Breaking Through the Mystery of Investing

Investing

In this episode, your Money Guys are breaking through the mystery of investing so you can start putting your money to work for you. Why? It’s the fastest way to grow your wealth.

Brian and Bo hate to see so many individuals out there put off by the idea of investing, so they’ve decided to show listeners how easy it is to get started with investing, and explain why you should.

If the idea of investing intimidates you or you get anxiety thinking about putting your money into the market, you need to listen to Brian and Bo’s advice on traditional investing. It could mean the difference between having a five-figure portfolio or six-figure portfolio in retirement.

5 Tips You Need to Know About Investing

Brian breaks down the simple facts of investing in 5 tips:

  • The Fix Is In: Brian explains that if you invest in the market for just one year, you have a 75-80% chance of making money.
  • Be Patient: If you invest in the market for 7-8 years, you’re almost guaranteed to make money. Investing for the long-term drives up your potential for success.
  • Have a Reasonable Expectation: Brian reminds us that no one has a crystal ball when it comes to forecasting the markets. It’s important to have realistic expectations and not buy into hype. Investors need to realize there’s no “best” time to get into the markets, and that you shouldn’t be so scared of investing that you don’t take action.
  • Don’t Swing for the Fences (All the Time): The worst thing you can do as an investor is be over-confident of your risk tolerance. When the market is performing well, it’s easy to think we should invest more, but it’s important to have some liquidity. Keep the future in mind as well: just because life is good now doesn’t mean it will be in 5 years.
  • Understanding Your Emotions: Brian goes through the range of emotions investors often feel throughout the market cycle: from being overly optimistic, to being fearful and desperate. It’s crucial to understand your emotions in relation to the market to recognize opportunity.

Brian also mentions how powerful investing can be when you compare your net worth with your earned income. If your net worth has gone up more than your earned income, that means the value of your assets is appreciating quickly, and you’re on the right track to financial independence.

Basic Investment Terms to Know

Brian and Bo quickly go through some basic investment terms you should know before putting any money into the market.

  • Cash and Equivalents: Checking accounts, savings accounts, CDs, money market accounts – anything FDIC insured that won’t lose value and is secure.
  • Bonds: A loan you make to another entity, corporation, or government. Essentially, you’re letting this entity pay you for the use of your money, and in turn, they’ll pay you interest.
  • Stocks: This is when you buy equity into a company, which means you have ownership in the future profitability of that company.
  • Mutual Funds: Offered by an investment company, these invest in a basket of stocks, bonds, and/or cash. Instead of buying individual stocks, you can invest in a mutual fund that owns shares in many different companies.
  • Exchange-Traded Funds: Similar to mutual funds, ETFs give you a wide exposure to a number of different holdings. These trade like stocks and are more tax efficient than mutual funds.

Lastly, Brian advises that people should also consider tax and risk diversification — you don’t need to invest all of your money wildly. Invest the right way with these simple tips, and you’ll be well on your way to financial independence.

What to Look for When You Need a Financial Professional

Financial Professional

It’s the first podcast of 2015! Brian and Bo are kicking off the New Year by giving out valuable advice on what to look for in a financial professional — be it a tax preparer, insurance agent, or financial advisor.

These are services nearly everyone uses (or should use!), and it’s important to connect with a financial professional who can actually provide value.

The guys walk you through the important questions to ask each of these individuals in order to make sure they’re in the right position to help you. This episode will also provide you with a better idea of how to vet each one so that you end up a happy client.

What Should You Look for in a Tax Preparer?

Brian tackles this question right off the bat, citing a wonderful article written by Kelly Phillips on Forbes: 11 Questions To Ask When Hiring a Tax Preparer.

Brian goes through a few of these questions and offers his perspective:

  • Knowing your tax preparer’s tax background sounds like a no-brainer, but you want to find out if they specialize in your situation.
  • Your tax preparer should be well aware of the intricacies of the credits and deductions offered by your state and local government. (Make sure your tax preparer will check on these things if you’re hiring one out-of-state.)
  • What do you want to get out of the transaction? Are you looking for just a tax preparer, who will have you in and out of the office within an hour? Or are you looking for someone that will also help you with tax planning for the upcoming year? What you need will help you determine which professional is right for you.

What Should You Look for in an Insurance Agent?

Everyone needs insurance of some kind — there’s no way around that. So how can we make sure we end up with a respectable insurance agent who is only recommending products that will truly benefit us?

