Listen Money Matters - Free Your Inner Financial Badass. All The Stuff You Should Know About Personal Finance.

What is a robo advisor and should you use one? Larry Ludwig from Investor Junkie joins us to tell us what we need to know.  A robo advisor is an on-line money management service that uses automated algorithms to give investment advice. It takes humans out of the equation.  These are companies like Betterment, which was the first robo advisor, Wealthfront, and Personal Capital. They are geared towards younger people who are comfortable with transacting business on-line and are less expensive than traditional investment advisors. Robo advisors use a lot of complicated math but basically they look at past returns to determine future returns. A problem with some robo advisors is that while they’re tax efficient within their portfolio, they don’t all have an over all picture of your investments so are not tax efficient overall. A robo advisor should be easy to use and inexpensive. Larry recommends Betterment above the others. Robo advisors aren’t perfect but it’s better than just throwing your money into an ac

A few months ago we did an introduction to bonds episode. We wanted to get a little deeper into the topic and a listener, Eric, agreed to help us out.  As you heard in the disclaimer, this is a complex topic. Stick with it though, it will all make sense by the end of the episode.  There are many types of bonds but the most basic description would be, a bond is an IOU. A coupon is the interest payment and you get that on a semi-annual basis until the bond matures. At maturity, you get the face value back.  A government bond is a treasury bond. These are often the benchmark that other bond rates are based on.  Agency bonds are issued by government-sponsored agencies like Fannie May. Mortgage-backed securities are mortgages sold off by the mortgage lender. Corporate bonds are what many of us are familiar with. These are sold when a company needs to raise money.  A municipal bond is issued by a city, town, state, or even a water company to fund expenses. Even Yankee Stadium has bonds! The yields are lower but fro

Being completely burnt out can happen to the best of us and it is not uncommon. Especially for vacation deprived Americans. But we can’t all quit and go live on the beach. So we have to recover somehow. You can bounce back. A break and a few deep breaths and back on track.  We did an episode on burnout which generated a ton of emails and still does. Many of you have suffered or are suffering burnout yourselves. What can we do about it and what can we do to prevent it in the future?  What Is Burnout?  “Burnout is a psychological term that refers to long-term exhaustion and diminished interest in work.”  That’s the technical definition. In real speak, “fed up with this shit!”  The Symptoms  Do you know the difference between being physically tired versus mentally tired? I’m a big fan of physically tired. Being tired from a long hike, a good run, helping your best friend move out of their fifth-floor walk up. That kind of tired quiets the mind and lets you sleep like a baby.  Mentally tired sucks and it’s the k

 Today we’re answering listener questions. Student loans, home equity loans, over paying your mortgage and a day in the life of a data engineer.  We love to answer your questions on the podcast. If you are wondering, odds are someone else in the audience would like to know too.  1. I miscalculated and took out too much in student loans. Should I pay it back right away? Yes, pay it back if you don’t need it. Pay off the higher interest rate loan first.  2. Should I take out a home equity loan to pay for roof repairs? Yes, a home equity loan will have a lower interest rate than a personal loan or heaven forbid, putting it on a credit card.  3. Should we use Betterment as a savings account for a down payment, to bulk pay student or car loans, and as a place to keep a 3-6 month emergency fund? If you’re going buy a house in less than five years, no. Yes to the loans again applying the five year rule. Yes to keeping your emergency fund there.  4. How to allocate extra money to mortgage payments versus to a retirem

Balance is important in all aspects of life, including your financial portfolio. Find out what well-balanced means when it comes to your portfolio.  What makes up a well-balanced portfolio? Andrew breaks it down for us.  Part of it depends on your age. The younger you are, the more risk you can afford. Diversity is important too. Many Americans have the majority of their wealth locked up in their home. Owning stocks and having retirement accounts is important too.  If your employer offers any matching, take it. Even if you have debt, it’s free money! Have some money invested internationally. Vanguard’s International Developed Market ETF can get you there. US investments only account for one-third of the world’s market so by only investing in US companies, you’re missing out on the rest of the world. Never spend more than one-third of your take-home pay on rent. The same percentage goes for owning a home. The home you live in should not account for more than one-third of your wealth. If you like to buy indiv

