Ask The Millionaire Mommy Next Door a question (Women of Personal Finance Spotlight)

[Julie Rains]

Hi Jen, I started subscribing to the NoLoad Fundx after reading about it on your blog (and a link from Blogher if I remember correctly). I had some investments in some Janus funds at the time that were returning 30-35% so it made sense that you were getting similar returns at the time (when the market was doing much, much less). Anyway, the upgrading process is straightforward, which is what I was looking for. But here is my question: how did you start with your investments? I know that there are minimums specific to the mutual funds but did you start with say $500 in each fund or more like $2000? I am curious as to how you spread out your investments.

[JourneytoProsperity]

Hi Jen! I have been an avid follower of your blog and thank you so much for the inspiration. I dont have any question.. yet. I just want to tell you though that I have an email for you at your gmail account. I hope to hear from you soon. Be blessed! this thread is simply amazing! I am learning a lot! Thank you again!

[MillionaireMommyND]

Originally Posted by Julie Rains

Hi Jen, I started subscribing to the NoLoad Fundx after reading about it on your blog (and a link from Blogher if I remember correctly). I had some investments in some Janus funds at the time that were returning 30-35% so it made sense that you were getting similar returns at the time (when the market was doing much, much less). Anyway, the upgrading process is straightforward, which is what I was looking for. But here is my question: how did you start with your investments? I know that there are minimums specific to the mutual funds but did you start with say $500 in each fund or more like $2000? I am curious as to how you spread out your investments.

When deciding how much to invest in each fund, I consider the fund's minimum investment requirement, the risk classification, and the percentage of my total portfolio that I want to allocate to that particular fund.

Here's an example of how I might put together the Upgrader portion of my portfolio:
(8) “Class 3” funds, 10% of total portfolio in each (= 80% total)
(4) “Class 1 / 2 / 4” funds, 5% of total portfolio in each (= 20% total)

With a smaller portfolio, make sure you watch out for transaction fees. Let's compare two portfolio sizes and the effect transaction fees would have on each. I pay $0 for each NTF (no transaction fee) mutual fund transaction, $9.99 for each ETF transaction, and $49.99 for each no-load mutual fund transaction. For simplicity sake, let's use the average of the three = $20 each purchase.

$1,000,000 total portfolio:

(12) total buy transactions x $20 transaction fee = $240
$240 divided by $1,000,000 portfolio = 0.024% in purchase transaction fees

compared to...

$10,000 total portfolio:

(12) total buy transactions x $20 transaction fee = $240
$240 divided by $10,000 portfolio = 2.4% in purchase transaction fees

As you can see, this is a significant difference, depending on your total portfolio size. So how can you use the Upgrader system if you have a smaller starting portfolio? You might want to take a look at the Upgrader Funds. These funds spare investors the hassle of making their own upgrading transactions because they do it for you within their “fund of funds”. Contact them directly to request more information and a prospectus. Last I recall, they had at least a half-dozen or so of Upgrader funds, so you can mix them up to create the risk/reward allocation that fits your individual needs.

Important to note: My investment strategy and portfolio allocations are not right for everyone and should not be construed as advice. If you're not sure how much risk to take, or whether your investments accurately reflect your life goals or appropriate timeframe, get some individualized help. Many 401(k) providers have investment professionals available to talk to participants about their allocations. Or consider talking with a fee-only financial planner. You can find one online at the web sites like the National Association of Personal Financial Advisors, or the Garrett Planning Network, a group of advisors who charge by the hour.

[BillionaireWoman]

Hi Jen, I really appreciate all of your time and advice!

My question is regarding shared goals/finances between a young couple. I'm 23 and so is my boyfriend, we are both debt-free and can easily make a good salary (we just graduated and decided to take a year to travel). We want to relocate abroad for work, and I want to start my own business. We are traveling to China for 4 months to visit my boyfriend's family and see the sights. I have a nice nest egg, because of passive income, and because I've worked a lot during school.