Bo and Brian acknowledge that Amica, USAA, and Auto Owners are the three leading property and casualty insurance companies according to Consumer Reports. If you’re not with one of these companies, seek out an agent who will look out for you in the following ways:

  • They set annual reminders to check-in with you to see if you’ve gone through any big life changes recently.
  • They look for holes in your insurance coverage. (You want to make sure your agent is truly looking out for your best interests!)
  • They are well-established and have a history of success, as they will be less likely to recommend products based on commission.

What to Look for in a Financial Advisor

The guys also touch on what characteristics your financial advisor should have, and what questions you can ask them to make sure they’re a good fit for you.

You should always look for someone willing to work with you as your fiduciary. This means they always put your interests ahead of all others, including their own.

Bo and Brian also suggest asking the following before hiring an advisor to help you manage your finances:

  • What type of advisor are they? How do they receive compensation?
  • What is their motivation behind their recommendation? Are there conflicts of interest?
  • What’s the value proposition? (You shouldn’t pay a dime to anyone if you’re not getting value out of it.)
  • What’s their wealth management philosophy?

What to Do If You Need a Financial Professional on Your Side

Always do your due diligence and don’t be afraid to ask questions when looking for a financial pro to help you with various money issues. The right professional will make you feel comfortable and put your needs and interests ahead of anything else.

Could you use help from a financial advisor? You can always reach out to the Money Guys to help get you on the right track — Bo and Brian are currently accepting new clients.

Email brian@money-guy.com or bo@money-guy.com if you’d like the pros behind The Money-Guy Show in your financial corner.

 

The Financial Decisions to Get Right at Every Stage and Age

Financial Decisions

This week, your Money Guys were joined on the show by special guest Alan Moore to discuss the various financial decisions that everyone needs to make at different stages and ages of their lives.

Alan is the co-founder of the XY Planning Network, the leading organization of fee-only financial advisors that specialize in working with Gen X & Gen Y clients. He’s also the President of Serenity Financial Consulting, a fee-only RIA and location independent financial planning firm. He currently lives in Bozeman, MT so that he can hit the slopes on powder days.

In this episode, Alan, Bo, and Brian each walk through some pitfalls to avoid, blind spots to be aware of, and solutions you can implement with your personal finances.

Money Matters to Think about When You’re in Your Teens and 20s

Alan takes on what younger generations should watch out for and think about. For those in their teens and 20s, he says to take your financial decisions seriously.

This decade isn’t a “throwaway,” and it’s never too early to think about developing financial independence and investing in your future. The decisions you make now do matter. Alan also has a few suggestions for people who are just starting out:

  • There are a lot of big things and changes happening right now — but don’t forget about the little things. Don’t let small mistakes trip you up and hinder your financial progress!
  • Invest in financial assets.. and your own skills, knowledge, and abilities.
  • Don’t be afraid to ask for what you want — but understand you’ll need to do your homework before you do. Don’t plan on getting what you ask for if you don’t put in the work first.

Keeping on the Right Financial Track in Your 30s and 40s

Bo picked up after Alan to help those at a little later stage in life — those who are in their 30s and 40s.

If you’re in this age group, you’re still young! But you’re not “entry-level” anymore, and it’s likely that this stage is bringing new experiences and life changes to you.

Bo brings up some common pitfalls that people in their 30s and 40s need to watch out for, including issues with your investment portfolios, spending temptation and lifestyle inflation, and simply forgetting to re-check your financial to-do list after you go through some big life milestones.

Finishing Strong with Your Financial Decisions After 40

Brian then addresses the over-40 group and the financial decisions they need to think about and the blind spots to be aware of.

The biggest issue? Time flips on you, and it’s no longer an advantage but a liability. That doesn’t mean it’s too late to take action, but it does underline the fact that you do need to jump on your financial goals if you haven’t gotten serious yet.

Remember, “someday” is not a day of the week. Think about these things, and if you need to take action on anything, do it today:

  • Understand your risk capacity. Even if you still feel comfy with risk, you may not realistically be able to handle swinging for the financial fences anymore.
  • Organize and tighten up your finances. Don’t get sloppy, and don’t abandon a plan of action at the finish line!
  • As much as you don’t want to think about it, you need to understand your mortality. Even if you feel young mentally, you can’t pretend you’re not aging at all. (Sorry.)

No matter what your stage or age, there are financial decisions to think about — and to get right. It’s never too early (or too late!) to take smart action and improve your financial situation.

So no matter what group you fall into, keep up the good work in avoiding pitfalls and making the right money moves.

Want help with this? You can always reach out to financial pros to help get you on the right track. You can also email your Money Guys at brian@money-guy.com and bo@money-guy.com — and you can email our special guest, Alan Moore, at alan@xyplanningnetwork.com.

