The Personal Finance Podcast - Are You Truly Diversified? How to Protect Your Wealth for the Future (Money Q&A)

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Starting point is 00:01:00 on this episode of the Personal Finance Podcast, are you truly diversified in how to protect your wealth for your future? What's up, everybody, and welcome to the Personal Finance Podcast. I'm your host, Andrew founder of MasterMoney.com. And today on the Personal Finance Podcast, we're going to be answering your questions on this episode of Money Q&A. If you guys have any questions, make sure you join the Master Money newsletter by going to Mastermoney.co slash

Starting point is 00:01:45 newsletter. You can respond to any of those issues that come out and we will be able to answer your questions. And don't forget to follow us on Spotify, Apple Podcast, YouTube or whatever podcast player you love listening to this podcast on. And if you're getting value out of this show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player. Now today, we're going to be diving into a bunch of your questions. And the first question we're be diving into is are we diversified enough for retirement without social security or pensions? The next one is I'm rolling over $120,000 into a Roth IRA. How do I invest it without feeling overwhelmed? The third one is I have $7,000 in military pension, but no savings. How should I build wealth in my 50s?

Starting point is 00:02:34 The fourth one is asking a question about 529 plan and as their son is approaching the age of going to college should they become more conservative with their 529 plan. The last one is how can I build charisma to improve my professional connections and confidence? So we will give you tips on that as well, talking about the Riz on the last question. So we have an action-packed episode, so let's get into it. All right, the first question, my husband and I love your show and can't wait for each new episode. Well, thank you so much. We are making great progress in our finances and believe we are on track to retire in about 10 years or so at 60 and 61. Our question is, what are some ways to diversify our portfolio if Social Security and old age pension is not an option? Some background information

Starting point is 00:03:22 on us. We are Canadian expats who are mostly invested in ETFs. The percentages that we plan to keep are 50% of the VFB, which is the S&P 500, 10% of VCN, which is the Canadian TSX, 10% of VRE, 10% of VDY, which is the high dividend and 15% VUI and then 5% emerging markets. We're investing about 100,000 to 120,000 Canadian a year with all these ratios and should have about $2.1 to $2.5 million in about 10 or so years. We also have a condo that will be paid off in three years and should give us about $8,000 per year or more after expenses and plan to keep renting through our retirement. We also expect to make about $25,000 per year in dividends and plan to use our final

Starting point is 00:04:09 year of work to put in cash of about $130,000. When completing our risk assessment, we both have very high risk tolerance, but want to ensure we are good if a flat decade like 2000 to 2010 should occur. Are we diversified enough, or should we use another investment of vehicle? We would love to hear your thoughts on the matter. First of all, this is a fantastic question. I love how you're thinking through this process. So your portfolio thus far, and again, this is not financial advice, I always have to have a disclaimer. I'm not telling you what to invest in. But your portfolio thus far is very well diversified in terms of what you hold. Because let's look at your portfolio.

Starting point is 00:04:44 You have 50% of your portfolio in U.S. large cap, heavy growth stocks. You have 10% in exposure to the Canadian market. You have 10% in real estate exposure with VRE, which is Canadian REITs. You have 10% in high dividend stocks, which is going to help you with cash flow and dividend stability. You have 15% in global diversification outside the U.S. and Canada, which is just going to give you some additional diversification, and then you have 5% in emerging markets. Now, what's great about this portfolio is that you are really well diversified globally across the U.S.,

Starting point is 00:05:18 across Canada, and developed international and emerging markets, and you've got exposure to real estate there with those reeds, and your high savings rate allows you to compound at scale. Now, the thing that is really propelling you to this amazing retirement is that savings rate. That savings rate that you have of $100 to $120,000 per year is so. incredibly powerful. And this is a lesson that I want a lot of listeners to understand. Once your income starts to increase, as you can see here, if you start to save a larger portion of your income, you can make significant progress in a short amount of time. This is a very powerful lesson that I think a lot of people need to understand. This is why we talk about

Starting point is 00:05:58 increasing your income so much because it is so powerful what you can do with your money as you increase your income. Now, if you start to see something like the lost decade, a lot of things happen during 2000 through 2010, where we had the Great Recession. And we also had a bunch of different town turns like the tech bubble and all that different kind of stuff. And so I understand your concern about the lost decade and kind of how that would factor into the way that you're thinking about this. And it's very good that you're thinking about this because over the course of the last 16 or so years, we have just had a crazy bull market. Sure, we've had some pullbacks and we have had short term downturns. but usually every single year has been positive over the course of the last 15 years.

