Beating Broke

Personal Finance from the Broke Perspective

Is It Always This Difficult to Find a Financial Planner?

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Thanks to working at my “traditional” job for 11 years that included a dollar for dollar match on my retirement contributions after 5 years of service, I have a nice 6 figure retirement account.  However, I left that job 1.5 years and the money is still just sitting there with my old employer.  The problem?  I can’t find a financial planner I trust, especially since that is currently our only retirement savings.

Jedi Salesman
This is not the Adviser you are looking for…

Adviser 1–In It for The Money

I first met with a financial adviser at our credit union to discuss transferring the money into my own IRA.  This is important because my retirement is currently part of the state’s retirement fund.  Unfortunately, in the state I live in, the higher officials have been siphoning money from the state pension fund and can’t agree on how to replace the money.  If I don’t move the money soon, I am worried it won’t be there!

This adviser highly recommended an annuity even though I am still fairly young.  He promised it was a safe investment that would give me money every month.  The problem?  I would only get about $1,000 a month 30 years from now when I retire.  After inflation 30 years from now, $1000 doesn’t sound like such a good guarantee.  A bit of probing helped me determine that the adviser works on commission and makes the biggest commission selling annuities.

Moving on, thank you.

Adviser 2–Helpful but Too Busy

Next, I turned to my accountant’s firm.  Her husband is a Dave Ramsey trained financial adviser.  This sounded perfect, and when my husband and I talked to him over the phone one night this past summer, he asked all of the right questions and seemed to have our best interests in mind.  He took the time to ask where we were financially right now as well as where we would like to be.  He recommended some investments, and we planned to talk in about 4 weeks to start the paperwork to move my retirement.

The problem?  We haven’t talked to him since.  I have left some messages for him; he has left some for me, but over the months, we have just played phone tag.  I last called in early December because I wanted this whole issue resolved before 2013 began.  We are well into 2013, and I still haven’t heard back from him.

Moving on.

Adviser 3–A Keeper?

When my cousin casually mentioned her financial adviser at Christmas, I pounced on her.  Who was he?  Would she recommend him?  Does he get back to her quickly?

She raved about him and said he was attentive and that the investments he chose were making them good money.  She gave me his number, and next week he is on my list of people to call.

When I quit my job 1.5 years ago, I would have never guessed finding a good financial adviser is so difficult.  I feel like I am back on the dating scene again trying to find just the right match.

Is my experience unique, or have you, too, had trouble finding a financial adviser to work with?  What did you look for in a financial adviser?

img credit:Brad Montgomery on Flickr.

Investing Made Simple

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Investing Made Simple: Index Fund Investing and ETF Investing Explained in 100 Pages or Less

investing made simple
Amazon

By: Mike Piper (ObliviousInvestor.com)

I had the opportunity to meet Mike at the first FINCON in Chicago last year.  He’s a thoroughly nice guy.  I knew him from his blog and website, but for some reason I hadn’t known the extent of his authorship.  I found out at FINCON that he’s written several books (9 of them if I count right) on personal finance.  They mostly lean towards the topics of investing, but even encompass Social Security and business structure.  After meeting Mike, and learning about his books, I made it a point to pick one of them up to read and review.  Well, over a year later, I finally made it to the reading and reviewing part.

Since I’m not much of an investor, I thought that it would be a double good idea to pick up the Investing Made Simple title he wrote.  I can review something he’s written, while probably learning a few things along the way.  Investing made Simple is an excellent book.  It’s short, which makes it an easy read, and the writing style is light, without all the technical investing jargon that’s typical to investing books.

It’s not an in depth book on investing, but it wasn’t intended to be.  What it is intended to be is a short (100 pages or less) book that will give anyone the basics of investing while setting them on the right track to a successful investing portfolio.  I think he accomplished that.

