Most financial gurus’ messages can be broken down into two camps. The first are all about keeping your costs down and living well below your means – the spend less camp. The other camp is all about making more, more, more money. But which camp is right?

Full show notes here: https://yourmoneypuzzle.com/money-puzzle-11-earning-more-vs-spending-less

Most people know Vanguard as the place you go for low-cost investing for do-it-yourselfers who are not using an Advisor. They’re known not only for their low fees, but also for their wide variety of investment options for individual investors. They are NOT typically known as a company that publishes studies on working with financial or investment advisers, so, when they DID put out a study about the actual value an adviser brings, a lot of people took notice. Episode 10 is a review of that study.

Full show notes here: https://wp.me/paQKv1-6Q

First, let’s start with the bottom line - the results. Vanguard say, “based on our analysis, advisors can potentially add ‘about 3%’ in net returns by using the Vanguard Advisor’s Alpha framework.” Yep, you read that right, working with an advisor has the POTENTIAL to add about 3% in net returns to your investments each year. Wow, a net 3% difference is pretty darn big!

We need to talk about why there is the “potential” to add 3% but, first, let’s talk about that net 3%. Your net is the important number, that’s the bottom-line number AFTER fees and expenses. A net 3% would take a 7% growth year and turn it into 10%. That’s a huge difference in growth! If you look at the rule of 72, which says that if you take the interest rate you get and divide into 72, that is (mathematically), how long it will take for your money to double. At 7%, your money double in 10.2 years and at 10%, your money doubles 3 years faster, at 7.2 years!

So, an extra 3% net is a really big deal, but what makes up the “potential” from an advisor? What is it they add to the equation? Vanguard’s study broke it down into several categories, each with a different potential value for investors. Here were the top ways advisors add value:

According to the study, asset allocation is widely accepted as the most important determinant of a portfolio’s return and long-term performance, and it is also deemed a “significant” value add from advisors – helping client’s set up their proper asset allocation for their specific needs. However, the value added is “too unique to each investor to quantify.” So, it’s listed first and as very significant, but it’s kind of like a BONUS, because it’s not actually included in the net 3%!

The study says that “cost-effective implementation is a critical component of every advisor’s tool kit and is based on simple math: gross returns minus costs (expense rations, trading costs, taxes, etc.) equals net return. An advisor can potentially add .40% annually to an investor’s returns. This makes for a great question for your advisor, are you using low-cost funds? Or, at least ask, how do the costs of your recommendations compare?

“Given the importance of asset allocation, it’s also vital to maintain that allocation over time,” says Vanguard’s report. The goal of rebalancing is to help control risk. In theory, more aggressive investments could perform better over short periods of time and as those investments grow, your portfolio might become unbalanced – more money in aggressive investments than you intended. Rebalancing a portfolio on a regular basis keeps the right amounts of money in the right investments. An advisor who rebalances for you adds up to .35% annually versus the same portfolio that is not rebalanced.

Although behavioral coaching has nothing to do with your actual investment returns, the Vanguard report says, “the discipline and guidance that an advisor might provide through behavioral coaching could be the largest potential value-add of the tools available to advisors.” Because investing can be very emotional (it’s your money, it makes sense to be emotional about it), advisors need to help their clients maintain a goal-focused, long- term, disciplined approach to investing. Doing so can add 1%-2% in net return each year.

From a tax perspective, optimal portfolio construction minimizes the impact of taxes. The study says, “constructing the portfolio in a tax-efficient manner can add up to .75% of additional return, without increasing risk.” Taxes matter, both inside of your investment accounts AND for your personal income.

"The more taxes you must pay, the less money stays in your pocket which, in theory, decreases the time your money will last in retirement."

Withdrawing from the right accounts and utilizing current tax laws is very beneficial to your long-term financial results. This is a follow up to the tax-efficiency point. Vanguard’s study says, “many clients hold multiple account types, including taxable, tax deferred, and/or tax-free accounts. Advisors who implement informed withdrawal order strategies can minimize the total taxes paid over the course of their client’s retirement, thereby increasing their clients’ wealth and the longevity of their portfolios.” How much value does this add? Up to 1.1% per year, depending on the investor’s breakdown of assets between taxable and tax-advantaged accounts.

Add up all the ways that an advisor can add value to your portfolio, and you get Vanguard’s study result of a net 3% per year. Keep in mind, the study says these are the ways that an advisor CAN add value, not that your particular advisor WILL add the value they discuss. The better way to look at the study is for the questions it gives you to ask your advisor. Do they help in the ways listed? Do they add the value that the study suggests they can? Once you find out, you can make good, informed decisions for your family about the type of advisor that you want to work with going forward.

