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Start Today - Where to Invest?

Lesson 16 from: Personal Finance for Artists & Freelancers

Galia Gichon

Start Today - Where to Invest?

Lesson 16 from: Personal Finance for Artists & Freelancers

Galia Gichon

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Lesson Info

16. Start Today - Where to Invest?

Lesson Info

Start Today - Where to Invest?

Where should you open your retirement plan so before we jump into that what I want to just kind of reiterate a little bit about what kind of retirement plan is best for you and so I'm going to start by asking our wonderful, lovely audience is jean marie and have the air just what kind of plans did this make sense to have any questions about it so let's hear from you well I already have a set and I was just looking at the scenario that you ran and I thought, wow, why don't I also add an eye for a one k to that um you know, you know if I was to make when you are with me when I make you know, like when I actually calculated how much more I could be investing it was like shocking and I was like, wow that that sounds a lot more in alignment with my goals it's great awesome yeah um I actually just realized that I have an I r a that I had from a job that I had six it was in an old for one k at the job it was an ira okay? Yeah, it was I think a traditional ira and so I think I'm going to call ...

and check up on it because I haven't I forgot that I even have um and then, um I've set up a roth ira um and I also now think that I want to set up a sep alright that's going to be pretty much my next step and it literally just came to me about that old I'm like, I think I set up my area before the ira have no right and that's I mean javier air I see this over and over don't people do their financial checkup like you guys were drinking right now because you're showing up on all of you that are watching this is that you find money so how much is in that ira? I mean, you don't have to share the dollar amount but probably a few thousand dollars a little bit more than that, I think actually okay and you forgot about it. All right? So you just found thousands of dollars and I mean, we know with the amazing work that you did rolling up your sleeves, finding all that money, your budget, but think about that just by doing the work showing up, doing a financial checkup, you find money, I see it over and over and it's not that we're wealthier that we but we just find the money we really, really doing its partial because we're not organized, it does not at one place, so it's kind of another reason to really simplify your financial life and pick a few places to do it and before I really move on into where you should open what I want you to also think about because this question came up during the break somebody asked me that and I realized that a lot of you that are listening might have it too is can you do both? Can you do a roth ira and a sep ira? Heck yeah absolutely especially if you're not making that much so my example before was let's figure out how much extra you've got no maybe for the year and maybe you only have five thousand for the year extra so you really could put some of it in a roth and some of it in a set because the roth if you get it if you get the concept that you get the after tax tax free excuse me that when you take it out it's tax free you might want to do that but then you also might want to see it on taxes today and that's just really my philosophy with money is that its moderation you could do a little bit of this a little bit ad pay off your debt and save money do the roth and do the set you know tuapse two kinds of savings that was my little finance jig I think I'm getting a little jumpy I'm getting I I love it I so anyway that that's the ideas that you khun so I have a question so I have a traditional roth and I want to send up a set would it be smart too grover my traditional to my roth or okay so that's a great question it's a little complicated what you could do is with the traditional the question is did you pay taxes on it or did you not I think it was I'd have to check I don't I don't remember I don't think I did so if it went in pretax you could convert it to a roth ira and combine it but then you're gonna have to pay taxes on that to say it's five thousand dollars and you convert it you'll have to pay taxes on that money again I actually did that I converted a traditional ira to a roth I called my c p a I feel like I've built this epa to be like you know at the top of the mountain I called my c p and I said what will that do to my taxes how much extra well I have to pay this year if I have if I convert she told me the number I was like okay I can afford that if you decide not to at least have it in one firm I see very often my clients who do consolidate show up with their statement roth traditional sap that's fine just in one statement so if you decide not to that school so again the question is did you pay taxes did you not because that'll determine working go if it's a traditional ira that you did not pay taxes on you might be able to also combine it with your rollover ira your old foreman came I can't promise that but that is something and you can ask the firm that you decide to keep it at about that so what I want you to do over the home over the break is really really get clear on what plan is best for you and don't if you don't understand it ask the question in the chat room but hopefully you're watching this and you're thinking ok I need to do the roth I need to do the sap I'm going to do the individual for one kay if I have a partner that I'm married with our mary to that has a four oh one k or for three b by the way the four or three b is the retirement plan if you work at a non profit or hospital or university and then they're just tax code numbers so this is corporate for profit nonprofit um so is your partner taking advantage of all the plans at work make it a priority and so here's sort of one of