 

We appreciate all our listeners and members of Tightwad Nation — and you can show your appreciation for The Money-Guy Show by leaving us a review on iTunes. You can either go directly through iTunes or leave a review with this link. These reviews help new folks find the show.

Knowing When to Go Pro

Hiring a professional financial planner could possibly be the key that unlocks the door to your financial success.  At the same time, choosing the right advisor to work with is an important decision that can often seem overwhelming.  In today’s show, we discuss the services that planners will and will not provide as well as key things to look for when hiring a pro.

In the March edition of MoneyAdviser, Consumer Reports outlined what typical fee-only planners will and won’t do for their clients:

What they will do:

  • Help you figure your net worth:  Typically, a planner will have the client gather the necessary data and then create a statement to uncover other planning opportunities, such as insurance analysis or estate planning.  (Do-it-yourself tip:  Collect current statements for all assets and liabilities and use an online net worth calculator, such as Mint or Yodlee, to determine your net worth each year.)
  • Advise you on 401(k) investments:  Your planner should be looking at all the pieces of your financial puzzle, including your 401(k) to ensure that your saving and investing goals line up across the board.  (Do-it-yourself tip:  See if your 401(k) plan sponsor offers access to investment guidance or check out the online retirement-planning program, Financial Engines, for additional support.)
  • Help you invest a lump sum:  A planner should be able to offer tax-efficient investment advice to their clients, as this is a core activity of financial planning.  (Do-it-yourself tip:  Use Morningstar software to research mutual funds and stocks for your portfolio.  Also, check out Bo’s Money-Minute about investing in a lump sum vs. dollar cost averaging.)
  • Determine if you’re properly insured:  Your planner should be able to evaluate your insurance needs, as well as refer you to an agent that can provide the coverage.  (Do-it-yourself tip:  Do as much research as possible and shop around for the best rates.)
  • Assess if you’ve got enough to retire:  A planner can determine whether you are on track for retirement or if you need to explore other options, such as working longer or changing your lifestyle.  (Do-it-yourself tip:  Assess your potential income sources, including Social Security, and use an online tool to calculate where you stand.  Consumer Reports recommends T. Rowe Price’s Retirement Income Calculator and Analyze Now’s Free Retirement Planner.)
  • Coordinate your retirement income:  Planners can determine the best method for drawing funds from your various retirement accounts, while considering tax consequences.  (Do-it-yourself tip:  Consumer Reports advises that unless your retirements consists entirely of Social Security and a pension, you might want to consult a professional on this one.)
  • Help you plan for college funding:  A planner can guide you on the best ways to finance your child’s education.  (Do-it-yourself tip:  Visit www.collegeboard.com, www.savingforcollege.com, and www.finaid.com for additional resources.)

What they won’t do:

  • Help you pay down debt:  As a general rule, fee-only financial planners refer such clients to a debt counselor or a bankruptcy attorney.  (Do-it-yourself tip:  Contact the National Foundation for Credit Counseling if you need help with debt.)

The gray area:

  • Help you control your spending:  While many planners recommend following a budget, it’s not cost effective for you or the planner to spend hours together developing a detailed budget.  Most planners are interested in overall cash flow and will recommend cutting back if needed.  (Do-it-yourself tip:  Create a spreadsheet or utilize budgeting software like Quicken, Yodlee, or Mint.)
  • Create an estate plan for you:  Planners can help you decide the structure and tax efficiency of your estate, but an estate-planning attorney will be needed to draw up wills, trusts, and end-of-life documents.  (Do-it-yourself tip:  Contact an attorney to prepare or review your documents.)

If you decide that hiring a financial planning professional would be beneficial for you, the following credentials should stand out to you:

  • Certified Financial Planner (CFP):  holder has passed a 10-hour exam, has at least three years’ financial planning experience, and has completed an approved course of study.
  • Chartered Financial Consultant (ChFC):  requires eight college-level courses in financial planning and 30 hours of continuing education every two years.
  • Certified Public Accountant/Personal Financial Specialist (CPA/PFS):  CPA with specialized training in personal finance.
  • NAPFA – Registered Advisors:  holder meets strict education and professional requirements for membership in the National Association of Personal Financial Advisors, for fee-only planners.
  • Chartered Financial Analyst (CFA):  holder completes a series of three six hour exams and has four years of qualified work experience.

Hopefully this information will be helpful if you are considering hiring a professional to guide your finances.  Check us out on Facebook, YouTube, and please leave any questions or comments below!

 

Links to other things mentioned in today’s show:

Is This the End of Popping Vitamins?
On the Job, Beauty Is More Than Skin-Deep