• Edgin Insurance & Financial Services Website

For the most part, I don’t believe that we will things into existence. I’m more of an action = consequence kind of guy, and there are both positive and negative consequences that we get form the actions we take. But science and the study of human behavior have a lot to say about our financial state, starting with what we tell ourselves about money and how we talk to others about money. In fact, it turns out that our behaviors, more than our investment returns or market timing or anything else, have the biggest impact on our finances and wealth.

I’ll be honest, as someone who has always chosen to work my ass off and do whatever it takes to be successful, I still have a hard time getting on board the “think it into existence” train. However, I do believe that the mindset we have about our money does impact what we BELIEVE we can or cannot do and, if we don’t believe we can do something, we probably never will. Not because it’s not possible, because you’ve got to believe something is possible before you’ll put in the appropriate effort and actions to make it possible.

VIEW THE FULL BLOG POST HERE: https://wp.me/paQKv1-6J

Back in episode 1, I told my personal story about why I got into the financial business and why good finances have always been important to me. I had two very different childhoods, depending on the week of the month. Both filled with love, but very different financially. I lived ½ my time in a household that never had any money and could never get ahead, and the other ½ in a household where money wasn’t a problem and we used it for a better, more enjoyable life. I heard all the things that poor people say about money for two weeks of the month - if I could just get some more overtime, but the boss won’t give it to me. If this wouldn’t have happened, if that person didn’t do that, rich people don’t have to work this hard, money is evil and on and on and on.

For a lot of us, that’s how we develop a negative mindset about money and our own ability to get ahead, we heard it for years and years from grownups while we were young and impressionable. Then we grow up and start repeating the same things to ourselves that we heard when we were kids! If this is how you grew up, you can change that script and change your future, starting today! Just because you had a poor childhood, or maybe have made nothing but bad money decisions your entire life, that doesn’t mean that it must stay that way going forward. If you change your money mindset, you’ll change the direction of your life!

Most people think that there is a limit to how much money there is or how much they can have but, the truth is, money is like the ocean.

If you go to the ocean with a bucket and you fill it with water and take it with you, the ocean doesn’t even notice. If you take 10 buckets, 100 hundred buckets, a million buckets of water and then you turn around and look at the ocean, it looks the exact same. There’s more water than you could ever use in your lifetime and, you know what, it’s the same with money. The amount of money available to you is more than you can ever use in a lifetime, you just need to get your bucket and start filling it up! You’ve got to change the script of what you tell yourself AND what you tell others.

You should never tell anyone that your poor - you may be temporarily out of money but that’s different than being poor. Poor is a state of mind! You need to quit telling yourself that you are bad with money and instead tell yourself, you used to be bad with money, but you will be better with it from now on. Instead of telling yourself you can’t afford something, tell yourself I am working on making more so that I can afford it in the future. Every time you catch yourself telling yourself or someone else a negative I am statement about money, change it to I was and then finish it with what you will be!

When you have a positive money mindset you look for opportunities instead of seeing roadblocks. You recognize that every financial situation is fixable, and you see the value of asking for help instead of struggling silently. what kind of money mantras will help you get a more positive money mindset? There are a lot you can use, from something very simple like telling yourself “I make better decisions and get better with my money every day.” Or, “all of the money I will ever need to be financially confident and have the future I dream of is out there, waiting for me to go get it.” Personally, I like to tell myself, it’s only money and I WILL make more.

Whatever it is you tell yourself about money, just make sure you replace any negative I am statement with I was, and then finish it with I will be. I am not bad with money, I was bad with money, I am getting better every day and I will be financially secure before you know it. Instead of, I am too broke to go out to eat, I was a little behind on my finances and I will be able to go out with you soon. Change your money script and change your life.

We all have amazing potential within us, and we all have the ability to have the future that we dream of. You deserve it! You deserve to be financially confident and your family deserves it too. It’s just a matter of believing you can do it, which starts with what you tell yourself and others about money.

Finders keepers? Police say no way after $30,000 spills on road. Here is the link to the story

• Edgin Insurance & Financial Services Website

Episode 8 is a follow up to the budget conversation we started two weeks ago in episode 6. That was the why, this week is a few ideas on the how. The thing about budgeting is that there are plenty of ways to do it that work great. There isn’t a one-size-fits-all budget that works for everyone. Budgets are like fitness programs or diets, the best one for you is the one you stick to and follow!