my catchphrases and I was quoted in the new york times saying this but there is no student loan at retirement so which means you cannot borrow money a retirement which is why I'm talking so much about this which is why we have to plan for retirement now and we have to make it a priority because there's no student loan a retirement so a lot of us khun borrow money for college which is a great I'm a big fan of that but there's no way we can borrow money retirement in our sixties okay? I'm that sobering now where should you open your retirement account so there's a few places I'm just going to quickly go through it there's kind of like d I y it's my first step that their mutual fun separate supermarket my second step and then the brokerage for a money manager so those were kind of like the three just overview let me go through them so this is the first step this is for those of you who I don't have a lot of investments or just want to get started on investing and you're really like ok don't know where to start I just want to begin this is probably the easiest option is and you don't have necessarily a lot of money saved. So what you might do is goto a mutual fund family on vanguard is probably the biggest mutual fund family in the country on what I love about vanguard which I'm going to talk about tomorrow is they also do what's called index investing, which is I'll definitely go into a lot more detail better tomorrow, but what I love about index investing is it's, the cheapest investment out there. So vanguard is the country's largest mutual fund company and the cheapest investments overall. And what is the avenge of this? Is this one stop shopping so you know not to digress into the beauty treatments and such, but it's kind of like going to bloomingdale's and doing all your shopping in blue dales you by your shoes, your pantyhose, your skirts here this so the minimum toe open a mutual fund and again, the mutual fund, you have your ira, which is your big empty box, and you've got to pick the investments within it. So you have to pick mutual funds, and recon will explain this tomorrow. I promise the minimum to open it a vanguard it's either a thousand dollars or three thousand, so if you only so you can open it for a thousand and then once it's open, you can add for his little one hundred dollars, so let's, just say you're opening a roth ira or a sep ira and you don't have one open. You do need a thousand dollars to open it, and then you can add it for as little as one hundred dollars. So if you want to open a roth and you don't have the money then save that thousand dollars in your rainy day a counter in a separate savings account and once you've accrued a thousand you can open the vanguard account and just as little as fifty or a hundred dollars a month this is a great first option and the reason why I like going with like a mutual fund family some other examples are t rowe price the american funds dreyfuss is air just mutual fund companies and we'll talk a lot about that tomorrow which one is best the reason I like it is on the whole they don't offer that many choices and so it's much easier not to get overwhelmed and just say I'm just going to go to vanguard I'm going to stick just a vanguard funds I'm just going to go to t rowe price and pick just hero price finds again I promise you tomorrow we'll talk about why one is better than the other but this is kind of your first step and it's no load mutual funds which means these air mutual funds that don't have any upfront fee this is where I get really cheap usual fun family one stop shopping you gotta have at least a thousand dollars toe open but then after that you can do as little as one hundred dollars what if you have old ira's you can roll it over here again, you need a thousand or three thousand depending on the fund to roll it over, but if you're rolling it over, chances are you've got that that's your first step the second and I came up with this term a mutual fund supermarket, so really the two biggest or fidelity and schwab and here's where it is I met fidelity don't endorse them, don't support him is just the place that I've been for the last twenty years. So here's, the thing about fidelity and schwab, why they're different than a vanguard or an independent sort of an individual mutual fund company is that fidelity and schwab have their own mutual funds or c fidelity mutual funds or schwab mutual funds, but you can also buy non fidelity funds you khun by individual stocks, you could buy bond, so they offer a lot of other services so it's a great, great firm they're online presence is fantastic and amazing, but guess what? They also have brick and mortar shops all over the country. I have a kind of minneapolis there's, a finality stored in downtown or fidelity office downtown. I'm in connecticut in san francisco and l a I mean their fidelity and schwab officers. I think shop is based here in san francisco, so what I like about these two firms is they have amazing benefits, amazing services they're online presence is great, their customer service is fantastic. They have a nine hundred number dedicated just for self employed people, and one thing that I was thinking about, too is that I know that a lot of people in the chat room are saying freelancers and self employed. This includes artists this courses for the artist, I work with artists, I work with painters with writers with, uh, performance artists, dancers, that's, a freelancer, that's I'm keep saying freelancer, but absolutely are just our encompassed in this I mean, my artists or some of my favorite clients, so and I think, you know, you said that you're a dancer as well, so if you would be a performance and actor, yes, and dancing, dancing, and I know how leela, you know, everybody, a lot of people I meet have that as well, so that is artist is included in there anyway. Fidelity and schwab are just fantastic if you want to maybe do a little bit more because maybe you don't want to just do vanguard maybe you