Introduction
Formulate a Financial Plan
Know Your Net Worth
Manage & Minimize Debt
Accumulate Assets
Budget to Live Within Your Means
Understand Investing Basics
Plan for Retirement
Insure People & Property
Deal with Financial Advisors
Review Your Employment Contract
Make Plans for Your Estate
Make Good Decisions
Conclusion
Another instance in which the time value of money works against you is when considering advisor fees. Let’s revisit the earlier example in which annual $1,000 investments are made over 30 years. Suppose the market allows a return of 8% annually. From the previous example we know you could accumulate a nest egg of over $120,000 after 30 years. But instead of managing the investments yourself you pay an advisor 2% per year to manage the investments for you. Instead of riding the 8% curve to the $120,000 nest egg, you ride the 6% curve for an aggregated total of $83,000. The $37,000 shortfall (31% loss) ends up in your advisor’s pocket. Even if the advisor fee is “only” 1% annually, over 30 years your shortfall would amount to around 17%.
Fees have an insidious effect on our wealth accumulation. Zealously reduce fees whenever possible!
