$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ WEALTH HEALTHY WOMEN [TM] Healthy Attitudes ==> Wealthy Women [TM] Volume 1, Number 3 December, 2000 $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ WELCOME to Wealth Healthy Women [TM], a free e-mail newsletter for women seeking greater financial freedom and well-being. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ IN THIS ISSUE: 1. Note From Your Editor, Lynne 2. Article: Taking Steps Toward Financial Well-being: The Impact of Current Financial Events 3. Spotlight - Mutual Fund Filing Shortcut 4. WealthHealthy Announcements ************************************************************ Note from your Editor We've certainly been on a ride the last few weeks as tech stocks have crashed, market indices have fallen sharply, and we are waiting to hear if the Federal Reserve is going to lower interest rates. There is substantial agreement that the terrific investment returns - and relative ease of making those returns - was a thing of the '90s. It is in downturns and lean times, however, that we can really learn about ourselves. Our strategies and choices matter even more since there is less of a cushion for down- side risk. The feature article of this issue of Wealth Healthy Women [TM] discusses risk and charting your course to financial well-being in these shifting times. After reading the feature article, consider treating yourself- or someone you love - to a FREE teleclass on "Charting Your Financial Course in Shifting Times." See the WealthHealthy Announcements section for dates and times. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ Feature Article: Taking Steps Toward Financial Wellbeing: The Impact of Current Financial Events In the last two issues, we focused on increasing AWARENESS of your current relationship with money and identifying what relationship you would like to have. Then we discussed MIND TRAPS that can block you from moving toward your financial goals and best interests. In the last few weeks, you may have decided to make some changes in the way that you earn, spend or invest your money. For example, my client Ann decided to focus on saving for her future. She began budgeting a certain amount of each paycheck for her retirement fund, rather than leaving it to the end of the year and seeing what money she had left for this important investment. She decided to invest in tech stocks after hearing her friends brag about their great returns on investment. She didn't want to be "conservative" and feel foolish for not taking advantage of the current markets. How do you think Ann is feeling today? More importantly, how would you feel if you were in her situation - and perhaps you are in her situation. What Ann did not think much about was her level of risk tolerance. She also was more focused on avoiding feelings of foolishness than on her long-term goals. While I'm not saying that anyone who invested in tech stocks was foolish or short-sighted, what I am saying is that the best cushion in bear markets is to understand your tolerance for risk and to be clear about your financial goals and values. Here are some questions to ask yourself in order to stay on your path to WealthHealth in these shifting financial times: * What are my primary financial goals - for the coming year, the next five years, and for my retirement? Are there circumstances that I have to save for, and what amount of money am I talking about? * Which of my financial goals are not negotiable - for example, repairing the damaged roof on my house, paying my child's yearly college tuition, etc. And, what amount of money do I need to have to meet these goals or obligations? * Which of my financial goals actually are negotiable - for example, buying a new car, going on an exotic trip. And, am I willing to forego these goals if my investments take a downward turn over the next year? * Imagining that I could put my investment contributions into the following options, how would I allocate my money in today's market: So that the total would be 100%, how much would I allocate to a guaranteed fixed account, a bond fund, a blue chip stock fund, a growth stock fund, aggressive growth fund and\or an emerging markets fund? * How would I have answered this question during the summer when the stock market was at its peak? As a money coach, I've observed that some individuals are very steady about their level of risk tolerance. For example, Teresa felt that she couldn't tolerate any volatility in her investments regardless of what was happening in the economy. As she examined her relationship with money, she came to realize that her experience growing up in a family where her father gambled away his paycheck, and the family had to move frequently to avoid creditors was at the root of her anxiety about "being at the mercy of the market." Teresa needed to understand another form of risk, inflation. Inflation affects your purchasing power - each year your dollar is worth less in terms of what it can buy because of inflation. Teresa needed to realize that she increased her risk of not having enough money for her financial goals if she only kept her money in a savings account in her efforts to "take control" of her life. On the other end of the spectrum is Ann. She viewed herself as a risk taker, similar to her friends. She stated that she knew that "investing is long-term" and that she was willing to put her money into the emerging tech stocks in order to get a high rate of return. However, Ann didn't realize, until the market began it's tumultous descent, that her perception of her level of risk tolerance was based on her belief that tech stocks would continue on their upward rise. She hadn't researched the fundamentals of the various companies that she'd invested in to see if they were solid ventures. Nor had she fully understood the true meaning of risky investments - the possibility of great highs, but also the possibility of great losses - in other words, volatility. In essence, Ann had fooled herself about her capacity to tolerate the potentially stomach-wrenching volatility of the market. So, if one is operating in a WealthHealthy way, what do they do in these current times? 