want to do fidelity and vanguard, or maybe you want to do a janice fund or on again tomorrow. When we learned about mutual funds, you'll get a better idea. So what I like about these two firms is it lets you do just a little bit more so if you feel like you know what I can roll up my sleeves I can handle this this might be a better place for you and again there's probably just a little more customer service which I find for my older clients that might just need that physical presence this could be a better place again if you just go on their website if you ask them the minimum needed is twenty five hundred dollars to open a mutual fund, but they have so many funds that are only five hundred dollars to open so if you just want to get started and you've got the five hundred dollars, get going so on a overall big pictures they sell their funds they're mutual funds but then they sell forty you know, four thousand five thousand other companies mutual funds so maybe you're really focused on socially responsible investing or you want to do e t f switch vanguard a ct f's but I think the idea is that this gives you ah little more option is one better than the other no, they're really both grade I mean my sister's got all our investments here she's great tomorrow but I was talking with one of the producers over the break and we were talking about socially responsible investing is there a resource online that you'll point us to hopefully tomorrow. We'll just throw out the website real quick social funds. Okay, doc, calm. But we are going to talk about that. I think it's a great great website, has every s r I which is the abbreviation socially responsible investing. So social funds list it's every sorry for those artists. They're watching that are really focused on socially responsible investing. Sorry. Funds are great. And social funds dot com list everyone. Vanguard has one mutual fund. It's, a social responsible fund. The two biggest companies. Air packs. Calvert in terms of independent companies. Domine ease or fantastic socially. Sorry. By the way, you can buy them a fidelity. You can buy them at schwab. So for me, just on a big picture basis, I have about five, maybe seven mutual funds. I have a fidelity. I have a vanguard have a socially responsible one have a janice one, but I bought them all of finality and get them all in my fidelity statement. So that's, why? I like going to a place like fidelity or schwab? Because I can choose some of their funds and other companies as well. I've got a handful of stocks I like. And again, we'll really get get into this tomorrow, but fidelity gives me a little more options when you're thinking, you know what? I'm just not ready to go there. I just want to keep my life simple, lt's possible? I just want one or two funds vanguard is an amazing twice a swell, and this is definitely a simpler way to do it, so if that you're just getting started and you're overwhelmed but you are ready to do it, maybe just start here. Um, what was my train of thought? The other thing that I want to point out is that money is nothing's permanent. This is not like a you know, a tattoo on your nose, you don't see that very often, but the ideas that say europe, vanguard and after a year you're like, you know what? I have researched fidelity and I want to transfer my money, they're great not saying cash it out and spend it, I'm saying you're going to transfer it it's a little bit of a paper headache, but that's it people transfer money from one institution all the time, and in fact, a lot of you're going to be doing that that's part of your homework, you're going to be consolidating, so say europe, fidelity and you research a little bit not mutual funds, and you learn you say, you know what? I like the vanguard funds. Ah, year from now, let me switch to vanguard great there's no wrong decision here, so don't. And very often I think, for artists and freelancers that don't understand finance and that get really scared of it, they don't make the decision out of fear because they feel like I don't understand it. So let me not do anything, so don't let the fear of not understanding these firms as well hold you back from not doing something obey. Do you consider a trade a mutual funds? Yes and no. So the thing about e trade is they they do sell mutual funds, but I feel like go to the source like, if I'm going to buy a fidelity mutual fund, let me just buy from fidelity if I'm gonna buy a vanguard fund, let me buy from vanguard. So I like going to fidelity, where I could do fidelity funds and other funds where if I'm going to go to e trade and he tries a great firm and I don't think there's anything wrong with going there, he trades probably abetter from fur trading individual stocks because that's sort of there their nature, if you will, because they offered the lowest fees in terms of trading stocks great great question keeping coming the third kind of firm is a brokerage for money managers and so the examples for this would be a merrill lynch jp morgan and morgan stanley bank of america you bs are b s you know plus like a gazillion other small firms that you've probably never heard of and so really how this works is that you work with one person and how they charge is they're going to take a percentage of your assets and to be honest they don't really want to work with you unless you are giving them to manage at least half a million dollars if not a million dollars so these air sort of most traditional financial planners financial advisors money managers so we've all met hm nothing wrong with that on people who are selling life insurance so this is sort of the third kind of place to invest your money so who is this good for? Well, first of all you've got to have these assets which is at least half a million dollars if not more and you also haven't understand your fee structure because on the whole how they want to charge and how they do get charged is a percentage of annual assets so most of them charge one to two percent a