More Pennies In Your Pocket: Kiplinger's Kathy Kristof Dishes On Wealth

Benzinga was able to follow up with renowned financial journalist Kathy Kristof after her recent publication in Kiplinger’s Personal Finance magazine. Titled "Six Steps to Building More Wealth," Kristof outlines a guide that will not only help you reach financial security, but potentially put a few more pennies in your pocket along the way.

Kristof’s article describes:

1. 1) The importance of building an outline for your goals
2. 2) Creating a realistic budget
3. 3) Distributing your savings and making your money work for you
4. 4) How essential asset allocation is
5. 5) Keeping a close eye on cost and spending habits
6. 6) Scheduling and checking in on your portfolios

Related Link: Don't Shrug Off Small-Cap Stocks Says Kiplinger Analyst

Asset Allocation: How Do You Chose?

BZ: I understand the concept of diversification in asset allocation (No. 4 in your article), but how do you go about choosing which “big companies, small companies, domestic outfits and foreign firms” to invest in? In other words, I understand the concept and the reasoning behind diversification, but the nitty-gritty details leave me scratching my head.

KK: You can invest in index funds that mimic either big company stocks, small company stocks or all U.S. stocks (best option: Vanguard’s Total Market Index Fund or ETF); get another index fund that mimics a broad international index, and one that mimics the bond market (like BND). It's simple, but not random. But, if you have a financial advisor, yes, he or she should help you with that.

No Kids Yet? Wait To Save For College.

BZ: My husband and I have our budget and short/long-term goals outlined, but haven’t sketched out college funds for potential kids (we currently don’t have any). Looking at No. 3 and No. 4, we want to save for our children early so that the account has time to mature.

Do you suggest waiting to start college funds until we have children, or would it be more prudent to start saving now and if we don’t have kids, allocate those savings to something else (such as our emergency fund)?

KK: Wait on the college fund until you have kids. The reason is simple: If you take money out of a tax-favored plan, such as a 529 college fund, for any other purpose – an emergency, medical bills, buying a home – you face taxes and tax penalties.

So, you should never put money in a tax-favored account until and unless you have a reasonable expectation that you will use that money for the "qualified" purpose. When you don't have kids, you have no idea whether you will or not.

Related Link: Parents And College Planning: Kiplinger Explains Unfamiliar Options

Portfolio Check-Ups

BZ: How often should you do a portfolio check-up (No. 6) barring major life events? Is every year sufficient, or is this a quarterly or monthly responsibility?

KK: Ideally, you should look at your portfolio once a year – do it on your birthday or New Year’s Day or some day you’ll remember. You don’t necessarily need to make any changes. But you should just make sure that where you have your money still makes sense, based on your goals; your funds are performing in a logical way (i.e. like the market); that normal market swings haven’t left the balance – or percentage of assets you have in different categories – stocks, bonds, cash, etc. – out of whack.

If all is well, fondly pat the "log off" button and vow to check it again in a year. Your portfolio shouldn't need daily, weekly or even monthly maintenance. It should be low-cost and low-maintenance because its role is to fund a happy, comfortable life. If it requires a lot of tending, it's getting in the way of the goal – life – so you’d know there was something amiss.

BZ: Thank you so much for taking the time to talk with Benzinga. We appreciate your insight and advice.

Although the advice might sound simple, keeping up with your financial health and well-being is no simple matter. There are many cogs that stabilize your financial vehicle. In following Kristof’s advice, be aware of what goes into your financial entity and take an active role in your financial security.