In our previous blog, we provided the first seven financial strategies to help you come out on top. But we aren’t done yet! Here are seven additional actions to take now to secure your financial future.

Here are seven additional actions to take now to secure your financial future.

1. Fast-track any type of long-term saving: If your employer matches your 401(k) contributions, you should try to contribute the minimum amount to earn that free money. Hypothetically, let’s say you are 25 years old and have a $50,000 salary. If you save 4% ($2,000 per year), and your employer matches that same 4% (another $2,000 per year), and you have a 7% rate of return on your investments, you will have $828,522 at age 65. If you wait just five years and start at age 30, the ending value earning a 7% rate of return is only $573,708. So, by starting at age 25, investing the extra $10,000 over those five years, and receiving the employer match, you will make $254,814 more by the time you reach retirement age.

2. Budget and save using the “envelope method”: Some find it very helpful to set up “envelopes” and save cash from each paycheck to go towards their specific savings goals (e.g., a new house, vacations, an emergency fund, or a new car). You can do this electronically by setting up savings accounts for each of your goals. Go a step further by automating the transfer after each paycheck.

3. Don’t overpay for financial advice and investment management: The typical fee for financial advisors can range from 0.25% to 2% of assets under management per year. For an account that has $200,000, this can be as much as $3,000 annually … or even more. There are also options to pay a flat hourly fee or an annual flat retainer fee. Make sure you know what you are getting for your money. Is the fee just for managing your money, or does the advisor also provide financial planning and advice as part of the fee?

4. Time your major purchase spending: If you plan to make a major purchase in the upcoming year or two, time your purchases for when the best deals are available for that specific product. A quick Google search will help you find the time depending on the item. For example, the week before Labor Day is a great time to buy large appliances and December typically offers the best deals on new cars.

5. Don’t overpay for mutual funds: There are two types of mutual funds: active and passive. Active funds have costs associated with highly paid fund managers who research investment options in an attempt to outperform the market. Passive funds, on the other hand, mirror an index such as the S&P 500. This means their fees are much lower than active funds. Fees over a long period of time greatly diminish your returns. According to Morningstar, only one out of every four active funds topped the average of their passive rivals over the 10-year period ending December 2022.

6. Make sure you are taking advantage of your company benefits: Open enrollment is right around the corner for many employees. Are you leaving great benefits on the table by just keeping the same selection you had the previous year? Take time to review each option. Can you add a life insurance policy for your spouse? Would switching to a high-deductible health care plan be in your best interest? Should you be taking advantage of the flexible spending accounts offered? Benefits make up a significant portion of many compensation packages. Make sure you are taking advantage of all that you are offered.

7. Reduce your taxes: There are many ways to reduce your taxes by taking some simple steps. Contributing to any of the following can help: traditional IRA, traditional 401(k), health savings accounts (for those with high-deductible health care plans), and flexible savings accounts for health care and dependent care expenses. If you itemize your tax return, you also can make tax-deductible charitable contributions. If you choose to donate stock to a charity, you get the benefit of donating the fair market value of the stock at the time of donation without having to realize the tax gain.

There you go. If you have any specific questions about how these strategies could work for you, ask Tilly! We’re happy to help.

In the classic tale, A Christmas Carol, the mean-spirited Scrooge appears to spend all of his time managing and worrying about his wealth. While there’s no need to act like Scrooge in real life, most of us should spend some time keeping an eye on money matters.

Here are seven big picture strategies to improve your long-term financial results.

1. Save half of your pay raises: Because you didn’t have access to these funds beforehand, make it a habit to invest or save half of each pay raise. This best practice will have a profound effect on your net worth over a long period of time.

2. Invest tax-efficiently: To encourage savings, the government has established all sorts of tax incentives. Some of these opportunities are downright confusing and require a little research or asking for help. Free money goes a long way, so it’s best to figure this stuff out – and not miss out on good wealth-accumulation opportunities.

3. Shop around: The financial industry emphasizes relationship-building and trust to dissuade you from shopping for the best deal. But remember: Financial firms offering these products change their prices frequently. It’s best to get three quotes. Tilly can help with that process.

4. Stay in your lane: This is a big one. If you aren’t a highly trained financial professional, steer clear of purchasing high-risk investments such as options, commodities, small stocks, and cryptocurrency. In the short-term, you may win on some of these trades, but the long-term is another ball game. (Reading articles on the Internet does not make you a highly trained professional, FYI.)

5. Strive for competitive interest rates on your cash savings: When it comes to your emergency funds and cash savings, if you readily accept the paltry interest rate your bank provides, you’ll lose thousands of dollars in interest over the long-haul. You must proactively manage your savings to get a good rate by finding better rates without sacrificing your risk tolerance.