year so this is regardless of how the market is performing or how they are performing they're getting paid one percent of your assets per year nothing wrong with that everybody's making money, it's just that most people don't know that and so that's really sort of my little beef with them. The other way that they get paid is they saw what's called load mutual funds, and a load is just a fancy word for sales charge and that's on average five and a half percent. So that means if you buy a fund for a thousand dollars before you even do anything you're charged, you're getting paid fifty thousand dollars that would be fifty five dollars, is that right? Yes. So a thousand dollars fifty five dollars right away is your sales fee, so the idea is that they are usually selling load mutual funds or they charge a percentage of assets. What do you get for that? You get one person that you work with and you get exceptional service that you can call that person any time? I mean, maybe not twenty four seven, but maybe nine to five, five days a week, they know you, they know your account, they're going to work with you, they're going to hold your hand. They're not going to be condescending to you, we're going to make you feel comfortable, so I'm not saying paying fees is bad it's not what I'm choosing to do, and I think most of us do this or a lot of people do this because they're so nervous about handling their money and I promise you after tomorrow you won't be so very often they let someone else manage their money so if you're going to do that you should still know what your money is doing because I worked with people who dealt with the maid off scandal I work with high net worth it's still your money so you still have to learn about it but more importantly think about well why am I doing this? Is it worth the fees that I'm paying? We're going to talk a lot about feast tomorrow with investments because it's a great place to save money but with that being said it is the third place that you can open a retirement account so think about where do you want to open a retirement account do you want to kind of like do it yourself at a place like vanguard which is the largest company but there's also other independent cos I'm a big fan of t rowe price on what t rowe price had and they still do is they have what's called their automatic asset builder so it's t rowe again I'm not I don't work for them I don't support them or anything like that here price dot com what I like about them I might be one hundred dollars now but say you had no money saved you could open a roth ira link it to your checking account and they would take one hundred dollars a month out of it and build your raw fire, and so they're stipulation is that they have to take a hundred dollars out every month until you reach the minimum of twenty, five hundred. Then you can stop don't stop with the idea is that they'll waive that minimum if you commit to doing a hundred dollars a month so that's a great company and fidelity will do that, too. I think on some of their funds, vanguard won't vanguards fees are so low that they're just like we can't bend the rules, and I don't I mean that's just who they are. Um, so maybe you do it yourself in a place like vanguard, you take it a step further and go toe like a mutual funds supermarket like a fidelity or schwab, which has a little more customer service, has some bricks and mortar offices, offers a little more selection of funds, the fee's a little bit easier or you work with a money manager. You've got a significant amount of assets, he prepared to pay the fee but get exceptional customer service. So figure out first we figured out which retirement plan is best for you come up with the place. So hopefully you are able to say, you know what I'm going to do, vanguard, I'm going to do t rowe price, I'm going to do finality, I'm going to do schwab those or four five examples if there's others that are coming in the chat room feel free to ask, but those air four, five firms that I like and you cannot go wrong with any of them any of those firms air great firms and you'll do really, really well with, um and once you learn a little bit more about investing tomorrow or next week or next year, you'll say, you know what? I found this other firm I love great transfer the money there, you'll have a lot of money to transfer, so figure out which plan is best and figure out where you're going to do it if you have old plans rolled him over. Talia, you were asking be online audience for their figures to do the savings of retirement strategy? Do you want it? And we have one of two that have more figures in them that could be more saving strategy, and then we have others. It will be your straight up for time, so I think we decided we're going because I do need my computer that we're going to do the actual retirement forecast first thing tomorrow morning. Right, right. But if it's a savings question about where should money go to which place that I can answer right now or I can answer later on, but in terms of actually running the retirement numbers and and the reason why that we realized we were going to do it tomorrow morning is I have to really go through the exercise is so we can get an idea as to what numbers they need to get together. Um, it was one thing that I was thinking of my head before I moved on. I could ask you a question only thinking okay, yeah, I'm going to slightly off, but it might come back in cindy, if you haven't old for a woman, the government from a prior government job, a thrift savings plan, you leave it there or do you move it? Great question a great question, and I have worked with a lot of people who had old thrift plans, so I didn't really talk about pensions because, frankly, most of us, you know, very few were corporations, organizations that we had worked for offer pensions anymore, so if someone tells me they have a pension, I know they're no, not a spring chicken, because very few companies really like, really true for profit