Investing According to Your Values

Question of the week:I'm just starting to invest and I really want to do it according to my religious values. I've never seen much information on how to do this. What are your suggestions for how to go about it? --M.T.

Dear M.T.,

Even though you don't hear much about it, there are actually plenty of people who pay a good deal of attention to their faith when they make financial decisions.

According to a recent study by MMA Praxis Mutual Funds, 80 percent of investors surveyed consider themselves to be religious or spiritual. Of these, two-thirds would consider changing investments based on their values and beliefs. And the survey also found that the five most important concerns of these investors are the operation of sweatshops, product safety records, high executive compensation, environmental records and adult entertainment.

When we asked members of the Armchair Millionaire community about religion and their money, we certainly heard all kinds of responses. Here are just two:

Values beat fundamentals. "I consider it my responsibility to manage my God-given resources wisely. When considering investing vehicles, I do reject those companies that contradict my moral values--regardless of how great their fundamentals are." --A. Rodriguez

Don't need to be religious to tithe. "Although I don't formally practice any religion, I do give 10 percent of my income to my favorite charities and non-profit organizations." --Mysticaltyger

Whether you would like to avoid investing in companies whose practices you dislike, or use your investments to influence the way companies do business, you have a number of different ways to invest according to your faith. My guide provides the basics.

The Armchair Millionaire's Guide to Faith-Based Investing

• Choose stocks that match your values. Like companies that donate back to the community, that support your favorite cause, or that produce goods and services you believe in? Help ensure their success by investing in them.
• Choose funds that match your values. If you'd rather invest in mutual funds than bother with individual stocks, there are a number of different ones available that invest in accordance with defined religious, social and/or environmental guidelines. You can find more information on these faith-based and socially responsible mutual funds at www.socialfunds.com.
• Engage in shareholder activism. Some investors choose to try to influence company policy by submitting and voting on corporate proxy resolutions. There are a number of organizations devoted to changing the way companies do business from the inside out. One is the Interfaith Center on Corporate Responsibility (www.iccr.org), a coalition of 275 faith-based institutional investors. Another is the Shareholder Action Network (www.shareholderaction.org), which serves as a clearinghouse of information for faith-based groups, and social and environmental organizations involved in shareholder activism.
• Get like-minded advice. Some financial advisors specialize in helping their clients choose investments that are aligned with their values. You can locate one through the directory located at www.socialfunds.com.

THE BOTTOM LINE: Even if you think that money is the root of all evil, that doesn't mean you can't use it to do some good while reflecting your deepest values.

Getting Help Springing the Debt Trap

Question of the week:We've really gotten in over our heads with our credit cards over the last couple of years, and are starting to consider going to a consumer credit counseling agency for help. Do you think this is a smart move? --A.T., Wisconsin

Dear A.T.,

According to the Consumer Federation of America, approximately nine million Americans have some contact with a consumer credit counseling agency each year. When we asked members of the Armchair Millionaire community about their experiences going to an agency for help, we generally heard positive responses. Here are two:

A lifesaver. "I got left with $10,000 debt after a divorce. Consumer credit counseling was a lifesaver! Half my debt was interest free for the four years it took for me to pay it off and the other was dropped to 8 percent. Afterwards, when applying for a mortgage, it came up, but when I explained it they had no problem." --Meg H.

Do it yourself and save the fee. "I'm in the midst of paying down significant debt right now. I've used a consumer credit counseling agency and it worked out fine, but then I realized I could do it myself and save the fee the agency was charging me. Every little bit helps when trying to pay off debt." --Jenny

A good credit counseling company will work with you to create a debt management plan and with your creditors to create repayment plans and in some cases, to lower their interest rates. They should also provide financial education to help you improve your overall financial picture and help you to not get back into debt again.

But you should be aware that the credit counseling industry has come under fire recently from the IRS, the Federal Trade Commission and other groups for allegations of excessive fees and deceptive marketing. This doesn't necessarily mean that you shouldn't seek help from a credit agency, because there are hundreds of reputable agencies who have helped thousands of people.

What it does mean, however, is that you need to check into an agency very carefully before choosing to work with it. My guide tells what to look for.

The Armchair Millionaire's Guide to Consumer Credit Counseling

• Fees. Fees vary from agency to agency, and you should look for a good deal. According to the Consumer Federation of America, you should avoid fees higher than $50 to set up a debt management plan and monthly fees higher than $25. And the agency should be upfront about their fees, providing you specific prices in writing.
• Services. Does it offer more than just help creating a debt management plan? You may also want budget counseling want debt counseling and other financial education. You may also want the option to work with a counselor not just in person, but also on the phone or over the Internet.
• Your best interest. Credit counseling agencies are supposed to operate with your best interest in mind, but not all do. Look out for agencies where employees are paid by commission, or that doesn't spend enough time with you to formulate a solution that will work for you. And don't assume that just because an agency has non-profit status that it's automatically looking out for your best interest.
• Advertising. Be wary of agencies that advertise aggressively through telemarketing or that make unreasonable promises to "repair" your credit. While the best way to find a good agency is generally through referrals from friends or family members, you should also check out any agency you're considering with your state attorney general's office or Better Business Bureau to find out if any consumer complaints have been filed against it.

THE BOTTOM LINE: It's not easy to ask for help when you have more debt than you can handle. But it can be the way out of the debt trap--provided you ask for help from the right credit counseling agency.

A Hand for Mom and Dad

Question of the week:My parents are in their late 70s and I'm worried about their finances. Any advice on how I could give them some help taking care of their money? --W.B.

Dear W.B.,

People are living longer, so they need to make their money stretch longer and manage it to an older age than ever before. According to the Census Bureau, there are 35.6 million Americans over the age of 65 (and 4.5 million over the age of 85).

