almost entirely of European stocks. The Deutsche European Equity Fund has soared about 95 percent year to date.

SHEILA HARTNETT-DEVLIN, GLOBAL MARKET STRATEGIST, FIDUCIARY TRUST INTERNATIONAL: You're finally getting an equity culture developing, in Europe particularly, very similar to what you have in the U.S. So people are learning how to buy stocks and hold onto them for the very first time in their history. So it's a very good time for international stocks.

THIERRY: Devlin recommends allocating about 20 percent of your portfolio in international stocks, and says the easiest way to achieve that is through a mutual fund.

World equity funds, on average, are down about 4 percent year to date, but over the past year, they're up more than 23 percent compared to a 19 percent gain in U.S. equity funds.

Some analysts, however, say buying individual stocks is your best bet.

DONALD SELKIN, CHIEF INVESTMENT STRATEGIST, JOSEPH GUNNAR: One, I think, can do better by owning these individual blue chip high- performance stocks rather than trying to search around for a mutual fund that invests in all European stocks.

THIERRY: Selkin's favorites include Nokia, Phillips Electronics, and ST Microelectronics, American Depository Receipts, which can all be bought in the U.S.

But keep in mind, investing in international stocks is not without risk.

SELKIN: The euro has been very, very weak against the dollar, and that's attracted more money into the American financial markets. So there is a little bit of a currency risk there when you invest overseas.

THIERRY: If you're still tempted by opportunities beyond Wall Street, check out www.worldlyinvestor.com. It's filled with commentary and advice from experts all over the world.

That's YOUR MONEY. Lauren Thierry, CNN Financial News, New York.

(END VIDEOTAPE)

METAXAS: Coming up, certified financial planner Al Gobo returns to answer a viewer's question about picking a mutual fund.

And more Americans than ever are starting up their own businesses. We'll give you tips on how to start your own.

It's YOUR MONEY.

(COMMERCIAL BREAK)

METAXAS: In today's viewer mailbox, our first question is from Joe from New York City. He writes, "I am a 25-year-old freelancer, and I just opened a Roth IRA. Can you tell me what mutual funds would be good to invest in for the long term? Also, is there something more I should be doing for my retirement, since I don't have a 401K through work? I have about $5,000 in mostly technology stocks that I have set aside for either emergencies or retirement."

Answering Joe's question is certified financial planner Al Gobo. And, Al, what mutual funds do you recommend?

GOBO: Well, let's take the last part of that question first. He has $5,000 invested in technology stocks for emergency funds, OK? Joe, I think you need to scale back a little bit, because emergency funds should be invested in something a little safer.

The mutual funds I would invest in for retirement, since you're 25 years old, you have about $2,000, I would take a look at some of the big ones, Fidelity, Vanguard. Get into a good index fund, get started, and put away as much money as you can as frequently as possible.

METAXAS: Well, you've presaged the next question. Our second question is from Stacy (ph). She writes, "I am a 35-year-old homemaker and would like to start investing. I have $20,000 to $25,000 and don't know where to start. I was told Vanguard was a safe bet. Any suggestions?" Al?

GOBO: Again, let's define "safe bet." Safe bet to one person might mean they can never lose any money. Safe bet to someone else might mean they lose once out of every five years. And when you look at Vanguard, when you say the word "Vanguard," you're telling me that you're really not sure of what Vanguard fund, because Vanguard is a family of funds.

So if you go into the Vanguard family, Stacy, you'll find that there are some funds that are more conservative and some funds that are more aggressive than others.

METAXAS: And yet Vanguard has a reputation of having the index funds, which are very low cost, and low expenses are an important point, aren't they?

GOBO: Absolutely. You want to take a look at low expense funds. And if you go into an index fund that seems to have the less volatility of all the funds out there.

METAXAS: Of course, Vanguard is not the only family with low cost index funds.

GOBO: Without a doubt.

METAXAS: There are a number of other good ones.

Al, thanks for joining us.

If you have a question you'd like us to get answered for you or have any comments, please drop us an e-mail here at yourmoney@cnn.com, or write us the old-fashioned way at YOUR MONEY Viewer Mail, Five Penn Plaza, New York, New York 10001. Please include your name and where you're from.

Well, ahead on YOUR MONEY, think you can make it on your own? We'll give you tips on what you need to know to make your business grow.

(COMMERCIAL BREAK)

METAXAS: In the past few years, record numbers of new small businesses have sprung up. The total now stands at 25 million. And according to the Small Business Administration, the number of bankruptcies has fallen to its lowest in 19 years. That doesn't mean every new small venture will be successful. Industry experts say it takes selecting a good product, preparation, and the right attitude to make a business work.

Allen Dodds Frank offers some tips on starting your own small business.

(BEGIN VIDEOTAPE)

ALLEN DODDS FRANK, CNN CORRESPONDENT (voice-over): L.A. Web designer Kalika Nacion left her full-time job to start her own company after she realized there was an outside demand for her skills.

KALIKA NACION, FOUNDER, CITRUS STUDIO: People were always asking me for advice on how to set up a Web site. And so slowly, I would get products. They would give me projects on the side, really small projects, and I would do it on the weekends.

So that's when I realized that this could actually be a viable business.

FRANK: Experts say any budding entrepreneur should start a venture with a strategic plan to help focus the business.

ROBERT SULLIVAN, SMALL BUSINESS ADVISOR, iSQUARE.COM: The plan has got to cover items such as the vision and the purpose of the business and the assumptions you're going to make when starting the business. And very importantly, you've got to think about the risks associated with starting the business, and what the strategies might be to mitigate those risks.

FRANK: Once that is penned, it's important to get a lawyer to help figure out what legal structure is right for you and your company.

NACION: If you're just doing it by yourself, (inaudible) recommend you to just be a sole proprietorship. If you want to -- if you have employees, then you may want to consider becoming a corporation. And the lawyer or your -- any qualified lawyer can help you make those types of decisions.

FRANK: An accountant also is vital, say business advisers, in order to maximize your tax advantages.

SULLIVAN: The advantages might be in terms of how you buy equipment, how you pay for equipment, and so forth.

FRANK: Figuring out your cash flow is another important task. List your potential expenses and your projected revenues so you'll have an idea of how much money you may need to keep the business going. Experts warn, though, that starting a business requires a lot of energy and patience.

But for many entrepreneurs like Nacion, running a business she loves is worth every hour she puts into it.

That's YOUR MONEY. Allen Dodds Frank, CNN Financial News, New York.

(END VIDEOTAPE)

METAXAS: That's YOUR MONEY for this week. Once again, don't forget to send us your personal finance questions and comments via e- mail at yourmoney@cnn.com, or write us at YOUR MONEY Viewer Mail, Five Penn Plaza, New York, New York 10001. Your question could be featured on an upcoming program and be answered by an expert.

Thanks for joining us. I'm John Metaxas. Goodbye from New York.

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