corporations offer that much these days, but with that being said in a good way if you are a teacher a few for hospital or few fort for government municipality you do have a traditional pension should you keep it or should you stay? Should I stay? Or should I go? Um gosh, that is not a black or white answer that's kind of a little bit of a grey answer. I'm of the school that I want my money I want to hold on to it like I just you know, what I see are the habits like, I'll never forget I worked with this one woman and we went through the exercise of really consolidating and putting everything together and sure enough, while we were going there, she was like, you know, I was a teacher in wisconsin twenty five years ago, and so that was part of her homework was to get the papers for saul the phone numbers that she had to get the information for the board of ed in this a little town in wisconsin. I mean, it was she said it was painful finding and it took her hours. It was thousands and thousands of dollars because she had done probably, you know, two, three years of being a teacher there, and then she transferred it so when I hear that I that's not the first time I've heard it and I've heard it over and over my inclination is just get that money toe where you wanted to be and that way you can because you know, we are artistes we are freelancers we are moving around like chances are we are goingto not live in the city tomorrow or next week so why not just have one or two places that you know that you're keeping track up so my inclination is bring that over to an independent place that she can keep track of it with that being said if she leaves it in a place like a thrift the nice thing about that is how they pay which I'll talk about later is when she reaches like sixty two or sixty five based on the age is that they dictate they'll say you know we're just going to give you a monthly paycheck if you will two hundred five hundred seven hundred month it comes out the same but it's sometimes just psychologically people in like getting that just that paycheck that monthly paycheck and retirement so that's a reason to keep it but I also see a lot of reasons not to keep it so you know that's the answer we have another question mo pat wants teo is saying when I invested I lost money between fees and losses I ended up with very little is it wise to invest with the economic outlook kind of bleak also is it too late for me to start on fifteen I know it's not too late to start I mean clearly you're not going to get such benefit in terms of the tax deferred but you can still leave it in there for another ten years because you have to start taking a little bit out at age seventeen and a half so fifty nine you khun start and yeah I it's definitely is not great that you had lost money on fees and economic outlook on we're going to talk a lot tomorrow because in and mo pat's case they probably need the money in five, ten years so they're just not going to be as aggressive but if they leave it in the bank it's earning zero toe one percent where is potentially now they could earn four five six percent so they absolutely have to invested there just gonna be a lot more conservative than the twenty year olds or thirty year old's listening yeah, they should definitely take advantage of pretax if they're earning money put into an ira to save money on taxes today and so the taxes you don't pay taxes well it's growing san francisco choung asks how to decide how much money we put in the ira what criteria t we're going to talk about that yeah we're gonna get into that okay so hopefully and again, there's no answer, so a lot of people open into banks, and I'm surprised no one has asked if they should open it at their bank and it's a little bit, my same answer with the e trade. I have nothing against a bank, but first of all and I it's funny, I was at my local bank and, you know, while I was talking to my account, he was like, oh, can I show you some mutual funds? And I'm like, sure, he, you know, like, he doesn't know who I am, right, that I know a lot more than most people he talks to, and and my biggest thing is that the fees that they're charging at the banks for their investments are a lot more than I want to pay. And so tomorrow, when we really learn about mutual funds and investments, you'll see that so that's the only reason that I don't suggest ira's, but a lot of people do open rafa areas of banks because it's sort of her first step, her first touch into our finances, it's, where we go daily weekly regularly. So why not open an ira there? And I just don't really I think that the funds or the investments that they're offering are so cost effective. So think about. Do you want to do vanguard fidelity, schwab? T rowe price? Hopefully, you've got a little more focused on the numbers you could put in there and really clean up the old funds.

Class Materials

bonus material with purchase

Day 1 Presentation
Day 2 Presentation
Day 3 Presentation
Monthly Spending Plan Worksheet
My Money Matters Kit for $7
Weekly Spending Plan
Budget Worksheet
Emotional Side of Money Checklist
Mutual Fund Checklist
Personal Finance Checklist
Retirement Planning worksheet

Ratings and Reviews

Kieu Truong

I love how approachable and welcoming and easy to understand this course has make financial terms and situation sounds. I love Galia and she makes I really feel calm and comfortable learning from her. Great!

Danielle Allen

This class was an eye-opener for me. I love the way Galia makes you feel comfortable thinking about as well as talking about your financial picture. I also appreciated her many examples and actionable steps for planning.

Shannon Borg

Galia is AWESOME! I love how down-to-earth she is (hence the name of her business!). I learned so much, and am going into a new year with a totally different outlook on my money. Now I have a plan, goals and much less anxiety about the whole process! Thank you, Galia!

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