Five Minute Finance

Summary:

A listener asks ”What apps or tech do you use to help manage your finances?”

In part 1 of this two-part show we spoke about budgeting and expenses. In part 2, II talk about:

• How I use a spreadsheet to track my Investments
• What is important to track when it comes to investments
• PersonalCapital: A tool to aggregate investment accounts.
• Fidelity / Schwab / Vanguard / Other: How free tools from these companies can help but also their limitations.
• What to do with Credit Cards
• Why a password manager is important

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

Summary:

A listener asks ”What apps or tech do you use to help manage your finances?”

In part 1 of this two-part show I talk about:

• Why it’s important to build awareness about your expenses
• Banktivity: I use this app for tracking my expenses
• Mint.com: A classic app for budgeting and expenses
• YNAB: An envelope system for tracking your budget - which really appeals to some people
• Simplifi and Trubill: Another couple of budgeting apps that clients have recommended to me.

Don’t forget to tune into Part 2 where I talk more about investments, credit cards and financial planning.

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

The situation in Ukraine is terrible and my thoughts and feelings go out to everyone in that struggle. There are a myriad of lessons to learn of course, but today I want to focus on personal investing.

When it comes to your personal investments, you should be personally invested. What I mean: know what you are investing into, understand the risks and rewards and be comfortable with the potential outcomes. Any single investment can be very volatile or go to zero. Diversification can help save your dollars from catastrophic losses. Even a country or sector is not immune to drastic fluctuations.

You may also want to consider your moral judgments when it comes to investing: do you want to invest in this country or that one? The major indexes are made up of many countries, so do a little research to understand where your investment dollars are flowing, what they are supporting.

Resources:

• FRDM Fund
• Freedom Investing

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

Megan Russell of MarratoaOnMoney.com once again joins us on the podcast to discuss which is better for you: a SEP-IRA or a Solo 401k plan? The bottom line is, as Megan states right away: every business deserves a 401k. Tune in to hear why the solo 401k trumps the SEP-IRA and when the opposite might be true. 

Both a SEP-IRA and Solo 401k are employer retirement plans where the employer (and potentially and employee) get to contribute dollars in a tax-advantaged way. You definitely want to consider opening the right plan for you to take advantage of these tax savings! The solo 401k generally beats the SEP-IRA because the contribution limits are much higher, allowing you to save more in taxes. 

You can read Megan's thoughts on her blog post about this post topic and tune in to hear all the details and why Megan believes the 401k wins. 

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

In this episode, Matt and Mike discuss all the nitty-gritty details of Exchange Traded Funds (ETFs) and Mutual Funds. What are these funds? How are they similar? How are they different? But most importantly: Which should you choose?

Tune in as we discuss:

• Why some investors were hit with a big tax bill for holding a mutual fund!
• Why you should invest in ETFs in your brokerage accounts.
• What are A, B, and C class shares of mutual funds?
• What is an index fund?
• The difference between an active and passive fund.
• Why are mutual funds and ETFs taxed differently?
• Can you exchange a mutual fund for an equivalent ETF?

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

In this episode, Matt and Mike discuss all the nitty-gritty details of Exchange Traded Funds (ETFs) and Mutual Funds. What are these funds? How are they similar? How are they different? But most importantly: Which should you choose?

Tune in as we discuss:

• Why some investors were hit with a big tax bill for holding a mutual fund!
• Why you should invest in ETFs in your brokerage accounts.
• What are A, B, and C class shares of mutual funds?
• What is an index fund?
• The difference between an active and passive fund.
• Why are mutual funds and ETFs taxed differently?
• Can you exchange a mutual fund for an equivalent ETF?

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

A listener asks: "I was reviewing my Individual Retirement Account with my advisor and he said that there was a .25% maintenance fee, which is the lowest around. I was confused about what this meant since you have talked about expense ratios in the past. Can you explain?"

Matt and I discuss what this fee is, but more importantly what does this mean for you? You might be losing out of tens of thousands or even hundreds of thousands of dollars that could be in your pocket. I'm certainly not saying that financial advisors shouldn't be paid or don't provide value - I'm one! But I do want you to understand what you are paying because so many times the fees are completely hidden. 

An account maintenance fee is an amount that you pay based on multiplying a small percentage times your account balance. That could add up quickly depending on the balance! And what's more, that small percentage could mean many thousands of dollars lost from compounding in your favor. But worse, the investments inside your account could be costing you even more on top of that fee!

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

A listener asks:

"We've been saving for college for our three kids age 7, 9, and 12 for several years using 529 plans that are time to our kids' high school graduation. Up until now we thought we were doing well. This past year we had a great year and saved almost $60,000 for college, and also put away some for retirement. But now, we're thinking about switching to a private school that would cost almost as much for all our kids as what we saved last year. And we're probably not saving enough as it is to be able to afford the most expensive colleges. What should we do? Should we consider getting more aggressive with out allocation to try to warn more return? Should we forget IRA contributions and focus more on college 529s?"

First of all, thanks for tuning in!! Below are the topics discussed in the video:

• Congrats on saving so much last year! Obviously, education is an important goal for you. 
• You will be paying for this now and in the future. Recognize that it's an expense. Don't get too caught up in the accounts, savings, and logistics. First and foremost, it's a large expense that will come from savings and salaries. 
• Contribute to your 529 for state tax savings, depending on your state. If you are not contributing for the future, you can still run current expenses through the 529 (contribute and take back out). 
• If you are confident that you will spend your 529 for college, leave it invested in there. 

Tune in to hear more!

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

A listener asks:

"The current economic situation seems to be taking a turn with high inflation, interest rates on the rise, and the pandemic potentially slowing down, allowing the economy to reopen. Given that backdrop, I'm curious about how to choose investments for the future? Even for the long-term, 5-10 years, how do you perceive this macro environment and what investments will you shift?"

Matt and I discuss this question and how to adjust your portfolio. Our discussion includes:

• Is 5-10 years really "long term"?
• If you have a thesis on how to invest given the current conditions, how do you implement an investment strategy

-How confident are you?

-When do you re-evaluate your thesis or adjust your investments?

-How much work and stress will that cause you?

• Why do I recommend low-cost index funds?

-80% of actively managed funds, trying to make active investments based on the current environment, fail to beat passive low-index funds. Are you confident you can do better?

-You get better returns: a win-win!

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

The Fed has indicated that they will raise short-term interest rates this year, perhaps multiple times. Given that rates are on the rise, how might that affect your portfolio allocation? Is there something that you can do about it?

First, you can always take the long-term view, have a well-balanced portfolio invested for the future, and just stay on course. You don't have to change anything. Target date funds, total bond market funds, total stock market funds if invested for the long-term future (10+ years) will be just fine. At least, they always have in the past!

That said, it is a unique environment of rising rates which we haven't seen in a while! Recall that when interest rates rise, bond values fall. Why is that? Tune in to hear an example. We also discuss why you hold cash as part of your portfolio and maybe a couple alternatives worth investigating.

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/