1. Take a hard look at your risk tolerance right now, during these fluctuating times, to get a clear sense of how you comfortable you can be with volatility and how much volatility you can really tolerate. Write this down so you can look back at it when times get better. 2. Decide to invest in financial vehicles that are consistent with your level of risk. You may want to build in some flexibility to incrementally increase the aggressiveness of your investments in better times, but you are trying to develop a strategy that you can live with over the long haul. 3. Take some time to really examine your financial goals and dreams. Decide what is essential in your life, and what would be ideal. For example, it may be essential to you that your child receive a good education, and that it would be ideal if you could send him or her to Harvard, but other less-costly universities may be good enough. Along another line, it may be essential to you to be in good health as you age. Paying for health insurance and regular visits to a specialist to deal with your arthritis, back pain or diabetes may be essential to your future well-being. 4. Assess what you need to do this year, and each month of the year to move toward your long-term financial goals. Put that into your monthly budget. For example, once you've estimated what it will cost to send your child to a good school when he\she is ready, figure out what you need to place each month into a dedicated educational fund. Many books and websites, as well as your financial planner, can guide you in making these calculations. To address your health goal, budget your monthly health insurance premium and potential medical visits into your monthly budget. 5. Commit yourself to spending your money on your true goals and desires. It's easy to "burn" money on luxuries and treats when things are "bullish" but this downturn is teaching many people a hard lesson - that historically, the market cycles, and there is no clear pattern of predicting how long a bull market lasts before a downturn. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ Spotlight - Mutual Fund Filing Shortcut Are mutual fund payouts your only source of capital gains? Then you may be eligible to avoid filing Schedule D because of a shortcut allowed by the IRS for Form 1040 filers. Information about reporting mutual-fund capital-gains distributions is available at www.irs.gov, the IRS website, or in IRS Publication 564. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ WealthHealthy Announcements FREE WealthHealthy Teleclasses on "Charting Your Financial Course in Shifting Times." Do you want to examine your level of risk and setting your financial priorities that take into account current changes and fluctuations in the economy? Join other like-minded women in a fun, interactive 50-minute class. Two classes will be offered: Tuesday, January 16, 7:00 pm (EST), and Wednesday, January 17, 7:00 pm (EST). Register by contacting Lynne@WealthHealthy.com. Please put "Charting Course" in the Subject box of your e-mail. Indicate which class you want to take. $$$$ To hear a 10-minute description of the WealthHealthy approach, as well as a bit about me, you can call 1-212-461-2660. If you are interested in coaching, simply e-mail me at Lynne@WealthHealthy.com or by calling (202) 387-5923. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ Pass this newsletter along to friends, family, and colleagues who also may be interested in moving toward greater financial freedom and well-being. They can get their own free subscription by going to http://wealthhealthy.com and signing up - it's as simple as typing in their e-mail address. Or, send an e-mail to whw-request@WealthHealthy.com with the word "subscribe" in the body of the letter. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ NOTE: Wealth Healthy Women [TM] is intended for informational and educational purposes only. It is not a substitute for financial, legal, accounting, psychotherapeutic, or other professional advice and consultation. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Copyright 2000 Lynne Hornyak, Ph.D. All rights reserved. The above material is copyrighted but you may retransmit or distribute it to whomever you wish as long as not a single word is changed, added or deleted, including the contact information. However, you may not copy it to a website without my permission. Reprint permission will be freely granted upon request. Advance written permission must be obtained for any reprinting of this material in modified or altered form. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CONTACT INFORMATION Lynne Hornyak, Ph.D. WealthHealthy.com Phone: (202) 387-5923 Fax: (202) 986-8980 e-mail: Lynne@WealthHealthy.com Web: http://wealthhealthy.com