  Today we break down listener Sylvain’s financial life. What is he doing right, what is he doing wrong, and what could he be doing better? Our This Financial Life series is back. One of our listeners lays out his financial picture for us and we critique it. Sylvain immigrated to the US from France in 2009. He does not have student loan debt because education is heavily subsidized in France. He’s now a permanent resident working for a private company. He currently lives in the Berkeley area which is expensive. Sylvain and his wife bring in about $7,000 a month and spend between $4-5,000. They share a credit card, split the bills, have $10,000 each in an emergency fund and are saving for a home. They expect to spend about $500,000 to buy a place. The money they are saving toward a home is invested currently. They discuss finances once a month. Sylvain was leery of getting a credit card but wanted to build credit in the US. He only uses it when he has the cash to pay it off immediately which is how we shou

  We haven’t done a five questions for awhile. Today it’s back! Andrew and Thomas answer five questions submitted by our listeners. Today we answer questions about bonds, interest rates, and one of our favorite subjects, retirement. 1.  If you’re young and looking to grow wealth, why bother have 10 or even 5% invested in bonds? If you’re in your early 20’s, go ahead and go 100% stocks. As you get closer to retirement, you move more to bonds. This is what a life cycle fund does for you. 2.  Am I going to incur a lot of fees if I take money in and out of my Betterment account frequently?  When you pull money out, Betterment will let you know the tax implications of doing so. That’s one of the reasons we tell you to buy and hold. But even with the taxes, you will almost always make more in Betterment than making dick interest in a savings account. The bigger question is why Joe is not leaving that money alone. 3.  Wouldn’t it be beneficial to have a traditional IRA for your working life, retire, wait a year

We are anti-fee at LMM whether they be bank fees, credit card fees, or investing fees. Uri Levine from FeeX joins us to discuss avoiding investing fees.  You probably go out of your way to avoid having to pay a $3 ATM fee but you might be losing much, much more than a few dollars through investing fees. Americans pay $600 billion in investing fees every year. That is 4% of the Gross Domestic Product! On an individual basis, you lose about one third of your retirement money to these fees over time.  Types Of Fees  Expense Ratio: This fee is charged for mutual funds, ETF’s and no-load funds.  Expense ratio is what it costs an investment company to operate a mutual fund. Expense ratio is determined by a yearly calculation. The fund’s operating expenses are divided by the average dollar value of its assets under management. Operating expenses are taken out of a fund’s assets and lower the return to a fund’s investors.  Plan Fee: If you have a 401(k), the provider may be charging you a plan fee for the privilege o

What is a penny stock?  Can they make you rich?  Well, it worked for our guest Timothy Sykes who turned $12,000 into $4.2 million by trading them.  Timothy took his bar mitzvah money and started trading penny stocks against his parent’s wishes. What they warned him would be a hard lesson in the value of a dollar, turned into a small fortune.  What Is A Penny Stock?  Penny stocks are stocks sold by speculative companies for under $5 per share. Penny stocks are usually growing companies that have limited cash and resources or companies in dire financial trouble, often already in bankruptcy. As such, they are much riskier than traditional stocks. You don’t trade penny stocks with the intention of finding the next big thing, rather, you’re trading momentum. If you’re wrong about a pick, get out fast. This is not a buy and hold discipline.  When a “conventional” stock is down, over time, it’s likely to bounce back. That’s not the case with penny stocks. The companies often go out of business before a bounce back c