You're not alone. When we asked about the state of their elderly parents' finances, we found plenty of worried Armchair Millionaire community members. This was a typical response:

Dark days ahead for mother-in-law. "I believe that my parents will have a comfortable retirement. They don't have big expectations about traveling the world so they'll be able to get by. Now, my mother-in- law is a completely different story. She has no retirement savings, no life insurance and no health care. We have tried numerous times to get her to 'see the light' but she lives in a bubble that I am worried is going to burst sooner rather than later. She lives in a different country so I don't think she can come to live with us but I am worried we are going to get stuck paying her medical bills and subsidizing the dog food she will have to eat in retirement." --mdonalds

As people grow older, they face a new set of financial issues, including Social Security, pensions, different insurance polices and wills and trusts. This challenge is compounded if they also have the stress of living on a fixed income or of health worries. However, there's plenty you can do to help your parents age with grace financially. My guide will get you started.

The Armchair Millionaire's Guide to Lending Parents a Financial Hand

• Tread carefully. Money is deeply connected to our feelings of personal independence and dignity. Any steps towards taking over control of that money naturally threatens those feelings. At the same time, you're likely to feel uncomfortable bring up the subject with them, as well. However, you need to overcome this to help your parents avert problems in the future. If they don't want to discuss the topic with you, provide them with the names of several reputable financial advisors, preferably ones who specialize in the finances of retired people.
• Organize paperwork. Know where they keep their financial documents, including insurance policies, bank and investment account information, tax records, and will or trust, so that you can easily find them if there's an emergency. If their paperwork is incomplete or unorganized, help them get it shipshape.
• Make it easier. Save your parents some banking chores by arranging to have their Social Security and pension checks deposited automatically and bills paid automatically. Less stress for everyone. If your parents are no longer up to taking care of their day-to-day financial tasks, and they're not something you can do, either, consider hiring a Daily Money Manager, a professional who can take care of bill paying, balancing the checkbook and organizing records. You can find one through the Web site of the American Association of Daily Money Managers at www.aadmm.com.
• Help them protect themselves. Older people are a favorite target of scam artists. Encourage your parents to never give out any financial information (such as credit card or checking account numbers) to anyone calling them on the phone, as well as take steps necessary to safeguard their identities.
• Consider power of attorney. Encourage your parents to look ahead to a time when they may no longer be able to manage their finances, and to designate someone to act on their behalf if the need arises. A power of attorney document can be created inexpensively by your parents' lawyer.

THE BOTTOM LINE: Just as your parents helped you when you were young, the time may come when you need to help them as they age. Go slowly and respectfully, and your help will be much appreciated.

Crafting an Early Retirement

Question of the week:I'm 30 years old and am absolutely determined to not wait 35 more years until I retire. I'm maxing out my retirement accounts, but what else should I be doing to be able to retire early? --Thomas C.

Dear Thomas,

Given that you may end up living more years in retirement than you do actually working, early retirement calls for some serious preparation and commitment.

When we asked Armchair Millionaire community members how they are planning to retire early, we heard from many who, like you, have had an early retirement in their sights for many years. Here are some typical comments:

Million Dollars or Bust. "I'm confident that I will retire at 50 years old with at least a million dollars. I am 31 now, and I started maxing my 401(k) at age 18." --Dion

Lucky 13. "I would like to retire by the time I am 55 with two million dollars. I am 34 right now. I started saving when I was in grade school with my babysitting money. I currently save 13 percent of my paycheck, which goes into my 401(k), my son's college savings plan and paying off my mortgage early." --Whitney

Retirement Power Tools. "I'll retire hopefully at 55. My wife and I focus on putting at least 10 percent into each of our 401(k) accounts, max out a Roth IRA, contribute monthly to a mutual fund account, purchase government protected I-bonds, and also stash away another seven percent of our gross pay each month into a money market account -- all of which is in addition to pension accounts we have through our employers." --Brent

Committing to early retirement is a big step, and you want to be sure to go into it eyes wide open. My checklist will help.

The Armchair Millionaire's Checklist for an Early Retirement

• Be sure it's really for you. Ask yourself a few key questions. Do you like going to work in the morning, or would you rather do just about anything else? Do you have compelling interests or hobbies outside of work that you know you want to pursue full-time, or would you find yourself with time on your hands without a job? Do you derive a large part of your identity from your occupation, or do you see other things as being more important about who you are?
• Find out what you need. Decide the age you want to retire and then make a guess at your life expectancy (your own family members will be a good guide). Once you know how many years you'll need your retirement income to last, figure out the total amount you'll need to derive that income. You'll need to factor in investment returns, Social Security and pension benefits, inflation and your rate of withdrawal. If it sounds complicated, you're right. Fortunately, there is an array of retirement planning calculators available on the Web. Check out at least a couple and compare the results.
• Know the rules on tapping your retirement accounts early. Many people who retire early may want access to funds in their 401(k) and IRA. While these are generally off limits until you reach the age of 59 1/2, there are some special circumstances in which you can access them early. Because the rules on early withdrawal of these funds are complex, you'll probably want to seek professional advice.
• Plan carefully. Advance planning is crucial because the odds are high. If you begin withdrawing retirement funds and it turns out that you're pulling out too much too soon, for example, you may do irreparable damage to your chances of making your money last as long as you need it to. As you approach the age at which you wish to retire, I strongly recommend that you engage a financial planner to help you run the numbers and figure a safe level of withdrawal, as well as to help you structure an appropriate portfolio.

THE BOTTOM LINE: We all want an abundant and secure retirement. If you want it earlier than usual, then you'll have to work even harder to get there. But with commitment and the right plan, it can certainly be done.