View the full blog post of this episode here: https://wp.me/paQKv1-6z

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We examined two different budgets and compared them against each other to talk about the goods and the bads of both to get your mind thinking about the different options and programs that are out there to follow. The two budget methods we looked at are the APAP budget and the 50/30/20 budget, one of which I teach to small business owners (APAP) and one that was developed by Senator Elizabeth Warren back in 2005 for a book she co-authored with her daughter. Let’s do a quick overview of both:

Always Profitable, Always Prepared (APAP): The APAP budget is a variation of Dave Ramsey’s envelope system and is based on the principle of pre-determining what % of your income you will spend in various categories – your expenses, emergency fund, wealth fund, giving/charity, weekly living, family fun, etc. The APAP system is very simple and straightforward, every time you get paid and money is deposited into your account, you immediately transfer funds to several other accounts at pre-determined percentages. It doesn’t matter if your paycheck is big or small, the percentages remain the same. Your deposit represents 100 % of your resources, which would be divided up something like this:

• 15% - Retirement: This is the account to money in now if you want to have money waiting for you in the future

50/30/20 Budget: Back in 2005, Elizabeth Warren and her daughter co-authored a book which featured the 50/30/20 budget. It’s a very simple concept that divides your money into three categories – needs, wants and savings. Fortunately, there’s a nifty little infographic that breaks down the categories from a recent article on TheBalance.com.*

The 50/30/20 budget does a good job of categorizing your money but requires you to put a lot of things into each category. For example, within the 20% savings, your retirement contributions at work need to be included, as do any EXTRA payments you are making towards debt pay off and your emergency fund. My personal preference is to get more specific with your categories, for the fear of using funds that should be going towards retirement (as an example) to pay extra on a car loan. I’m not saying that is a good or bad thing, but technically either would be in the 20% savings category so funds could have a tendency of being used less-efficiently.

While the above two options are great for getting control of your budget, they really are just a few options of the many, many that are available to you. It’s worth repeating, the best budget for you is the one you will stick with and use. Budgeting is just like any other “new” thing you do to make yourself better – it takes a little bit of time to figure it out and get comfortable with it but, once you do, it becomes a part of your life that you look forward to, like going to the gym!

Give one of these options a try or develop your own plan. Let me know if you’ve got a great way of budgeting that works well for you so that others can benefit too!

*https://www.thebalance.com/the-50-30-20-rule-of-thumb-453922

This week’s news story came from Yahoo Finance and the headline reads: The U.S. is the unhappiest it’s ever been. For the full story and the reason why the U.S. is so unhappy, here is the link:

https://finance.yahoo.com/news/u-unhappiest-ever-124845786.html

We all have little daily or weekly habits that we spend money on in exchange for convenience or enjoyment. Personally, I like to eat out for lunch. I also like to wash my car (a lot), so 2-3 car washes a week isn’t unusual. You might like your daily Starbucks stop or a massage every other week. You know what those little habits are costing you in the short term but, whatever your little daily habits are, the real question is, how expensive are they in the long-term?

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While I was preparing for this week’s show, I was listening to another podcast and the guest happened to be David Bach, author of the Automatic Millionaire, Smart Couples Finish Rich, and about 7 other best-sellers. He was traveling around the country, doing interviews in order to promote his newest book, The Latte Factor. The latte factor is a story about a woman who, basically, can’t get ahead financially because of her daily latte habit and, here’s the spoiler, if she redirected that money into herself instead of the lattes, voila, she can finally get ahead.

In the long-term view of finances and money and planning, it really is the little things that add up to make big differences over time. I hate to break it to you, but chances are you will never get rich from winning the lottery or an inheritance from a long-lost wealthy uncle. For most of us, our future wealth is determined by what we do for ourselves, over the course of our lifetimes. This might seem a little bit depressing to some, but I like the idea that I control my future wealth and I can make choices to improve it. Especially if those choices are little and easy and can still make a big impact in my life and finances!

Let’s look at some of the most common expensive daily habits that don’t seem expensive in the moment. David’s book brings up a great place to start, your lattes. In David’s story, his character is getting a latte and a muffin 6 days a week, at a cast of $7.00 per day. I know he’s trying to make a point in the book, but that seems a little excessive to me. But I do see people in my office showing up with a Starbucks cup in hand 3-4 times per week, every week, so let’s go with four lattes per week for our average.

If you’re a nice person and you tip your barista, you’re probably spending $5 per drink x four drinks a week, or $20 a week. Add it up over the course of the year, and you’ll spend $1,040 on lattes. In the moment, $5 doesn’t seem like that big of a deal. Over the course of the year, $1,040 might not even seem like that big of a deal. But $5 isn’t the real cost. The real cost is what that $5 could have done if it was redirected to your future wealth.