College costs are rising.  If you have kids and want to help them pay for college, the earlier you start a 529 Savings Plan, the more it will grow.  Kathryn Flynn from Saving For College will explain the fine points.  A 529 Plan is like a retirement account for college. You contribute with after tax dollars and are not taxed when the money is withdrawn as long as it is spent on educational expenses. You do have to name a beneficiary but can change it once a year.  There are two types. Pre-paid which is more restrictive. You are locking in current prices. The more common type is the college savings plan. You can invest in any state’s plan.  If your kid forgoes college for the starving artist route, you can change the beneficiary, use the money to fund your own education or make a non-qualified withdraw. You will pay income tax and a 10% penalty on earnings.  You can control the level of risk of the investment with an aged based investment option. The closer your kid is to college, the less risk you want to tak

At LMM we bang the drum loudly in favor of investing over saving. But are there times when it’s better to just save? We’ll find out today.  We’ve gotten a lot of questions about when to invest and when to just save so we thought we would dedicate a whole show to the subject for you.  One of the good things about Betterment, and why we encourage you to keep your emergency fund there is that there is no penalty for taking money out and you can have it quickly, within a few days.  But an emergency fund is for emergencies.  If you’re constantly pulling money out, that’s a problem.  If your time frame of needing to access money is less than a year, that money should be kept in a savings or checking account.  The Rule of 72 is a way to determine how long it will take to double your investment.  With a 7% return rate, it will take about ten years to double your money. What do you need to buy soon?  A car in two months, a house in two years?  If you need the money in that time frame, you’re better off just saving it

If you’re sick of renting, you might be considering a home purchase. After all, mortgages tend to be cheaper than paying rent — so why doesn’t everyone just stop renting and buy a home? The truth is that buying a house isn’t just a matter of paying the mortgage every month. There are all kinds of hidden costs of buying a home. Today we’ll help you sort them all out.  One of the top draws to homeownership, among many, is the fact that mortgage payments are often much less expensive than rent. However, just because a mortgage payment is less than your current rent does not necessarily mean that buying a home would be cheaper. There are numerous costs to consider when deciding to buy a new home. Loan origination fee To start, there will be a loan origination fee whenever you take out a mortgage. This is what you pay the lender for doing the work involved with making the loan. Because this fee can be a large one and it is required to be paid upfront to your lender, it’s important that you figure this originatio

Deciding whether or not to have a baby is probably the biggest decision you will ever make.  Today we’ll discuss how to prepare financially for baby.  Stephany Kirkpatrick from LearnVest is our guest to discuss the financial aspects of having a baby. Having a baby doesn’t have to derail your financial goals.  It does change your financial priorities.  Good bye to five star resorts and hello to camping!  To raise a child to age 18, it will cost nearly $250,000. Retirement needs to stay front and center.  There are more ways to fund a college education than there are to fund retirement. Ask around about child related expenses.  What are people paying for child care, for school, for after school activities.  The numbers won’t be firm but you can at least have a sense of what you’re in for. Check into your maternity/paternity benefits.  If you are lucky enough to have paid leave, and many people are not, it may not be as long as you want or need to stay out of work.  You need to have money set aside to get yo

We’re talking all things treasury today on Listen, Money Matters. Treasury bills, notes, and bonds.  Which, if any should you invest in?  Were you given bonds as gifts when you were a kid?  It may have seemed like a lame gift at the time but there probably aren’t many other gifts you still have decades later.  A Treasury Bill has a maturity date from 91-364 days.  A Treasury Note, from 2, 3, 5, or 10 years.  And a Treasury Bond, 30 years.  Buying a bond is buying debt. Buying bonds is less risky than buying stock because bond holders are among the first to get paid even if a company goes bankrupt.  The yield is low though, less risk equals less gain.  Because it is unlikely that the US government will go bankrupt, these are among the safest investments you can make.  A bill doesn’t pay interest but is bought at a discount and when mature, pays at the full value.  A note does pay interest.  When it matures, you get back what you paid for it but you are getting interest payments in the meantime.  All of these i