6. Maintain a “Goldilocks” amount of insurance: While insurance provides security and peace of mind, you don’t necessarily need to purchase too much insurance or buy expensive features such as whole life policies. Instead, consider purchasing what you need and using good financial management to protect against smaller risks.

7. Purchase financial products that are best for you, not just suitable for you: There’s a big difference between a suitable product and the best product. For example, a suitable product might imply there is a less expensive, better product available that you aren’t aware of. Many financial professionals will recommend the suitable product, so beware!

So there you have it. In future blogs, we’ll dive deeper into some of these strategies. If you have questions, ask Tilly today. We’re here to help.

Today, we’re sharing how Tilly clients benefit from working with us. Clients pay only $800 per year and in exchange secure these vital services.

1. Experienced Financial Decision-Making: Do you have someone to help weigh if you should make a particular investment? Or if you should refinance your mortgage? Do you struggle deciding which mutual fund to buy? Do you have access to someone who can run various retirement savings scenarios? Are you dialed into the latest tax code changes? Tilly offers you access to a CERTIFIED FINANCIAL PLANNER™ so you’re in the know!

2. Task Management: One of the biggest challenges managing money is just getting things done. If tasks aren’t handled, money is lost. For example, let’s say you need to roll over your former employer’s 401(k) plan into an IRA. However, like most of us, you kick the can down the road getting this completed. Weeks turn into months, months turn into years before you get it done, if ever. Meanwhile, your retirement savings aren’t being optimally managed. That’s where Tilly comes in. We maintain a list of your tasks online and nudge you along without being a pest. A bonus feature is that we also track completed tasks — providing you that satisfying feeling of accomplishment.

3. Tracking Your Net Worth and Optimal Asset Allocation: Tilly’s goal is to grow our clients’ net worth — and so we track it for you on a quarterly basis. Each quarter, we email our clients their statements of net worth and update any changes. On an annual basis, Tilly reviews your investments to make sure they are properly balanced to reach long-term goals. We evaluate equities, bonds, cash, etc. (asset allocation), and if your investments are out of balance, Tilly provides recommended trades to get you back where you need to be.

4. Big Mistake Avoidance: The average American estimates they waste around $1,819 per year due to their lack of financial knowledge, according to a 2022 survey from the National Financial Educators Council. This amount keeps rising each year. There are so many reasons for mistakes — such as not understanding the complex US tax codes, or overpaying for investment products. Tilly helps our clients avoid these mistakes.

5. Access to Money-Saving Financial Tips: Tilly provides our clients with many financial tips. For example, we’ve had several clients saving money at a bank earning 1% interest or less. We have shown them how they can invest their intermediate to long term cash in similar low-risk investments such as US government I-Bonds. The I-Bonds yield at least the rate of inflation, providing them much higher interest. Over a long period of time the added interest more than pays for the cost of Tilly.

6. Financial Counseling: When you need to make important financial decisions, it’s helpful to have access to someone who listens and understands your needs. That’s where Tilly steps in. Our CFPs understand your personal challenges and goals, which are important to you on an emotional basis. We help you remove the emotion and guide you to make good fact-based decisions without being overbearing with our advice.

7. Tips for Completing Complex Tasks: Tilly clients are do-it-yourselfers, but every now and then you may get stumped by financial forms and platforms that are difficult to complete. No worries, Tilly can provide a helpful hand. Tilly also helps our clients with questions about making trades on Schwab, Fidelity, MerrillEdge, employer 401k platforms, and others.

Tilly clients really do gain a big return on their $800 per year investment.

There are two types of return on investment (ROI): “hard” ROI and “soft” ROI. Hard ROI is calculatable. For example, if your savings account balance $30,000 and you earn 2% interest, you will earn $600 per year. If Tilly provides you advice that earns you 4% interest with the same or less risk, you will earn $1,200 per year. You extra $600 is hard ROI. Another example of hard ROI is the time we save our clients from having to conduct their own research. There are many other examples of Tilly providing clients with hard ROI – and we will cover those in another blog post.

When it comes to soft ROI, these are more difficult to quantify, but they are valuable. Examples include counseling our clients and the confidence we provide them knowing they have a second opinion with big financial matters.

I hope this post helps. If you’re interested in learning more about how Tilly can benefit you specifically, please let know. We’re happy to provide prospective clients a free, 30-minute session.

Back in the day, the hillbilly TV Show Hee Haw song, “You Were Gone” is about a boy wanting his girl back. You might could say the same thing about wanting your dividend back when you gave them all away… to your investment advisers!

