I really like this article

By: Christine Larson source-workingmother.com
Like so many of us, Lisa Glover makes a lot of the right money moves. This 40-year-old single mom pays her bills on time, puts a little cash aside each month for retirement and saves for her 4-year-old daughter's education. But that's as far as she gets. The bigger goals, like buying a two-bedroom condo and building an emergency fund—well, the money never seems to stretch that far. "I've been living in financial denial," Lisa admits. Like Lisa, most moms find the money for ballet lessons and iPods but forgo building an investment portfolio. A 2005 survey by OppenheimerFunds found that women usually do their household's budgeting and bill paying but leave the investment decisions to someone else. Lack of confidence is one reason: Fourth-quarter results, interest vs. yield, compounding—who has the time or energy to learn all that jargon? In a 2006 study by Prudential Financial, two thirds of women graded their financial literacy a C or below. "But if we really want to take care of our families, we need to become smart investors," says Georgette Geller-Petro, a financial planner with AXA Equitable. The good news is that we're
already better at investing than we realize. Men tend to chase the market, buying and selling impatiently rather than buying smart investments and holding them for a long time. One study showed that married men traded 45 percent more and earned 1.4 percent less in average annual returns than married women. To help more women gain confidence and know-how, we introduced three working moms to financial planners from some of the country's most respected firms. What they learned can educate and inspire families at every income level.Single MomLisa Glover, 40, Newmarket, NH Job: Researcher/planner for efficiency programs for a power company Child: Gillian, 4 Household income: $61,000 ($55,000 salary plus child support) Retirement savings: $14,000 in her 401(k) College savings: $1,000 Outside investments: None Emergency fund: None
Goals
Buy a home
Build an emergency fund
Save for retirement
Save for Gillian's college education.
Lisa Glover thought she was doing just fine—until her car broke down. Her $61,000 annual income went a long way in her affordable New England town. But when her vehicle needed $500 in repairs last fall, she didn't have any money to cushion the blow.
What she did have was $2,000 in credit card debt, plus student loan payments. Lisa dreams of buying her own home and of having enough money to contribute to her daughter's college tuition and to retire—but she keeps experiencing small setbacks. "I know I could be doing so much better," she says. We asked leading financial planners Georgette Geller-Petro and Beth Botti of AXA Equitable in Stamford, CT, to come to Lisa's aid. The duo analyzed Lisa's spending patterns and long-term goals and came up with some surprising findings. First, it was clear that Lisa was spending too much: She had only about $50 left at the end of each month. While her $700 monthly day-care expense was a necessity, her constant impulse buys—usually toys and clothes for Gillian—weren't. She deposited 6 percent of her monthly salary into a retirement plan and another $50 a month in a college fund, but she invested those savings poorly. She poured the retirement money into aggressive growth funds rather than diversifying the account, which would have offered more protection. Worse, she had no estate plan, no emergency fund and only minimal life insurance. In other words, Lisa had no peace of mind. Here's what her advisors recommended:
Will Lisa must appoint a legal guardian and make financial provisions for Gillian in case something unexpected happens.Life insurance A 20-year term life insurance policy with a death benefit of $325,000 (cost: about $50 a month) will provide for Gillian in the event of Lisa's premature death.
Housing If Lisa bought an inexpensive apartment, she would be able to reduce her housing costs and pay less for a mortgage than she now pays for rent. She'd diversify her investments, add to her tax savings, realize her dream of home ownership and build equity to help finance her daughter's college tuition. Retirement savings Lisa should move the money currently in her 401 plan's S&P 500 index fund into its "Lifestyle 2030" fund. Lifestyle funds, also called target date funds, are now offered by many companies, including Vanguard and Fidelity. They automatically allocate assets based on a target retirement year. There's nothing wrong with S&P 500 index funds, but most of us need more than just large U.S. company stocks in our portfolios. Advisors usually recommend mixing large and small domestic stock funds, international stock funds and bonds. Some advocate mixing value and growth funds.
Choosing a variety of bonds and funds can provide growth with less volatility. For someone more than 20 years from retirement, lifestyle funds pick relatively aggressive investments. But the best part for Lisa is that she can "set it and forget it"—she won't have to keep checking her portfolio to make sure she has the right mix of investments. "In an ideal world, we'd all manage our own portfolios, but the reality is that our kids have runny noses, our offices get crazy, and suddenly, two years later, all our money is still in the S&P 500," says Geller-Petro. "The more you put on autopilot, the greater your chance of success." College savings/Emergency fund Lisa should create an emergency fund with three to six months' salary. When that's done, she can restart her contributions to Gillian's college account.
The bottom line
Talking to the advisors was a wake-up call for Lisa. "I felt shocked to see I was only saving fifty dollars a
month," she says. "And I was surprised that they recommended I stop saving for Gillian's education. But I see there are more important things to do with our money right now." Within days, Lisa started checking real estate ads. "I thought we'd just keep getting by like everybody else," she explains. "But this shows me that I can do so much better. I can make choices that will make us much more comfortable and stable than we are."