Smart Conference - Dave Ramsey, etc

[Corraleno]

On 2/8/2020 at 10:04 AM, Ktgrok said:

And I have zero intention of following his investment advice - we have someone from Edward Jones that we trust and has done very well for us - referred to us by DH's family in Ohio who are very money savvy. So that's covered. 

I realize investment strategy wasn't part of the original question, but it is basically the "fourth leg" of the stool along with cutting expenses, increasing income, and increasing savings, and if you are going to be looking at books and blogs and podcasts on getting out of debt and increasing savings, you will likely learn a lot about investments as well. One of the first things you will learn about is the "hidden" costs of investing: load fees, management fees, expense ratios, etc. You may not realize just how much of a premium you are paying for "management" by Edward Jones, vs using very low cost no load mutual funds. I'm going to paste a couple of excerpts from the bogleheads forum here:

Quote

Edward Jones are only allowed to promote specific, actively-managed funds from specific fund families (JP Morgan, MFS, et al.) who essentially pay EJ a “kickback” in return for bringing assets their way. They also charge something like a 1.35% AUM annual fee off the top of your return, even *before* taking into account the expense ratios of whatever funds they put you in.

Quote

Expense ratios (ER) matter much more than a hill of beans to the prosperity of savers, whether in 401Ks or other accounts. When I ran the numbers on various internet calculators, I tried an example in which a saver started with $0 at age 25, and saved so as to have a $1 million at age 65 if ERs were omitted. The effect of a 2% ER reduced the terminal amount to about $600K. The imposition of a 0.1% ER enabled the saver to end up with about $980K.  
At a 4% withdrawal rate, minus the 2% ER, the 2% ER saver can withdraw: $600K * 2% = $12K a year, or $1K a month.
At the same 4% withdrawal rate, minus the 0.1% ER, the 0.1% saver can withdraw: $980K * 3.9% = $38.22K a year, or $3.184K a month. 
Thus, the 0.1% ER saver enjoys a 218% increase in available monthly spending over the 2% ER person. That's not only more than a hill of beans, it's a whole bean plantation.

Someone with a portfolio of $250,000, with management fees (AUM) of 1.35% plus ER of say 0.65% is paying $5000/yr for the privilege of being "managed." Investing the same amount of money in a Vanguard 3-fund portfolio, or one of their all-in-one fund-of-funds (e.g. a Target Date Retirement Fund or Life Strategy Fund), will be paying around $200-300/yr (no management fees, ER of around 0.1%). At $500K, management can cost $10,000/yr, etc. That is a HUGE expense that can be cut quite painlessly and will have an immediate effect on savings and investments going forward.

Edited February 10, 2020 by Corraleno

[ktgrok]

2 minutes ago, Corraleno said:

I realize investment strategy wasn't part of the original question, but it is basically the "fourth leg" of the stool along with cutting expenses, increasing income, and increasing savings, and if you are going to be looking at books and blogs and podcasts on getting out of debt and increasing savings, you will likely learn a lot about investments as well. One of the first things you will learn about is the "hidden" costs of investing: load fees, management fees, expense ratios, etc. You may not realize just how much of a premium you are paying for "management" by Edward Jones, vs using very low cost no load mutual funds. I'm going to paste a couple of excerpts from the bogleheads forum here:

 

 

 

 

Someone with a portfolio of $250,000, with management fees (AUM) of 1.35% plus ER of say 0.65% is paying $5000/yr for the privilege of being "managed." Investing the same amount of money in a Vanguard 3-fund portfolio, or one of their all-in-one fund-of-funds (e.g. a Target Date Retirement Fund or Life Strategy Fund), will be paying around $200-300/yr (no management fees, ER of around 0.1%). At $500K, management can cost $10,000/yr, etc. That is a HUGE expense that can be cut quite painlessly and will have an immediate effect on savings and investments going forward.

Wow, thank you. I will take a much closer look at our investments with this information. Appreciate it!

[Pen]

2 hours ago, Ktgrok said:

Wow, thank you. I will take a much closer look at our investments with this information. Appreciate it!

 

Are your investments earning more than you are paying out in debt payments? 