A dividend is money a corporation pays to its shareholders. Dividends normally come from profits earned and are paid on “per share” basis. Most large, mature companies that are publicly traded pay dividends to its shareholders.

Let’s say you own 1,000 shares of a company that trades at $100 per share. The value of your investment is $100,000. One year, that company earns $4 per share and it decides to pay $2 of it per share in dividends. You will earn $2,000 (1,000 shares times $2 per share). Remember, you earn this $2,000 in exchange taking the risk of buying the shares. The yield on those dividends is 2% ($2,000 payment divided by $100,000 value).

In June, 2019 the average dividend yield for S&P 500 stocks was 1.85%.

You might be thinking that you buy mutual funds and they don’t pay dividends. Actually, with mutual funds you still receive dividends because they purchase stocks. You’re just sharing those dividends with the other mutual fund investors.

How Investment Fees Take Your Dividends

Investment advisors are those who manage your money such as a mutual fund company or advisors you meet with face-to-face or over the phone. In addition to charging commissions, they often charge you a percentage of the assets the manage on your behalf.

Let’s say you hire an investment firm to manage your money, and that firm charges you 1% (typical fee). Let’s assume they invest your money in mutual funds that also charge you 0.85%. So, the total you pay is 1.85% per year.

This percentage may not seem like a lot, but by taking a look closer, your entire dividend has gone to investment advisers under this scenario. Phht, they’re gone!

Why is this so important? Because if you’re giving away all of the earnings in stocks you purchase, you should reconsider your entire investment strategy. Of course, you also benefit from a stock price’s growth over time. But giving away your portion of the earnings is probably be a mistake.

Carefully Consider Investment Fees

How much are you paying in investment fees. Find out. If you’re paying a high percentage, perhaps you should be finding an adviser who charges less than what you’re paying in exchange for what you’re getting. To learn more, download Tilly’s Guide to Smart Investing.

Don’t be left “here all alone.”

Last week, I wrote about how expensive percentage under management fee structures can be for the average investor — especially when they’re also paying mutual fund companies a hefty fee as well. I pointed out that if you pay $7,350 in fees over 25-years earning 8.5%, you’d add $578,977 in savings.

Don’t want to pay that much in fees? Here are some alternative investment fees:

1. Investing on your own: As the great Jack Bogle, founder of Vanguard, says, “Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes.” The process of managing investments given today’s resources does not have to be incredibly complex. The keys discussed in our Guide to Smart Investing include keeping your money safe (custody), keeping your fees low, managing your investment tax efficiently, allocating your asset properly, and getting multiple opinions from those you trust.
2. Paying a planner occasional flat fees: Some independent “fee only” financial planners will provide you a complete financial plan for a little as $1,000. This plan can get you on the right track if you’re planning to invest without ongoing support from an advisor. Furthermore, some planners have an option of an hour meeting for a few hundred dollars which is another great way to gather a second opinion and gain tips from an expert without paying every year for services you don’t need or want.
3. Investing using a Robo-advise platform: Robo-advising provides automated investment management with limited or no human intervention. It uses algorithms based upon your age, income, risk appetite, and other variables in order to keep your portfolio properly balanced. While Robo-advising platforms typically do charge a percentage of assets under management annual fee, those charges are much less than the traditional 1–1.5% more like 0.25%, as an example. Betterment and Wealthfront are examples of companies that are solely focused on robo-advising. However, large traditional investment firms such as Charles Schwab and Vanguard offer robo-platforms as well.
4. Using Tilly to help guide you: I’m biased, but Tilly is a great way to keep your fees low and predictable, yet also have access to a financial advisor for big decisions. We accomplish this by providing advice to you virtually. We keep your portfolio balanced and properly allocated like Robo-platforms do, but, do not charge the 1–1.5% annual fee like the traditional face-to-face advisory firms. Tilly will help answer the many complex questions you may have related to buying insurance, saving for retirement, purchasing a home, borrowing money, or all things financial. Learn more about our fee structure and services.

By the way, there is a fifth option I didn’t mention because it’s also very expensive — which is paying a “financial advisor” commissions. This option involves your advisor buying you expensive mutual funds, annuities, and other insurance products that charge big bucks you don’t even know you’re paying. I would avoid that model due to how much the commissions really add up to be. Sit tight, next week I’ll dive deeper into the details of these arrangements.

Lastly, ask yourself which of these four alternatives is best for you? The right answer depends upon personal desires and what is most important to you. For example, if you enjoy learning about investing and money matters, then perhaps investing on your own is best. If you enjoy technology and feel that you can get advice from others about big financial decisions, then maybe robo-advice is a better choice. But think twice before you pay 1 to 1.5% of your investments because that is probably by far the most expensive alternative.