If you repeat this daily habit over the course of your working years (30 years), you will spend $31,200 on lattes. If you had moved those funds into an investment that averaged 7% per year, your $31k would be worth $98,239. Not bad, when you compound it over time!

My big habit is eating out for lunch. I tell myself I’m too busy to grab some left-overs or make a sandwich but, truthfully, I’m just being lazy and taking the easy way out – going out and paying someone else for my lunch. Besides, “I work hard every day”, I tell myself, “I deserve to go out and be treated to this lunch.” Maybe I do deserve it, but what is it really costing me? If you’re eating a cheap lunch, you’re spending $7.50 a day s five days a week x 48 weeks per year (assuming you miss work here and there). That’s $1,800 per year on lunches. Add that money to your latte money and your investment account would grow to $202,146!

These are two examples of expensive daily habits and, my guess, is that most people have 5-10 little, daily or weekly habits that they’re spending on. Because the numbers are small, we think they make a small difference in our future. But just like small hinges move big doors, small dollars make for big wealth over time. The key to most things in life going as they should, is being balanced – balanced nutrition, work/home life balance, financially balanced, etc. Financially balanced means you are not neglecting the future to spend all of your money on fun today, but you are also not neglecting today to save all of your money for the future.

What daily habits do you have that add up to $100 a month? $200 a month? Can you make small sacrifices today for big rewards tomorrow by skinnying down a little from this habit and a little from that one to add up to $200 a month? I’m not giving up my lattes all together, I was actually AT the coffee shop when I was doing my research for this week’s episode. Then, I treated myself to a nice meal for lunch afterwards as a reward for my hard work! But we can all be a little more balanced. If you’d like to see what a little here and a little there can do for your future, we’ve actually got some great calculators on my office website – www.robertedgin.com. Click on resources, then calculators, and choose the savings accumulation calculator and you can check some numbers for yourself! I’d love to hear about your most expensive daily habit AND how you plan on redirecting that money.

This week’s news come out of Yahoo as a follow up to the Kentucky Derby and the headline reads, “Just the feces: Kentucky Derby winner poop on sale for $200”

Here is the link to the story: https://news.yahoo.com/just-feces-kentucky-derby-winner-poop-sale-200-123359003.html

We spent the whole show talking about budgets. Specifically, what they are and why everyone should have one. Technically, everyone already does have a budget, even if you never set one up (more on that in a minute). This is NOT some boring episode about budgets because budgets aren’t boring. In fact, this episode proves that the “B” in budgets stands for bad-ass, because that’s exactly what budgets are!

Check out the full show notes for today's show at this link: https://yourmoneypuzzle.com/podcast/money-puzzle-6-budgets-101/

If you measure what matters, what matters always improves! Episode 5 is a follow up to the “freeing up money” conversation we started in episode three. We were examining money leaks and different ways to free up lazy, inefficient money so we could put it to better use for our financial future. Two principles that go along with that topic are the “Law of Measurement” and “Parkinson’s Law.” Although neither of them are actual, legal laws, they both apply to your finances and investments and money puzzles!

Check out the full show notes for today's show at this link: https://yourmoneypuzzle.com/podcast/money-puzzle-5-parkinsons-law/

This is episode four (4) of the Money Puzzle Podcast. What is the difference between timing the markets and time in the markets? How does it work? Is it possible to do it to improve your investment returns and, if so, how big of a difference does it make?

We also discuss the famous challenge that Warren Buffett issued to hedge fund managers and some other practical tips for bettering your investment returns and improving your financial future.

Check out the corresponding blog post & the video version of this episode here: https://yourmoneypuzzle.com/podcast/money-puzzle-4-timing-the-markets/

This is episode three (3) of the money puzzle podcast. We spent the show reviewing the results of our toilet paper research and talking about simple ways to free up some of your money that is currently being lazy or is being used inefficiently, so you can put those dollars to better use.

For the full show notes, visit:

https://yourmoneypuzzle.com/podcast/freeing-up-money-for-better-use/

There's been a longstanding debate in the investment world about what's more important. Is it the amount of time you have in the market or taking your money in and out of the market at the proper times? Robert's business partner, Brian Johnson, joins the show for the conversation.

Check out the corresponding blog post & video version of this episode here: https://yourmoneypuzzle.com/podcast/time-in-the-market-vs-timing-the-market-ep-2/