Lessons Learned -- November 4, 2024

Link here.

From the linked article:

I started writing a personal-finance column, Getting Going, for The Wall Street Journal in 1994, and soon earned a reputation as a relentless proponent of indexing. In 2024, at age 61, it seems I’m becoming renowned all over again—for dying.

Yeah, this is a little weird.

Ever since I learned I had cancer and might have just a year to live, I’ve been working like crazy to make sure I bequeath a well-organized estate and leave my family in good financial shape. I’m determined to have as good a death as possible, not least from a financial point of view.

Here are some steps I’m taking.

A Starter Kit: The Ideal Schwab Account -- October 2, 2024

Personal Finance Course

See also "final advice."

Deal with as few financial institutions as possible; try to limit it to:

• local bank
• investment programs offered by employer -- 401(k), TSPs
• one-stop shopping for everything else: I prefer Schwab -- see below.
  
• necessary credit cards

There are three components to a personal finance plan:

• record keeping
• an actionable finance plan (planned allocation of income and expenses)
• monthly expenses: tracking actual expenses
  
• cash management (we used to call this "savings and checking accounts")
• investment plan
  

Minimize fees / expenses:

• in today's market, one should be able to find everything one needs without any fees or expenses
• if you're being charged for something, take another look
• exceptions
• annual tax preparation
  

Leave it to the professionals:

• I doubt (m)any of us can max out our company retirement programs; individual retirement accounts
  
• IRAs: professionally managed
• only after maxing out these options, then does one begin to think of investing on one's own
  

Life insurance

• I took out permanent life insurance (two flavors: whole vs universal; see below) when I was young; turned out to be a great decision but I did it as a way of forced savings/investment
• however, no one recommends permanent life insurance as an investment vehicle -- so, again for me, it was a way of forced savings (and early forced investment which turned out for the best) -- but not a recommendation in general.
  
• not a recommendation but what we did:
• as parents
• we insured ourselves to the max we thought reasonable
  
• we took out moderately good whole life insurance programs on our children when they were born
• incredibly inexpensive if bought within first two years of life; premiums don't increase; and option to add insurance later on possible; younger the age when first bought, the lower the premiums, and again, the premiums don't increase;
• we took out basic, but not great, whole life insurance programs on our grandchildren (for same reasons as above)
• as young adults, our children and grandchildren have at least basic life insurance;
• whether to buy more as they grow older is case specific and their choice
• but for now, not an additional expense
  
• whole life vs universal insurance.
  

Comments

• IRAs? Establish only Roth IRAs; no traditional IRAs

The Ideal Schwab Account

Two portfolios within same account:

• cash management portfolio (checking, savings, and record-keeping)
• investment portfolio

Cash management portfolio

• a Schwab checking account 
• Schwab includes a debit card; personal choice: I didn’t activate; won’t use a debit card; 
• limit $500 for a college student
• limit $1,000 for most others
  
• a money market fund (MMF) sub-account
• in lieu of a standard savings account
• a place to "park" money until invested or needed for expenses
  
• a bond fund
• not recommended for cash management
  
• optional; I generally prefer not using bonds for cash management
  
• an account aggregator 
• Rocket Money heavily advertises their app to do this
  
• an app that links to all outside accounts like  magazine subscriptions, etc, for easier management; 
• very, very optional; Schwab broker will be able to help;

Investment portfolio with the following sub-accounts:

• at least one margin account (a typical brokerage account) 
 
• max: ten individual tickers (stocks) 
• least important but standard in a Schwab account   
• ETF sub-accounts: at least the following three; no more than five: link here:
  
• SCHD
• SCHB
• SCHG
  
• a self-directed IRA sub account in which multiple investment vehicles can be placed; 
• self-directed but professionally managed
• only Roth IRAs
  
• education fund: 529s
• investment portfolio professionally managed — one of either:
• Schwab Intelligent Portfolios: 
• free; minimum: $5,000
• Schwab Intelligent Portfolios Premium:
• one-time set-up fee: $300
• monthly advisory fee: $30 / month

Final Advice -- Dynamic -- First Published September 29, 2024

See also "starter kit."

********************************
Final Advice

Minimize the number of financial institutions with which you have to deal:

• local bank: for depositing cash; physical checks
• discount broker
• cash management (checking account)
• brokerage account
• life insurance: to be discussed elsewhere

My recommended one-stop shopping financial institution: Schwab. These are the components one should have in one's Schwab's account:

• checking account: minimum amount, maybe $1,000. Max depends on history.
  
• money market account: SVWXX -- park your cash until you decide on other investment options
  
• ETFs:
• SCHD
• SCHG
• SCHB
• Schwab ETFs: list here.
  
• 529s (where applicable: parents and grandparents)
• IRAs (where applicable; must have active income)
• Roth IRAs
  
• max out
• don't forget spousal IRAs
  
• self-directed sub-account; 
• no-load, no-fee mutual funds; all listed ETFs, stocks
• Account aggregator
• link external subscriptions for better monitoring, easy-to-cancel subscriptions no longer used
  

Federal and state income taxes:

• if you have a "relatively simple" financial plan, filing your own taxes is fine;
• however, once you get into "more complicated" situations, it behooves you to go through a professional tax preparer.

