Special Report: Kicking Wall Street to the Curb: Managing Your Own Finances

Many financial advisers at the big Wall Street firms often make more off you than they make for you...

They're incentivized to sell you a certain family of funds.

They can charge you fees, commissions, and even a percentage of your earnings — and bury it all in the fine print.

Over time, it can really eat into your returns, without you even noticing!

Consider my situation with the only investment account I don't manage myself, a SIMPLE IRA that I max out for tax advantages and the employer contribution.

The account was opened in September 2009.

As you can see from the chart below, the market — both the Dow Jones and the S&P 500 — went up more than 140% over the next five years.

That's a 28% annualized return as the stock market recovered from the 2008 crash.

SP DJI recovery chart

Compare that to the annual return of my retirement account, which holds three popular funds in the American Funds Family...

It returned 7.56% annually over the same time period — about a quarter of what the broad market returned.

Retirement Account Return Since September 2009

That means I could've bought a fund that tracks the Dow or the S&P on my own and been ahead of the performance of three professionally-managed funds.

What am I paying them for, both the managers of those funds and the “advisor” who is my point of contact?

They managed to return a quarter of what the broader market was returning, and the only thing the advisor did was hand me a list of funds to choose from and process the paperwork when the account got set up.

Yet they've made careers and lifestyles out of skimming off of everyone's retirement accounts. It's crazy.

You shouldn't mess with professionally managed accounts, or advisers that take a portion of your returns, or get paid to sell you a certain list of funds (the only way it's worth it is if you're getting match funds from your employer).

It's not in your best interest... It's in theirs.

It's not until you're managing your entire financial life — not just buying stocks — that you can truly maximize your wealth-building potential.

So to help you gain some solid fiscal footing, here are a few things you should consider...

Track Everything. Keep a budget that tracks your savings, spending, and investments. It should include all bills, debts, incoming cash flow, assets, and home equity with a dynamic total of your net worth.

You can do this with many tools around the Web, by downloading a free, pre-formatted spreadsheet or creating your own. Most templates are built to automatically total monthly bills, withdraws, spending, incoming cash, and investment gains or losses. It should also include spaces for all debts and assets, as well as a space for your home value relative to what you still owe on it, if that applies.

With all this, you can see a dynamic total of your net worth and be in a much better position to manage your overall financial well-being — without the need for costly advisers.

It's a great tool to see a snapshot of your finances on one page so you can identify spending habits, problem debts, cash flow patterns, and more — and then start to use that information to make beneficial financial planning decisions...

What can I cut out? How can I maximize savings? If I'm not already, how can I get myself debt-free?

These are all questions you should be asking yourself.

And an overview of all things in your financial life will help you start answering them. (I even track every gallon of gas I buy and every mile I drive.)

Max Out Retirement Accounts. Max out any 401(k) or Savings Incentive Match Plan for Employees IRA (SIMPLE IRA) offered by your employer. Any match they offer is free money, and you should take advantage of it.

Outside of any employer-related plans, you should also open an individual retirement account (IRA). Your income will determine whether this is a Roth IRA or Traditional IRA.

If you are single, file as the Head of Household, or are married and file separately (and don't live together), you can make a full contribution to a Roth IRA as long as your adjusted gross income is below $118,000.

If you're married and file jointly, you can make a full contribution if your adjusted gross income is below $186,000.

Roth IRA Income Limits 2017

Filing Status

Full Contribution

Reduced Contribution

Single /Head of Household

Up to $118,000

$118,001 to $133,000

Married Filing Jointly

Up to $186,000

$186,001 to $196,000


If you're above these thresholds, you should likely open a Traditional IRA, not a Roth. (You can find a great retirement planning guide here.)

Either way, you can put $5,500 in these accounts every year if you're under 50 years old, or $6,500 per year if you're over 50.

These contribution limits will change in the future because they're indexed to inflation.

Roth & Traditional IRA Contribution Limits

Tax Year

Annual Contribution Limit

Catch-Up Limit (Over 50 years old)

2017

$5,500

$1,000

2018 and beyond

Indexed to Inflation

Indexed to Inflation

Make sure your IRA is fully funded before you open any other type of brokerage account.

You can use an IRA just like a standard brokerage account to buy stocks, options, CDs, and bonds.

Consult a Tax Professional. I don't believe in paying someone to manage your money. I wholeheartedly believe you should choose your investments on your own, based on your own research. But hiring a tax professional is a very wise idea...

You can do research and buy stocks and funds and options on your own. But if you're like me, you have little expertise on the egregiously complex U.S. tax code. So I found someone who charges a flat fee to answer all my tax questions and file them for me...

This is called a fee only tax professional: They charge you one fee instead of working on commissions, percentages, or incentives.

Ask this person as many questions as possible. Tell them about all the things you learned and have questions about from the budget you're now keeping.

He or she will alert you to tax-saving ideas and strategies you didn't know about. These ideas and strategies will more than pay for the flat fee.

A tax professional can help you with health savings accounts (HSAs), tax-loss selling, pre-paying deductible expenses, donating stock, and exactly which types of retirement accounts you should use. They can and should be your sounding board for deciding why and how to make financial planning decisions.

The guy I use is in business for himself, charges one flat fee for the year, and isn't concerned with earning commission by selling me financial products.

Once you do these things, you'll be in a prime position to take full advantage of the investment ideas presented by the Outsider Club and its various publications.

Thanks for subscribing to the Outsider Club. We'll continue to find ways to boost your portfolio with flexible and safe investments that will help you break free of the traditional trading advantages, traps, and pitfalls financial institutions use to siphon off your wealth...

Call it like you see it,

Nick Hodge Signature

Nick Hodge

follow basic@nickchodge on Twitter

Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street's Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.

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