I think one of the things that many beginning investors, including myself, get bogged down in is that the world of investing is a pretty big world.  There’s all these different ways to invest in something.  There’s shorts, longs, calls, margin, options, commodities, ETF, bonds, and the list goes on.  And on.  But, when the beginning investor, who knows little to nothing about investing goes looking for information to get them started, it’s a whole lot of overwhelming.  Piper lays it out simple and easy.  He gives you the meat of what you need to successfully invest for the long term, while quietly informing you that you’ll likely be better off ignoring most of the  stuff that’s confusing you.

What you end up with is a book with all the basics of investing in a small package.  But, you also end up with something that, for most people, is also a complete investing manual.  Keep it simple, and invest wisely is the order that I took away from reading Investing Made Simple.  I think it should be recommended reading for all beginning investors.

 

Are Certificates of Deposit (CDs) Still a Valuable Tool?

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Read just about any personal finance article on saving and you’re likely to also read something about certificates of deposit.  Heck, I’ve covered what a certificate of deposit is, how to create a CD ladder, and mentioned CDs several other times.  But, as much of a mainstay as they are in the typical savings mantras, are they still a valuable tool for savings?

Recent economic changes have certainly not been kind to many of us, and our methods of savings haven’t been treated well either.  The interest rates on savings accounts is terrible.  My local credit union doesn’t pay enough to even make it worth my while.  And online savings banks that used to be the poster children of high-yield accounts are paying less than 1%.  It wasn’t that long ago that a 5 year CD would have been paying 6-7%.  Now?  Closer to 1%, even at the online banks.  My local credit union is paying 0.25% on a 12-month.  (they apparently either don’t offer  5 year, or they don’t post the rates for them)

There are still some good rates out there though, if you take the time to look.  Well, better rates than what some are offering.  In the current economic situation, you can’t ask for much.  Click here to read more information on one such certificate of deposit.  But, even with rates that are closer to 2%, are they worth your time?  If we assume that the rate of inflation is somewhere around 3%, (I think it’s higher) aren’t you losing money by only earning 2% on the CD?  Yes and no.  If the money would just be sitting around in a savings account and making little to no interest, the CD at near 2% would be better than nothing.  Literally.

So, back to the question at hand.  Are CDs still a valuable tool for savers?  The answer, again, is yes and no.  No, because they aren’t the best tool.  There are other ways for you to make your money work for you.  They all make better returns than you would with a CD.  However, they all carry some caveat that you have to know about if you’re going to use them.  In many cases, the risk is higher.  Investing the money in stocks, or in something like Lending Club can get you much higher returns, but the risk is also much higher.  Investing the money into real estate, while a good passive income idea, is also a higher risk investment, plus the money is locked away in a non-fluid investment.  Treasury bonds can have higher returns, but often only at the cost of tying the money up for a long time.

If there are so many higher yielding investments to make, why are CDs still sometimes a valuable tool for savers?  There’s two really good reasons.  The first is that the money is not tied up for very long.  Even if you purchase a 5 year CD, you can still cash the CD out and only pay a small fee.  That fee is usually something like 3 months of interest.  As long as you’ve held the CD 3 or more months before cashing it out, you don’t lose any money.  So, the money remains pretty fluid.  The second reason is that a CD is an ultra secure investment.  That’s also why the rates are lower.  A CD is what is called a secured investment.  You deposit (hence it’s name, certificate of deposit) an amount of money into the account, and agree to leave it there for a certain period of time (the term of the CD) in exchange for a guaranteed return rate.  There’s very little risk at all.  Even if the bank you open the CD at goes bankrupt, you’ll be covered by the FDIC or NCUA insurance.

While I wouldn’t suggest putting a huge chunk of your retirement into CDs, (unless you’re nearing retirement) I would suggest putting something like your emergency savings into them.  They’re also a good tool for squeezing a bit more interest out of a new car savings, or a similar savings that has a mid-range use date. Just pick a CD with a term shorter than the length of time you’ll be saving up to avoid any extra penalties.

CDs don’t offer the greatest rates, that is for sure.  But, their lack of risk, and higher fluidity make them great for short and mid range savings.  And that makes them a mostly valuable tool for savers.  You just have to know where and when to use them.  Just like any other tool.

Do you agree?  What savings would you use a CD for?