I feel secure in my financial future, but my boyfriend doesn't have as much saved and he enjoys spending money on me (gifts, etc) or "going out" (restaurants)... Sometimes it feels as though my money is hemorrhaging through him, since he is the one spending money, but then I sometimes write him cheques to cover his credit cards.

What would you recommend as a strategy for the two of us? I know I should just talk to him about it, and I've told him not to buy me gifts before asking me first, but sometimes habits creep up. I think he read an article about "double income, no kids" couples and how they are bound to make lots of money, and because of that he feels it's alright to spend.

Thank you!

----
http://www.billionairewoman.com

[Donna]

Hi Jen, I have been following your site for some time and really admire you, unfortunately, I just read everything and do not act on investing. Let me give you some background. Appx 5-7 years ago, my husband and I lost appx $40k in the stock market, our broker just kept telling us to wait it out, but everything was lost, we trusted him.

My husband and I are in our upper 40's and now have appx $25k in our retirement account, as you can see it is taking us awhile to build back our retirement. Needless to say we are very cautious w/our retirement. We absolutely trust our new broker, he has been really good to us, he kept telling us we had to start saving. We also have appx $20k in our savings, it is just sitting there. We are scared to do anything w/it for fear of losing any more. Would you be able to give us a suggestion as to what to do w/half the money. As the other half, I want to keep for emergency and what not (we also have two young children).

We do own a house, and have no debt what so ever. Our two vehicles are paid off and whatever I put on our credit cards, are paid off every month. I do not believe in paying interest. Anything you could suggest would be greatly appreciated. Thank you. Donna

[MillionaireMommyND]

Originally Posted by Donna

Hi Jen, I have been following your site for some time and really admire you, unfortunately, I just read everything and do not act on investing. Let me give you some background. Appx 5-7 years ago, my husband and I lost appx $40k in the stock market, our broker just kept telling us to wait it out, but everything was lost, we trusted him.

My husband and I are in our upper 40's and now have appx $25k in our retirement account, as you can see it is taking us awhile to build back our retirement. Needless to say we are very cautious w/our retirement. We absolutely trust our new broker, he has been really good to us, he kept telling us we had to start saving. We also have appx $20k in our savings, it is just sitting there. We are scared to do anything w/it for fear of losing any more. Would you be able to give us a suggestion as to what to do w/half the money. As the other half, I want to keep for emergency and what not (we also have two young children).

We do own a house, and have no debt what so ever. Our two vehicles are paid off and whatever I put on our credit cards, are paid off every month. I do not believe in paying interest. Anything you could suggest would be greatly appreciated. Thank you. Donna

I prefer fee-based financial planners over commissioned-sales brokers. I'm sure there are investment brokers worth the fees and commissions they charge (and you may have found one), but I haven't met one yet. I went through five brokers before realizing that no one cares as much about my money as I do. Brokers are salespeople. Naturally, they cared more about their bottom line then mine.

You could ask your friends, attorney, and accountant for a referral to a good, fee-based financial planner (one that does NOT sell any investment products – just good, solid advice). Or try the National Association of Personal Financial Advisors at www.napfa.org.

Learn as much as you can from your hired financial planner: ask questions, read, study. It's your money. It's your responsibility to become educated about the decisions you (and your adviser) make. And over time, you might decide you're capable of investing on your own.

Read my posts, 10 Keys to Investing On Your Own, When I was a beginning investor with a small portfolio, these were my first considerations, and the rest of my investing post archives to see a little of what I've learned over the years.

Once you've learned more about investing and have a good adviser on your side, you should feel more comfortable about investing your savings for retirement. Do it soon, though, because the astounding power of compounding takes time - the more time the better!

[Lynn]

Hi everyone! This thread is officially closed. If anyone wants to leave Jen a comment here they are welcome to do so, but keep in mind that there's no guarantee she will be checking back in this specific thread.

Thank you so much for the wonderful answers Jen. You've really captured the imaginations of our readers. I feel like a meanie for closing this thread, but Jen you've certainly gone above and beyond the call of duty with your detailed answers.

