Keep it Simple (I won’t call you stupid!)

“Are you a financial advisor?” I get this question all of the time and here’s the simple answer: Yes and No. I don’t get paid to be a financial advisor, so in that sense, NO. But I do help my staff and people in the community get their finances in order and make smart, forward moving decisions when it comes to their personal finances, so in that sense, YES! 

I have always had a hard time with traditional financial advisors. Don’t get me wrong, I love them and their services are extremely valuable to many people (including myself!). But the reality is that the vast majority of working individuals don’t need a financial advisor to begin investing. 

Last week, I talked about a ROTH 401k. If you are employed and your employer has a 401k account, they likely have a ROTH 401k option. Based on today’s laws, individuals can contribute $24,500 into a ROTH 401k. If you are between 50 and 60, you can contribute an additional $8,000 per year, bringing your allowable contribution to $32,500. And for workers 60-63, you can play super catch up and contribute a total of $35,750 per year! These numbers don’t include what your employer contributes, if they contribute anything. 

For most Americans, this account is far from maxed out each year. Remember, our goal is to invest 15% of our income for retirement. With the average worker under 50 able to contribute $24,500, if you maxed that out by investing 15%, that would be a $163,333 annual wage. It isn’t until you go over $163,333 that you would need to look at a separate investment account. 

Therefore, there’s no need to worry about finding a financial advisor today if you are under that wage - you just need to start investing 15% of your pay into that account until you have maxed it out! 

The question then becomes, “What investments should I purchase within my 401k?” First, remember, I am not a financial advisor… in the traditional sense. So I am going to rely on a pretty savvy financial investor named Warren Buffet. 

In 2008, Warren Buffet made a million-dollar bet that by investing in the S&P 500 (essentially the average of the top 500 companies in the country), he would outperform 5 hedge fund managers who individually picked stocks. By the end of 2017, Warren Buffet won the bet as the S&P out performed the handpicked funds by over three times. 

Therefore (again, this isn’t my financial advice to you, just me pointing to Warren Buffet’s experiment), if you simply invest in an index of the S&P 500, you have a strong likelihood of receiving a favorable return over a long period of time when compared to picking individual stocks. 

The other benefit of your 401k plan is that your employer is already paying for a firm to run that account. Most likely, there will be financial advisors you can work with inside of your 401k plan who will give you advice on different accounts to help you reach your retirement goals depending on where you are today! Utilize that free resource and work on maximizing your retirement account over time! 

Keep it simple! No need for a full-out financial planner today. But in time, I hope you max out your retirement account and need one to help you continue investing for your future! 

In just a couple of weeks on August 1st, I will be launching my book, Increase! Make sure to keep your eye out for how you can get your copy! 

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Zach Santmier is the owner of Trumble Agency, Inc. and the author of the personal financial course, Increase. He focuses on helping families escape paycheck to paycheck living so they can freely pursue their ideal future.