Are you guilty of one of the seven debtly sins?  Find out how sinful you are and prepare to repent your sins in the church of Listen, Money Matters.  There are seven deadly sins if you subscribe to ancient fairy tales.  You can commit those sins in the realm of personal finance too. Come forward and be bathed in the blood of personal finance, all you sinners out there.  Let’s start with lust, possibly the most fun of the sins!  Lust is when you long for something to perhaps an unnatural degree.  A new car when you have a perfectly good one.  I’ll disagree with Thomas on high thread count sheets.  They are totally worth it and there is no going back.  Buy those.  Gluttony is over-consumption to the point of waste. Wasting food is probably the best example.  If you plan your meals, you’ll waste less.  Don’t buy a bag of carrots, roast two and let the rest rot.  Learn what else you can do to use the other carrots.  Greed is wanting more, more more.  You have ten million and you want eleven. If you have enough an

We mentioned margin and a previous episode and only touched on it.  A lot of you wrote in with questions so we’re doing a whole show to explain what it is.  Simply put, margin is borrowing against your investments without selling your investments.  You can pull money out of your brokerage account on margin by setting a toggle on the account.  You’ll pay interest and if you don’t pay back the loan, the brokerage firm takes your investment.  It’s like borrowing money against your house.  If you don’t repay it, the bank takes the house.  There isn’t a monthly payment, the interest gets added to the total margin you have out. The trick is to grow your investments faster than the rate of the interest.  Playing with margin can be really good or really bad.  Margin is the reason people like Warren Buffett gets huge returns and the rest of us don’t.  You can use margin to do whatever you want, go to Vegas, buy a house, or invest in more stocks. We are doing this episode for informational purposes.  Margin is a risky

Living with roommates can be a minefield.  Particularly when it comes to splitting shared expenses.  Here are a few tips to navigate the situation.  One of the best things about roommates is splitting the expenses.  But it can also be one of the most fraught aspects.  Learn how to do it so everyone feels they’re being treated fairly.  Thomas is currently living with three roommates even though they are all done with school.  So he knows something about how to make this situation work.  They have individualized leases which not everyone may be able to get but is worth asking about.  The utilities are shared and you’ll have to decide in who’s name to open the accounts.  That person should automate the payments to ensure that nothing is ever paid late. Thomas uses Stripe to breakdown the amounts everyone owes and they pay him through it.  Some stuff is just not worth fighting over.  Breaking down who takes longer showers or works from home using the most electricity is petty and probably doesn’t make a huge diff

How much real fun do you have compared to not that fun distractions? Those distractions are the reason for your lack of fun.  Learn how to get rid of them.  Do you wish you had more time to see friends devote to your hobbies, knock a thing or two off your bucket list?  Well, you would if you stayed the hell off Facebook when you should be working.  That kind of stuff is low-density fun.  It’s a little fun and it’s spread out through the day.  But it’s not the same kind of fun as hanging out with friends or playing your favorite video game. That is high-density fun, fun that is really fun and takes a few hours.  This kind of fun is so important that you should schedule it.  You have to work when you should be working of course but you should have fun when you should be having fun too.  And if you are getting rid of the dumb, low-density fun activities during your work time, you will get more done.  Then when it’s fun time, you won’t have unmet obligations in the back of your mind haunting your good time.  So c

The life success triangle has three parts, learning, value creation, and relationship building.  We’ll see how they fit together to help you make money.   Thomas came up with this concept for college students and it was the Student Success Triangle.  But it can be applied to your post-college life as well. All three points of the triangle are equally important and support each other. Full Article Here Show Notes CIG:  Thomas’s original post. Betterment:  The smart way to invest. Learn more about your ad choices. Visit megaphone.fm/adchoices

If you want to start buying individual stocks and make your money work for you, Google Finance is a great place to conduct thorough research and learn more about stock investment strategies that will help you reach your financial goals. This article gives you key information about Google Finance, and how you can maximize its data. Full Article Here Show Notes Betterment:  Investing made better. Google Finance:  Research at your fingertips. Learn more about your ad choices. Visit megaphone.fm/adchoices