Hi everyone, this is Dan Thompson with wise money tools video. Thanks for joining me today. If you recall in our last video, we were talking about another video out there called the index card. It was done by PBS or something like that. Basically it was an index card with a list of 10 items that basically everything you need to know to have financial success or to create a financial plan that would actually work. And the list looked like this. If you recall, number one was saved 10 to 20% of your income. Number two, pay your credit card balance in full every month. Number three, max out your 401k and other retirement savings accounts. Number four, never buy or sell individual stocks. Number five, buy inexpensive index funds or ETFs. Number six, make your financial advisor commit to a fiduciary standard. Number seven, buy a home when you're financially ready. Number eight insurance - make sure you're protected. Number nine, support the social safety net and number 10, Remember the index card.


Okay? Well, in the last video, we went through the first five, and we're gonna finish up on these next five. But just as a quick little recap, because I think some of these things are important. Remember, number one was save 10 or 20% of your income. Again, no brainer, got to do it. Number two is also an easier one. Make sure that you pay off your credit cards every single month. That's a very good practice to get into now. Number three, maxing out your 401K and IRAs. That's something that you may want to review. Go back to the last video. It's something that you can't assume or just take for granted that it's a good move to make. Number four and five. We finished up where we left off, don't buy individual stocks and buy ETF. Well! maybe understanding what's really gone on there. We'll change that around just a little bit. Again, you're gonna want to review those steps because there's a lot to unpack there and honest, we could do a whole video on each one of these steps.


Okay, but let's go to number six. Number six, make your financial advisor commit to a fiduciary standard. So we really need to understand this for just a second. What he's saying is that there's kind of two sides of the Wall Street world so to speak. There's brokers and financial advisors, and then there are what are called registered investment advisors and they also tout this title called fiduciary. Now the reason he says that you need to insist that your advisor commit to a fiduciary standard is because when you pay a fiduciary. You're supposed to be paying a fee for a service and the advisor is not supposed to have any bias and do what's best for you. Well, In the end, that's really what it means it means the advisor is supposed to put your interest over his or her interests. Okay? So first of all, if you even have this smidgen of a doubt for a single minute. That this person that you're sitting in front of isn't gonna do what's best for you get out of their office, move on.


If you're doubting their integrity, and the purpose that you're there to talk with him for. Then you really shouldn't stay even, like I say, even a minute longer, okay? I don't need to slap a title on my desk or on my forehead with this big bold word fiduciary to make me do what's best for my client. So the irony is this, just because they say that they're putting your interests ahead of theirs has no bearing on whether or not you'll make any money. Whether or not you'll lose money, or whether or not the advisor is a complete moron. Moron might be a tough word. But seriously, morons can be fiduciaries. And sadly I see him all the time. I think more important than a title is to find out if the advisor has a clue as to what they're doing. If they have a plan or a strategy, that's not the same old thing that everyone else is doing. Does the advisor or the person you're talking to have a way to protect your money on the downside and make you money on the upside, and better yet even make you money?


No matter what the market environment is doing? That's better than a title. So folks, listen to me. A title or a designation does not make that person a genius. A fiduciary, a CFP, a CLU, even a CPA is not an absolute given that they're gonna be smarter then a three year old, they just know how to pass tests. So let me It kind of reminds me of a story back in high school, right? I used to date this girl and hope she's not listening. But she could sit in a class and understand the lecture. She did great on tests. And she was a straight a student. She always did her homework and passed with flying colors. The problem was, she was about a smart as a post I'm gonna to really take some flak on that one. Yeah, let's just say she wasn't the brightest bulb when it came to common sense and real life situations. If you taught her how to do a math problem, and it was given to her well, she'd probably be able to do it.


But if she had to figure out things like, you let's take some financial things like a price earnings ratio or how much revenue a company made. Or what does a large manufacturing company need to do to be profitable, you know, things like that we had to kind of think through it. Well, she'd be totally lost. And I see the same thing so often with some of these fiduciaries, or CFP, whatever, they're really good test takers, right? But I wouldn't give them five bucks to manage, right? They just don't seem to understand how to formulate and look for things outside of the box. So just remember, insisting that someone commit to being a fiduciary is not gonna make him or her any better or smarter when implementing a strategy. And finally, if mutual funds are their answers, in other words, you walk in and the answer is to buy five different mutual funds. Well, you really need to look elsewhere because they haven't figured it out yet.