Most people look at “percentage under management” as a fair fee structure to share their investment returns with their financial advisors. After all, the advisor makes the investment choices, so if they choose well, you both will earn more money. Right?

A lot of investors believe that a reasonable percentage (i.e., 1%) of their investments is not a lot of money. And because they don’t have to write a check for the fees (they are automatically taken out of your investment account), they may never feel the true effect of this cost. They consider the fees as the “going rate”…just a part of doing business.

But the fees are real. Oh, they’re very real.

Here is a typical investment fee structure for millions of Americans:

• They have $350,000 invested in mutual funds.
• On average, the mutual funds earn 8.5%, or $29,750 per year.
• Their advisor charges 1.25% per year on the $350,000 ($4,375), and the mutual fund companies charge you 0.85% per year on the $350,000 ($2,975). The total combined fees per year are $7,350.

But the client doesn’t calculate the true amount — $7,350; they just believe a percentage under management fee is normal and obviously worth the price.

Now, let’s consider three alternative ways to look at this $7,350 in fees.

• First, let’s look at these fees as a percentage of your investment returns. Under this scenario, each year you’re paying your investment advisory firm 24.7% ($7,350 fees / $29,750 returns) of your returns. So, you’re the one taking all the risk, and they’re getting nearly 25% of the returns? Is that fair? Are financial advisors really that skillful at selecting mutual funds? According to studies, they are not. Over the long haul, Index funds, which require no selection skill whatsoever, beat actively managed mutual funds 83.7% of the time according to a recent study.
• Second, let’s look at these fees as a percentage of your disposable income. (This is the big one!) Let’s say your income is $120,000 per year, leaving you disposable income of about $84,000 per year. Your investment fees are a whopping 8.75% ($7,350/$84,000) of your disposable income! Wow! That percentage could be your annual rent for an apartment, a mortgage payment for the year, an amazing vacation each year, or LOTs of savings!
• Third, let’s look at these fees as if instead of paying them, you keep the money in your nest egg. Over 25 years, if you saved $7,350 each year earning 8.5%, you’d have $578,977 in your savings…more than half a million dollars! Realistically, the amount is even greater because I assumed your $350,000 doesn’t grow, and therefore the $7,350 in fees doesn’t grow. The financial damage is actually much worse.

It’s no wonder investment firms can pay their employees hundreds of thousands of dollars per year (and their executives millions), rent the most expensive real estate in big cities, pay for the most expensive TV commercials, and possess 30%+ operating profit margins. For the investment firms, this is a terrific business model. But you may end up on the wrong side of that business model — sorry!

My point is that if you pay an advisor a percentage of assets under management and also pay the mutual funds companies to invest, you should seriously consider whether or not you’re truly getting a return on your investment. Is the advice they’re providing worth all the money you’re paying? Are their ideas worth half a million dollars? If they aren’t, what are your alternatives? I’ll address that question in my next blog post later this week.

The truth is that getting financial advice should cost you money — but the relationship should not be a partnership where you take all the risk and advisors always get paid. Because if it truly were a partnership, the advisers would lose principal when the stock market falls, but they don’t — they just keep charging you the 1.25% in fees.

Feel free to check out Tilly’s Free Guide to learn more about how to invest.

One reason the investment advisory business is so profitable is because most people don’t understand how investment firms charge for services.

Investment fees are collected in a similar manner as your paycheck’s tax withholdings: they’re automatically deducted from your account. And because people don’t write a check for those advisory services, they just let it go — and rarely consider these automatically deducted fees as “real” money. But make no mistake about it: The fees deducted are real money — real money you’ll need during retirement, to pay for your children’s college, or for a down payment on a second home.

Let’s assume you’re considering hiring an advisor under the following assumptions:

• 35 years old
• Begin with $100,000 worth of investments
• Invest $5,000 per year for 30 years
• Investments earn 7% per year
• Pay 1.25% per year for advice

Over thirty years, the time value of these fees come to $365,837. Keep in mind, the $365,837 DOES NOT include commissions that you might pay your advisor as well, or the fees that actively-managed mutual funds charge you. You can just add those fees to the total. Why are the fees so large? Because over a long period of time, 30 years, 1.25% really adds up!

Tilly’s advice:

1. Pay VERY CLOSE attention to all advisor fees and make sure you understand how much you’re paying. (We’ll write another piece about fee details soon!)
2. Shop around. The difference between 1.25% and 1.0% can be significant over a long period of time.
3. If you enjoy finance, don’t rule out investing on your own and purchase low-cost mutual funds along the way.