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How To Manage Your Wealth

By: dmc-admin//April 13, 2009//

How To Manage Your Wealth

By: dmc-admin//April 13, 2009//

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After many days — and probably nights — of toil, probably mixed with bouts of second-guessing your legal strategy, your efforts have finally paid off in the form of a hefty legal fee.

Now you can buy that new car and even that second home you’ve had your eye on, right?

Maybe, but financial experts say you should be as careful investing your new-found wealth as you were with the case that generated your big fee. That means creating a long-term financial plan that will get you from here to retirement comfortably.

Start with a financial checkup. “Look at your whole personal financial planning picture,” recommends Everett Stone, a financial planner and president of Vrakas/Blum Financial Advisors Inc. in Brookfield. “What do you already have invested in real estate, stocks, and so on? What are your goals for this money? Is it for retirement? If so, how far from retirement are you, and how does this money blend into investments you already have?

“We’ll look at clients’ whole picture of what they already have and then plug this piece in. We’ll also make decisions about clients’ short-term needs, such as funding college-age children’s education, and recommend investing short-term funds more conservatively than the remaining funds.”

D.J. Verhaalen also recommends a holistic approach with his clients. “We’ll gather facts about clients, the amount of the lump sum, and the assets they already have to determine where they are today,” says the senior financial advisor and vice president of U.S. Bancorp Investments Inc. in Milwaukee. “We’ll also ask their feelings about the marketplace, their risk objectives and time frames, in addition to their family dynamics.”

Any financial advisor will tell you that what’s best for you may not be best for another attorney. “If we’re working with associates, we make sure they have a cash reserve, and it’s extremely important to do a debt review because many associates have a high amount of debt from student loans that might not be locked in at a low interest rate,” says Verhaalen. “Also, do they have a home, or are they saving for one? Are they starting a family?”

Attorneys who’ve already started investing may have other concerns. “For those attorneys, it’s extremely important to get an overview of their portfolio,” says Verhaalen.

“What areas need to be focused on or avoided? We make sure they don’t have overlap in their portfolio. If we’re diversifying for clients, we ensure they have plenty of dollars on the short-term side, and long-term investments have to be properly allocated and diversified. For example, we may find they have no international or fixed-income exposure.”

Wherever you are in the financial planning spectrum, there are only four things you can do with a large payday, says Thomas A. Haunty, senior partner at North Star Resource Group in Madison. “You can spend it, invest it, reduce your debt, or save it,” he explains.

“Attorneys need to do all four areas at once. You can’t afford to focus on only one financial goal, no matter what it is. For instance, if you pay off all your debt at the cost of having no emergency funds, when a problem comes up, you’ll just have to borrow again.”

To determine how much you should allocate to each category, Haunty starts asking questions. For instance, if clients want to spend, he asks them to list what they’d like to spend the money on, rank each item, and then challenge themselves about whether those expenses are truly needs or simply desires. “The list is usually enormous,” he says. “I typically suggest clients spend on the top two things on the list.”

As for investing, most attorneys are “horrendously behind” where they should be, says Haunty, and he typically recommends earmarking funds to shore up that category.

With financial markets roiling, however, where should you invest? “All investors have been through a shock with today’s market correction,” says Stone. “Everyone needs a little more security than previously. Many people should be looking a little more at secure investments, like certificates of deposit and government bonds.”

And though it might seem scary, it’s not a time to shy away from the stock market.

“It’s still a good time to invest in the market,” says Stone. “Stocks are less risky now than they were a year ago.”

If you think some investments are too hot to touch, you may be ruling out good buys.

“So many investments have gone down in value that everything’s starting to look attractive,” says Haunty. “Even General Motors and bank stocks, which look horrible, are priced basically for going out of business, and that’s ridiculous. The mood today is fear, but you can be more bold in your investing if you have an organized financial plan.”

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