Now, I have no problem with fiduciaries don't get me wrong to my partners, our fiduciary they fit that bill and man, they are extremely smart. There are plenty of them out there that are smart. And I can assure you that these guys aren't gonna sell you a basket of mutual funds and then charge you fees for the next 10 or 20 years. As if they have any control over those funds or the markets for that matter. So please get the picture, a title is worthless. Ask them how they're gonna protect and grow your money and see how they answer it. Then ask how much money did your clients lose over the last month, right? And then finally ask how much of my money are you willing to lose? And by the way, if that's even above zero, yeah, again, you might want to walk out. So that's gonna give you a lot more peace of mind and a lot more realistic expectations than a particular title. Now, again, I understand what he's saying. He's saying, find somebody who's gonna do what's in your best interest.


Well again, If you got a good solid advisor, they're doing that with or without a title. So let me just talk real quick about fees again, some fees are worth pain. I mean, if they can protect your money on the downside, make you money on the upside, that might be a fee worth pain. If you're just writing the ups when the things are going great and then you'll lose money when it's going down. What are you paying for? You could do that by yourself just investing in indexes or ETFs without paying fees. You know, just this morning, literally driving around. I was listening to a talk show morning talk show. And the guy happened to be talking about fees. Now he was a fee based advisor. And what he was doing is he was getting all over another advisor who is getting paid commissions instead. And he was saying that the Commission guy, all he wants to do is sell you a product, lock your money up for 10 years and take his 6% commission. And I got to thinking, Hmm, well, what does the fee-based guy want?


We came right down to it. He wants to sell you his product, lock your money up for 10 years or so, and then get paid a fee every single year that you have your money there. There was really no difference. The only difference was the final product. And I have no problem with somebody arguing whether this product or that product works better, right? But he was such a hypocrite, because he wanted the same thing that he was accusing the other advisor of wanting. He just charges differently. But he still wants the same thing. Then I got to thinking just kind of in my mind real quick, then I had to run back to my office and calculate this. But let's just say the client was gonna invest $100,000 and suppose this guy, the other advisor did get a commission of 6% or $6,000. That's it and then he has to to basically work with that client over the next 10 years without any further compensation. So what is the fee based guy get? Well, most have sliding scales on fees.


And the more you put in the lower the fee, but at $100,000 from the scales I've seen in very familiar with. Most advisors are gonna be right about 2% in that range. If he sells you a mutual fund, that you can pretty much count on another percent and half, maybe even more for the fund manager as well. So he's stacking his fees on top of the mutual fund fees that are already gonna be there. All right. Now let's just use the proverbial 10% growth rate, which is not likely to happen after market corrections, taxes, volatility, all that but we're gonna use it anyway. So without fees, and a straight 10% per year if you just had $100,000 got 10% on it. No fees, you'd have about $259,000 in 10 years. Okay? Now if we just take out the advisor fee of 2%, the account would net after fees $216,000. So in other words, this advisor charges the client $43,000 in fees. So you kind of have to ask the question, who's really the fiduciary now?


Interestingly enough, the advisor who was paid the commission, he wasn't even paid by the client. In other words, the company that took in the money, paid the advisor, and 100% of the client's money went into the investment. So it wasn't like the client was paying $100,000 and then $6,000 went over to the other advisor. Anyway, the point is the fiduciary. The fee based advisor made 700% more compensation. Then the other advisor that he was accusing of being such a dastardly dude. That's why I call the fee, an annual commission, because that's what exactly what it is. Wall Street just is disguised it to hopefully make you feel all warm and cozy that you'll pay $43,000 out in fees during the same period of time. But fee based advisors have been making a killing over the last number of years, some might deserve it. But seriously, most of them are simply collecting fees and not even managing your money in the first place.


They send it off to mutual funds or to an index and then just hope that the markets do well. And that you'll keep paying their fee as because they're gonna call you up every once in a while and say, hey, look how good we're doing. Well, worse than anything, guess what, you probably lost money to these fee based advisors this year. Maybe even as much as 30% and guess what's gonna happen now, you're still gonna pay the fee. So you're down 30% and they're still gonna take out their fees. So when you see that there's one famous commercial out there. It's about fee based advisors. And they have this fancy tagline that says, we only make money when you do. Well that is just hogwash. Their tagline should be, we make money even when you don't, because that's exactly what's happening. They're gonna make their money, they're gonna charge you the fee no matter what. Okay, so that's a lot for one item number six, sorry about that. But it's an important one, because the fleecing of America is happening in many cases due to fees.