Originally Posted by BillionaireWoman

Hi Jen, I really appreciate all of your time and advice!

My question is regarding shared goals/finances between a young couple....

Hi Nathalie! Your terrific question got caught in our spam filter by accident.

I wanted to point that out in case you thought Jen was ignoring your question because you tried to upstage her blog's name.

[MillionaireMommyND]

Originally Posted by BillionaireWoman

Hi Jen, I really appreciate all of your time and advice!

My question is regarding shared goals/finances between a young couple. I'm 23 and so is my boyfriend, we are both debt-free and can easily make a good salary (we just graduated and decided to take a year to travel). We want to relocate abroad for work, and I want to start my own business. We are traveling to China for 4 months to visit my boyfriend's family and see the sights. I have a nice nest egg, because of passive income, and because I've worked a lot during school.

I feel secure in my financial future, but my boyfriend doesn't have as much saved and he enjoys spending money on me (gifts, etc) or "going out" (restaurants)... Sometimes it feels as though my money is hemorrhaging through him, since he is the one spending money, but then I sometimes write him cheques to cover his credit cards.

What would you recommend as a strategy for the two of us? I know I should just talk to him about it, and I've told him not to buy me gifts before asking me first, but sometimes habits creep up. I think he read an article about "double income, no kids" couples and how they are bound to make lots of money, and because of that he feels it's alright to spend.

Thank you!

http://www.billionairewoman.com

I'm impressed that you made it through college without incurring debt – AND that you've managed to accumulate a nest egg in the process! What a fantastic start to your financial future! You're heaping the rewards now. That's wonderful that you are able to take a year off to travel before jumping into your career.

Obviously you are smart and you know how to take care of yourself. Guess what... your boyfriend knows this too. So don't fall into the trap of enabling his less-than-frugal money behavior!

Why oh why are you paying his credit card bills? Your statement, “ Sometimes it feels as though my money is hemorrhaging through him...” says it all loud and clear. I can't help but be completely frank here-- You may be smart about money, but it sounds like you have a little learnin' to do about relationships. And that's okay, because you are young, and you don't have kids that are counting on you.

I think you already know what to do, right? But you want me to say it anyway, so you won't feel like the big bad meanie with your boyfriend? Okay, here it goes:

You are not married. Your money is your money (and his money is his). You've worked hard for it! Keep separate accounts. You pay your own bills and living expenses and he pays for his. He wants to buy you gifts? That's his choice. He's coming up short this month? Not your problem! (Unless you make it your problem by paying his bills for him.)

It's time for tough love. You two are young, and if you want a solid, long-term relationship together, you'll need to come to terms with your money differences first. The number one reason couples divorce is because of money.

Let him fall on his face financially, if that's what it's going to take. Better now – while he's young and before you are married – than later. Let him hit his credit card maximum limits – at least then he CAN'T continue to live above his means by charging more.

You know how you can help him out the best in the long run? Be a good role model, not an enabler.

Now, with personal and financial boundaries firmly in place, have a great time during your trip to China!

[MillionaireMommyND]

Originally Posted by Lynn

Hi everyone! This thread is officially closed. If anyone wants to leave Jen a comment here they are welcome to do so, but keep in mind that there's no guarantee she will be checking back in this specific thread.

Thank you so much for the wonderful answers Jen. You've really captured the imaginations of our readers. I feel like a meanie for closing this thread, but Jen you've certainly gone above and beyond the call of duty with your detailed answers.

Thank you, Lynn, Will, and the rest of Wise Bread, for your invitation to participate in this Women of Personal Finance Spotlight series. Big thanks to those individuals here that posed such great questions, too! I enjoy donning my thinking cap to consider personal finance topics in a more relevant, personal way, so I enjoyed taking the time to do so here.

[BillionaireWoman]

Thank you Lynn for getting my question out of the spam filter.

And thank you so much Jen for answering my question. I do have more to learn about relationships, but this is the time to get some experience. I appreciate your honesty, and I am going to take your advice for tough love.

Thanks again, I really learned a lot by reading the other answers too!