Starting point is 00:06:37 And so we need to remember what the market actually does historically. Typically, every 10 years or so, we get some sort of recession. That has not happened over the course of the last 15 years, but typically we get a legit recession every 15 or so years. Now, sure, we've had those pullbacks. We've had the COVID recession, I guess is what a lot of people will say. But in reality, we haven't had a true recession that has pulled back for over a year or more. And so thinking through that process, the one way,

Starting point is 00:07:03 to hedge against some of those market downturns would be to add some fixed income or some bonds to your portfolio if you want to reduce that volatility. But you said you have a high risk tolerance. So that's not something you absolutely have to do. And you can even ladder bonds with Canadian government bonds or corporate bonds, things like that or BNDX. Those types of things are great to look into more and do some research. But that would be one way to kind of think through that is to diversify into bonds if you're worried about that flat decade. You're going to have cash on hand because you have a cash plan, which we'll talk about here in a more a second. But I think that is, uh, one star. Now, an amazing thing that you have is this rental condo. So this rental condo is going to produce

Starting point is 00:07:38 $8,000 per year in rental income for you, which is going to help you significantly over time. Now, if you wanted to and wanted to diversify your income sources, another thing you could do is buy more physical real estate. I don't know how much you enjoy the process of being a landlord, but if you do enjoy that process, you could buy another condo or some other piece of physical real estate that is going to allow you to cash flow even more into the future. That's another thing that you could do because you have such a high savings rate. In terms of like your read exposure in your portfolio, I think, you know, in my opinion, the way that I look at that, that's plenty of read exposure. I think you have enough there. But if you wanted more physical real estate, that's another

Starting point is 00:08:17 thing you could consider is adding more physical real estate to your portfolio if you like the process. If you don't, that's not a requirement. Real estate is not for everyone. And sometimes just having a couple of properties is the manageable solution. So maybe one is the manageable solution for you, but it just kind of depends on what your tolerance is for becoming a landlord. Because again, it is not for everyone to take those phone calls and having to manage those tenants. Any other investments that you could look into, you could diversify into other areas if you wanted to own a small business or if you wanted to own maybe some sort of passive small business, like, you know, things like laundromats. But honestly, you don't need it the way that you're

Starting point is 00:08:54 currently structured. It is not something that you absolutely have to have. I think you're really well diversified. Now, what I do love that you're doing is this cash buffer because I truly believe that most people need to have a good amount of cash as they enter retirement. They need to reduce their debt and liability and they need to have a good chunk of cash because if there are down years, you can utilize that cash to save yourself so you don't have to draw down on your portfolio in really down years. So if you have a year like the Great Recession, for example, in 2007, 2008, where we had a huge market pullback of at least 50%. Those are the types of years that you can utilize some of your cash influx that you have saved up. So you're going to work an additional year to have that

Starting point is 00:09:35 cash. I think that is so wise. And I think that is a great step for anybody thinking about this. And considering keeping, you know, two to three years of cash on hand is a great option for most people. It's just a much larger emergency fund because in retirement, you just need more flexibility. And flexibility is the name of the game when it comes to making sure that you have a good financial plan. And then the other amazing thing is you can expect $25,000 per year in dividend, which is great passive income. And I think that is a great option for you to have as well. So you are very well diversified into real estate and stocks, dividend producing assets. And if you wanted to hedge against the flat decade, if you're worried about that, you could get more bond

Starting point is 00:10:15 exposure or even alternative real estate investments if you wanted to. But you're an amazing financial position and you are on pace for 2.1 to 2.5 million in investments. You have that strong rental income and you're saving six figures every single year. You know, I have no critiques of what you are doing whatsoever. I think that's absolutely amazing. And I would just continue to stay aggressive. I would stay aggressive with some of the stuff that you're doing. Stay aggressive with equities. That's the way I would think about it. If I was in your shoes, again, not advice of telling you what you do, but I'm just kind of going through the process of how I would think about this. That is an amazing, amazing progress.

Starting point is 00:10:49 So congratulations to you guys. And thank you so much for the fantastic question, because I think this is a really amazing progress and really excited to see where you guys land on this. So keep me posted because I love these kind of stories of people who are building wealth really, really quickly. And I think it's really powerful what you were doing. But you're on the right track. Love everything you're doing. All right. The next question is, hey, Andrew, the webinar replay was very helpful.