All right on to number seven. Number seven, buy a home when you are financially ready. Once again, I can buy into this principle good principle. But let me just take it one step further. If everything you make each month goes into your mortgage payment and your living expenses, and you can't save a penny above that, where you bought way too much house. So going back to principle number one that we have to implement today this moment, and that's pay yourself first and at least 10%. So if you can pay yourself 10% and by the house awesome, you did a probably a very, very good financial thing. Don't get house payment poor, be able to comfortably make the house payment and save your 10%. But where we live, I just somehow lucked out that housing turned out to be a really good investment. And since you have to have a roof over your head, it's not a bad idea to build some equity along the way. But also be able to save and save that money outside of your sticks and stones. Don't put all your wealth inside your house.


Okay, number eight was a more insurance oriented and it was saying make sure you're protected, again makes common sense good financial sense. And we're not talking about just life insurance here but we're talking about car, home and health insurance. And one thing to consider is to have insurance be there for your catastrophes and your major expenses, not the little stuff. So oftentimes, it's so much better to get high deductibles and low premiums and being able to cover those smaller expenses of $200, $500 even $1,000 that are out of pocket. Seriously, if you'll save the difference between the premiums of a low deductible and a high deductible insurance policy. In other words, go get some quotes. See what car insurance as an example, see how much the premium is each year. For a $1,000 deductible or even a $20,500 deductible, and see how much the premium is for a $250 deductible, and you're gonna see a pretty wide spread of premium.


And if you would just take the higher deductible, save the difference, you're gonna put away that 500 or 1000 bucks in no time. And be able to handle those kinds of expenses and unforeseen incidences. Now for medical, if you're not covered by your employer, and you're paying for your own Medicare, medical insurance, there's some group share programs that you might want to look into them. Some are pretty good and some are very inexpensive and it's not technically insurance. It's more groups, but look into it. The other thing you might do is get that deductible up there, maybe 5000 10,000 or even more and once again, if you'll save the difference between the premiums. And you start to save that deductible and get it put aside, you'll be surprised how fast you can put that money away. It is a good idea to have access to your deductible, just in case, right? You may not be there in the first year so, but you'll get there.


And the money that you'll save by having high deductibles you tuck it away, you'll have plenty for the deductible down the road. So don't invest that deductible somewhere where you could either lose it or you lose access to it. In other words, an IRA is not a good place to put your insurance deductibles. Interestingly enough though, life insurance that's building high cash value may be a good spot for it. Because not only will that cover your life insurance needs potentially, but access to that cash as well. So when you keep your deductibles high, it's eventually gonna save you more money in the long run. Now, we're almost done because I don't have to spend much time on numbers nine and 10. Number nine is support the social safety net. Now this is just another way of saying, be charitable giving, you know, local charities and churches can often be the first ones on the scene to help others out in your community. In the book, The Richest Man in Babylon, great book, if you haven't read it, you gotta go read it.


The first two principles are pay yourself first, at least 10%. And then give away 10% that could be to a church or a charity or a school or just anywhere where you're helping out others. And I think being charitable is a great way to give back. But it makes you not only feel good, but it's a win-win for the charities and the communities and being able to help others as well. Sadly, someone seems to always be hitting a rough patch, and hopefully you can be there with some of your funds to help them out when you can. Number 10 Lastly, remember the index card, right? So I think this is kind of a play on Warren Buffett's two rules. Warren Buffett's rules are this rule number one, don't lose money. Rule number two, don't forget rule number one. And so I think number 10 is kind of doing the same thing. It's saying the idea is, if you're a believer in these concepts, then don't forget them, use them, put them into your financial strategies and implement.


So at the end here, let me say, there are some great strategies that you can implement that will adhere to the important aspects of these principles or these 10 rules, if you will. Overcome the challenges of the ones that don't make a lot of sense. Make some adjustments on those. But keep your money growing and keep it safe and even keep it tax free. If you do things right. You might be genuinely surprised when you see what safe money strategies can do. When you implement Einstein's formula of y=a(1+r)x exponentially growing or squared, right? The squared or the exponential growth is what so many people are missing. Even we missed it for years. We had to build it from scratch. And I think when you start looking outside the box and how other people are generating their wealth, you can figure out some of these things. And what I love to do is figure out how are people generating wealth or return and doing it with the least amount of risk?


Well, if you want to see how that might fit into your situation, then just click on the time trade link below and we'll have a quick strategy session. Always feel free to comment below. If you have any questions, shoot them to questions at wise money tools.com. I'll answer them as quick as I can. And for heaven's sakes, don't forget to subscribe. Don't want to miss a video. Always good to have you with me. Thanks for joining me today. Until next time, take care.