[hjffkj]

6 hours ago, Ktgrok said:

I should clarify that my husband is better at managing finances in general. He is just the one dealing with the peer pressure, for lack of a better word. I hang out with other single income moms, you know? Different worlds. 

And, in full shameful disclosure, I splurged yesterday. Some of you know that last year I discovered lawn work - it is my new passion. It makes me SO happy and my husband jokes that I love the lawn more than him. Anyway, I spent all last year mowing with either a manual reel mower (the old fashioned no motor kind) that I like the cut of but it's very narrow so takes a long time AND is constantly getting out of whack so I am always adjusting it or having to mow twice to get it cut right, or an old beat up gas push mower that isn't self propelled and cuts badly. Ideally I'd get a gas reel mower but those are $$$$ and probably not worth it for my quality and size of yard. So I've been looking at upgrading to a self propelled toro, with rear wheel drive. New they are $400-$450, so I've been watching used ads. Yesterday I found one in great condition for $175 30 minutes away and I got it. 

That's money I could have put to credit cards. But I will use this weekly and then in the summer twice a week, for years. And will sell the old one for about $50. And the neighbor had a heart attack a while ago so I try to mow his when I can, and this will make that a lot more likely as it will be faster to get mine done so I have time for his. 

Thats how I'm justifying it, anyway, lol. 

Situations like these pop up often, the key is making sure you aren't talking yourself into all of the great deals and end up actually spending more than you would if you never came across the deals.

Just today I spent $71 at A.C. Moore. They are closing so everything is 50 - 70% off. Well I have a long running list of things I need to purchase coming up. Birthday gifts for nieces and nephews, replenishing art supplies, and gifts for my own kids. With that list in mind I found great deals. Spend $15 on 3 different gifts for nieces and nephews. Got hot glue guns, felt, paints, etc to replenish what I've already been planning on replenishing in our house. And the kids bought some things they wanted at a great price and they will pay me back with money they already have.

I could have spent sooo much more and justified it any which way but if I really went off that ongoing list I've had then I'd be spending unwisely, even if it was a great deal. The only things I spent on that wasn't on my list was sketch books. But they were high quality and will be stored for next school year because we always need them and the price did beat what I normally pay.

[ktgrok]

1 hour ago, Pen said:

 

Are your investments earning more than you are paying out in debt payments? 

Either way, most of it at this point is in retirement accounts that I believe we'd take a big hit on if we withdrew it. We did liquidate some small amount that was not retirement savings in order to pay off the larger credit card a while back. 

37 minutes ago, hjffkj said:

Situations like these pop up often, the key is making sure you aren't talking yourself into all of the great deals and end up actually spending more than you would if you never came across the deals.

Just today I spent $71 at A.C. Moore. They are closing so everything is 50 - 70% off. Well I have a long running list of things I need to purchase coming up. Birthday gifts for nieces and nephews, replenishing art supplies, and gifts for my own kids. With that list in mind I found great deals. Spend $15 on 3 different gifts for nieces and nephews. Got hot glue guns, felt, paints, etc to replenish what I've already been planning on replenishing in our house. And the kids bought some things they wanted at a great price and they will pay me back with money they already have.

I could have spent sooo much more and justified it any which way but if I really went off that ongoing list I've had then I'd be spending unwisely, even if it was a great deal. The only things I spent on that wasn't on my list was sketch books. But they were high quality and will be stored for next school year because we always need them and the price did beat what I normally pay.

Oh yes! I actually no longer even OPEN any catalogs that come in, as I figure if I don't already know I need/want it, I don't actually need/want it. Don't need the temptation. This was definitely me looking for a particular thing, and watching used ads for months. Ideally I'd have waited for the tax return check to come in which I think will be later this week, but at that price it would have been gone by then. Most used ones are missing the bag as well, and this guy still had it - those are about $60 to replace. 

Next "wish" is a picnic table for the front yard. We may do that before paying off every bit of credit card debt, but will again find used or build it ourselves...Lowes has one for $99 that you have to assemble. I'm scanning used ads for that as well. We spend a LOT of time out front socializing with neighbors, etc and would like a spot the kids can color at, or do schoolwork, or us adults can sit and talk while the kids play. But that won't be for a bit.