Starting point is 00:11:14 Thank you for sending it out. I wasn't able to attend the webinar on the new day, but I have a quick question that I wanted to ask. regarding moving a 401k to my Fidelity Roth IRA. So for those who are listening, we did an investing for beginners webinar, teaching people how to invest step by step. If you're interested in that, by the way, you can go to mastermoney.com slash investing for beginners, and we actually will have the next webinar that is available coming up on that landing page.

Starting point is 00:11:40 So if you are interested in learning how to invest, we have that available for you. Once I move my 401K from my old employer to my Fidelity Roth IRA, using either capitalized that you spoke of or something else, does that money go into SPACs or a cash account, just like when you typically move money over? And since that means the money is just sitting there until I do something with it, how do I disperse that high dollar amount of money? I have over $120,000 in it. I guess the high dollar amount makes me feel a little paralyzed on what to do when I'm moving to my 401k. Thus, I have not moved it, even though it is still growing where it's at. I typically use the following in Fidelity. I use the Fidelity S&P 500.

Starting point is 00:12:19 100 index fund, which is FXAIX. I use the small cap, the midcap, the China region, and the Fidelity Freedom 2040 target date fund. And although I'm not asking for financial advice or where to put it, am I on the right track that I would have to take that $120,000 and somehow divide it into whatever funds I currently use or whatever funds I chose? Or does something have to happen when you complete a rollover? Thanks so much. I appreciate your efforts to help us all with our money. Well, thank you so much for the question. And honestly, I appreciate you even watching the webinar replay. So anytime we have a webinar, we usually will send a replay out to. And so it is really cool that you were able to kind of go through that. Now, first of all,

Starting point is 00:12:59 amazing progress having $120,000 in your 401K. This is a really, really powerful position to be in. And kudos to you for saving up that 120 grand. That is an amazing progress so far. And there are some things that you can definitely do. So one consideration that I want you to think about first is if it's a traditional 401k and you move it to a Roth IRA, you're going to have to pay taxes on that money. So typically, the way I look at traditional 401Ks and what I did when I left my company is I rolled it into a rollover IRA. So not a Roth IRA, but a rollover IRA. That way, it is in a like kind tax situation. So you're not paying taxes on that money. So capitalize, if you use that service that you mentioned there, it's a completely free service and they will help you

Starting point is 00:13:48 with your rollovers. I think they get paid on the back in somehow with some of the brokerage houses, but they will help you completely for free if you want to roll over an old 401k. And when you do that, there may be some questions that you want to ask them just like that because you will be paying taxes on that money if you roll it into a Roth IRA. Because remember, the way a Roth IRA works is its money that's already been taxed is contributed to the account. So it's post tax money. Okay. And then the money grows tax free and you can pull the money out tax free. So Uncle Sam wants to get paid one way or another. Whereas a 401k, you don't get taxed on the money that you put into that account. It grows. And then when you pull the money out, you get taxed. And so since you have not

Starting point is 00:14:27 been taxed on that money yet, you will get tax on it if you put it into a Roth IRA, which is why I typically, when I have an old 401k, I roll it into a traditional IRA so I don't have to pay those taxes. But here's what happens if you roll it into, to answer your question, into a Roth IRA. So when you roll those funds into Fidelity, they will land in SPACs, which is Fidelity's core cash position, or a similar settlement account if SPACs is not available for some reason. Usually it's in SPACs, though. And this does not mean your money is invested yet. It's just sitting in cash until you decide what to do with it. And since this is a Roth rollover, you'll owe taxes on the amount converted like we talked about. But once inside the Roth IRA, your money will grow tax-free forever. But what's really important to

Starting point is 00:15:08 understand is if your current 401K is a traditional 401k, you're going to owe taxes on the full 120,000 when you roll it to the Roth IRA. but if it's a Roth 401K, for those listening who have a Roth 401k, you won't owe taxes, but you still will need to invest the funds. So if it's in SPACs, you still will need to invest those dollars. And so you want to decide how you can allocate those funds. So if you're currently invested in all those different funds that you were just talking about, your instincts are correct, is that once your money is in your Roth IRA, you will need to manually allocate the $120,000 into these funds.