Comments:

• once you have active income, best place to invest within the Schwab account, is in a self-directed IRA;
• you can re-balance your diversification at any time without tax consequences
• money is fungible: as long as you have active income, you can place "up to that annual amount" in an IRA regardless of where the money come from
• in other words: if you earn $30,000 in one year, you would need all of that income to cover your living costs;
• however, if your parents, or grandparents, or others "gift" you money, you can place that money ("up to your total income") in your IRA
• it is unlikely that you can generate more income than your allowable IRA contributions -- think about that

********************************
Comments

Why Schwab over others?

• most important
• the only discount broker with physical branches in larger cities
• has checking sub-account as well as brokerage sub-account in one Schwab account
• physical checks: free
• all discount brokers
• no fees
• incredibly easy-to-use websites

Account aggregators:

• I know almost nothing about account aggregators except what I see Rocket Money advertise on television
• it appears Schwab offers the same service
• to learn more: suggest googling Rocket Money vs Schwag vs Empower -- Reddit will provide some interesting observations

From Reddit, link here:

I use Schwab for aggregation and have 30+ accounts linked. It works fine if you just want to see balances, your net worth, and positions for investment accounts. You can use the Portfolio Checkup Tool to run portfolio reports on your Schwab plus non-Schwab investment accounts. Also, the linked accounts flow through to your financial plan at Schwab, which is primarily what I use the aggregator for.

I was a devout Mint user for 10+ years, and I'm currently looking for a replacement for that. Schwab is nice if all you need is aggregation of balances and for running holistic portfolio reports and financial planning. But Mint was good at the micro-budgeting level--like aggregating transactions, too, and I used Mint's budgets and goals tools, so that's what I'm looking for. No brokerage firm is going to have the level of detail Mint had, since that's a full-time business keeping up with all the software issues for customers (and it doesn't make Schwab or any brokerage firm any money), so I imagine this needs to be a standalone budgeting site that's meant for this like Mint was.

IRAs: Roth IRAs, not traditional IRAs.

• this article just coincidentally popped up today: ROTHs IRA for children.

Schwab ETFs: list here. 

Schwab tools: link here.

Best Cash Management Options -- Updated September 16, 2024

Cash Management / On-Line Banking / Investing
September 16, 2024

Three options:

• Schwab
• Sofi
• Robinhood

After spending quite a bit of time researching on-line banking and investment platforms, Schwab, by far, is the best option.

Observations:

• physical branches/offices: only Schwab has physical branches
• physical checks: Robinhood does not have physical checks; Sofi does
• two separate accounts required by Sofi: one for banking; one for investment

Schwab:

• only one account needed: banking and investment
• physical branches in larger urban areas
• physical checks

Ease of use, on line:

• I don't have experience with Sofi or Robinhood, but it's hard to believe that either is significantly different in ease of use or presentation than Schwab.

Mint: no longer exists. Transitioned to Credit Karma. Jury is still out on Credit Karma.

***************************
Original Post
August 19, 2024.

Link here.

Discussed:

• Wealthfront: robo-advisor
• Fidelity
• Charles Schwab
• Bettermen: robo-advisor
• Interactive brokers

I am only familiar with Schwab. I like the ability to work face-to-face with a broker.

Bruce and May: Schwab
Laura: Schwab

At the end of the day, my hunch: there is very little difference among the five. Choose whomever you feel most comfortable.

********************************
Sofi Vs RobinHood
September 15, 2024

I'm incredibly partial to Schwab. 

But after doing a bit of research .... Schwab has some great competitors .... 

Sofi caught my attention recently. As did Robinhood. For different reasons.

So, I was curious: Sofi vs Robinhood.

Video: link here. From 2020 -- things have changed since then. Only eleven minutes long. A must-see/hear. Mint is mentioned. But Mint has disappeared; it is now Credit Karma and with regard to Mint / Credit Karma, the jury is still out. Google mint cash management now what. 

Vidoe update: This 2020 video was updated in 2024: link here.

As a personal account.

As an investment.

App economy.

Lesson 6 -- BYU -- September 16, 2024 --September 23, 2024

Home loans, mortgages, auto loans.

Chapter 7 -- Debt: avoiding debt like the plague: link here.   [166 of 352; page 155]. [60 minutes]

Begins on page 155 or 166 of 352.

Objectives:

• understand our leader's counsel on debt.
  
• understand the principles of using debt wisely. 
• understand how to develop and use debt-reduction strategies.
• understand plans and strategies for debt reduction.
  

Lesson Five -- BYU -- September 8, 2024 --September 15, 2024

Home loans, mortgages, auto loans.

Chapter 6 -- Credit: understanding and using it wisely: link here.   [138 of 352; page 127]. [60 minutes]

Begins on page 127 or 138 of 352.

Objectives:

• understand consumer loans, principles, characteristics and costs.
  
• understand mortgage loan types, characteristics, and costs. 
• understand the key relationships for borrowing.
• understand and create your Consumer Loans and Debt Plan
  

One Stop Shopping: Schwab Vs SoFi -- Cash Management Accounts -- September 11, 2024

With regard to savings, checking, and investing, one word of advice: work with as few financial institutions as possible. 

Personally, I have not found anything better than Schwab when it comes to cash management, savings, checking, and investing.

A possible exception, about which I know nothing, is SoFi.

 At wiki:

I then googled: is schwab's biggest competitor sofi -- and this was the top return:

Having read all that, I would now strongly suggest choosing either Schwab or SoFi as your one-stop financial institution. Period. Dot.

In the Stanford area, it might come down to easiest physical access to a Schwab office or a SoFi office. I don't know if SoFi has physical offices; Schwab does. 

Later: well that was easy -- SoFi has no physical offices. That does it for me. Schwab over SoFi.