Starting point is 00:15:41 Now, step two is to, should you invest gradually or should you invest all at once? Since the $120,000 is a large sum, many people feel paralyzed about investing all at once. But just think about it this way. You already have it invested right now. So there's no difference of just transferring it over and investing those dollars. Historically, lump sum investing has outperformed dollar cost averaging when you have a big large lump sum of cash like this. This is not the same as like dollar cost averaging from your paycheck every month. But when you have a big large lump sum of cash like this or you get an inheritance or you know, you win the lottery, those types of things. Historically, if you look at the data out there, and you can read studies about this

Starting point is 00:16:17 if you want to look at it, over 70% of the time, the large lump sum of cash invested outperforms just dollar cost averaging slowly that amount of money. Why? Because a lot of your cash is still sitting there while it's starting to get to work. And so you could dollar cost average over time if you're a little nervous about it. You just kind of want to get your feet wet. But again, remember, right now it's already invested in the same exact stuff that you're going to roll it into. And so all you have to do is just kind of manually go in there and invest those. dollars. So that is kind of how I would think about that in terms of, you know, looking at, should I invest at all or should I not? If you're uncomfortable with it, there's nothing wrong with

Starting point is 00:16:52 kind of investing it piece by piece until you get comfortable. But if you are thinking to yourself, well, yeah, I guess it is already all invested here. Then there's nothing wrong with just investing the whole thing at the same time, too, into what you want to have it in. So I think that is great. And you're on the right track. Love the way that you're thinking about this. And congratulations again on having that great account. You are making financial progress for your future. You are buying back your time and I absolutely love that. So really love when people take action. So thank you so much for the question. And if I can help in any other way, please let me know. So lately, I've been noticing how fast things are changing at home. The kids are growing like crazy. Clothes don't fit

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Starting point is 00:20:28 at IDPrivatewealth.com. All right. So, the next question. Hey, Andrew. I've been listening to the show for a while now and have a simple question on where I should be at this stage in the game. I just turned 50 this week,

Starting point is 00:20:41 and I have about $10,000 in savings, $3,000 to $4,000 in cash and approximately $10,000 in retirement accounts. With my military pension, I bring in just under $7,000 a month. I'm between positions now and have been part of a reduction in force in August, and interviews have started

Starting point is 00:20:57 happening this. week, thankfully. My question revolves around retirement. With my pension of $7,000 each month, I'm wondering how this impacts investments and savings. I cannot retire yet because I need to pay off this truck. So I'm looking at three to four more years of working to do that. How do I break this down? I understand I am blessed to have this coming in each month for time serve, so to speak, and I'm wondering what else I can even be doing at this point. So thank you for the continued content. It's excellent, by the way. So thank you so much for this question. And first of all, thank you so much for your service. So many of my family members have served in the

Starting point is 00:21:28 military. And so I have the highest, utmost respect for everyone who has served in the military. And we have a lot of military listeners, actually, which I absolutely love. And I cannot thank you enough for serving our country. I think it is absolutely amazing. Now, when you have this amazing pension, first of all, $7,000 pension, awesome stuff. So that's going to get you in a great position thus far. And you are on the right track. You're thinking through kind of what do I need to do next in order to make sure that I can retire comfortably and reduce some of the liability that I have. So that $7,000 pension is going to be in a great spot for you. Now, it kind of depends, I guess, on how much you need to live on every single year, but $7,000 will get you going and it will be in a

Starting point is 00:22:07 great spot for how you want to think about this. So the first thing I would do is I would prioritize my cash savings first. So I would think through, hey, the 13-6 method, what is one-month cash expenses, what is three months, what is six months, just so you have your emergency fund in place. You're going to need an emergency fund when you retire. And so getting your cash reserve stayed up, six months at a minimum, but when you hit retirement, I'd like you to have even a year or so saved up and starting to get those dollars together so that you have a big cash position for you to be able to retire. So that's the first thing I would do is prioritize cash savings first. If you have not heard our episode in the 136 method, I highly, highly, highly recommend that episode. It was our

Starting point is 00:22:44 most popular episode last year. We've gotten some great feedback on that, but that's how you manage your emergency fund. So for sure, number one, I would take advantage of that. Another thing that I would consider is looking into some of the retirement accounts. So the Roth IRA, the traditional IRA, the brokerage account, all of those would be great places to park some of your cash. It depends on your age and kind of when you're going to need to utilize this money. But that is a great spot to keep some of your cash so that you can grow your money over time, especially when you get that tax-free growth. Since I know you're in your 50s, you'll be able to kind of get that catch-up contribution also when you have some of these. So if you want to get more cash into those, you

Starting point is 00:23:20 absolutely can. So the Roth's great spot. If you want to be able to access. those funds early or anything like that. So any contributions that you make into the Roth area, you'll be able to access if you just can't access the money, you know, the growth on that money until you kind of follow the five-year rule and then you get to 59.5. There's a bunch of additives there. So secondly, is I would look into retirement accounts. Now, third is I would pay off debt strategically.

Starting point is 00:23:43 So if your truck payment is a high interest debt payment, then sure, we need to get one month of expenses saved up. Then we need to focus on paying down that truck if it's high interest debt, meaning any debt above a 6% interest rate, we probably need to start paying that down. But if you can pay it off over the course of the next couple of years by the time you hit retirement age, then that's fine as well. Then I would consider paying that truck off over those four years and building up that cash position. So you have it available. That would be a really, really great spot to look at that. But paying it down strategically is very, very important. And so it depends on what your

Starting point is 00:24:15 interest rate is. A lot of military members, though, can get some very favorable interest rates. So yours may be lower depending on where you got it from. But, you know, you're going. it can be something where you get a lower interest rate or just looking into refinancing that may be the move too. And then long term planning is, you know, the 7K pension is going to really, really help you. If I'm investing now in my 50s, I would be investing heavily in retirement accounts. If I were in your shoes, again, not financial advice, but just telling you kind of what I would do in your shoes is because you get those catch-up contributions, you get the tax benefits. And then once you reach your retirement age over the course of the next couple of years, then you can utilize some

Starting point is 00:24:50 of that cash, depending on where you put it. You can do all kinds of stuff. We have an episode talking about how to access them early if you want to check that one out too, but that's kind of where I would be looking for the next thing. So first priority is to build up the cash savings. Secondly, is to start looking at your retirement accounts and see if that's something you can invest in. Third priority is to make steady progress on your debt payoff, but don't rush if the rate is low. If the rate's high, I would start to kind of really prioritize that after I start getting my cash position built up. And then last priority, is once savings are solid, I would invest in the diversified portfolio even more aggressively

Starting point is 00:25:26 to grow my wealth until I kind of reach retirement age. That's just going to give you extra income and extra dollars that you can start to draw down every year. You can draw it on 4% of your portfolio every year based on the 4% rule. It's going to depend on a lot of factors. But that's just kind of the rough estimate. If you want to talk to a fee-only advisor or something like that, then you can do that in order to figure out exactly where you need to land. But I think for sure, you're in a great, great position with that pension. That pension is absolutely amazing. And I think you can make some real, real progress with having a cash position and getting some investments going. That'll really, really help you long term. So congratulations on this.

Starting point is 00:26:02 I mean, that's absolutely amazing. And again, thank you so much for your service. I appreciate you so much. And thank you so much for sending in the question. If you have any other questions, please let me know. All right. So next thing we're going to do is we are going to talk about the scam for this week that we have been kind of following. And if you're new to money Q&As, a lot of times what we do is we talk about scams that are going around so that you can protect your finances. And I think it's a huge deal. So the last two that we've been talking about is one, there are packages coming to people's front door and they have a QR code and people are like, I don't know where this package came from. And the package is going to have this QR code. And when you scan that

Starting point is 00:26:48 QR code, it actually is going to try to steal some of your personal information. So that's the one we just talked about recently. If you haven't heard that episode, you can check that one out. And then we talked about another one where they're now sending out text messages that looks like your government agencies that you need to pay tolls and you're backdated on tolls. And if you haven't heard that one also, basically what you do is you get a text message that looks real, stating that you have to pay for your tolls because they're late or behind. And if you don't pay them today, you're going to get a bunch of late fees. And so it creates this urgency. People open it up. It looks like the government agency's website and they go pay these tolls.

Starting point is 00:27:19 And all of a sudden, the scammers have your credit card information. So those are the last two we talked about. If you want to hear more about those, just check out the other money Q&As that we've done recently. But the latest one here is now there are scam text messages going out. And a lot of you probably will be able to identify these. But I want you to kind of spread the word for people who are in the job market. So if you're on LinkedIn or if you're in the job market, there are a lot of messages going around stating, hey, I got this brand new full-time job for you.

Starting point is 00:27:46 The salary is starting at X amount of dollars. I want you to interview here. And so they'll say something like that. and they'll say they're recruited for a company, and it'll usually be a company that you know. And specifically, if you have never applied to this company before, that's your first red flag. But typically what they do is they make you fill out an application. When you fill out that application, you are giving them all of your personal information. And then they are asking you for some more information that's going to help them steal your money or your identity

Starting point is 00:28:13 or whatever else their specific intention is. I've seen these happen a lot more with people. And I've had friends tell me that they've had this happen to them a ton. And so it's definitely one that you want to. to watch out for. So to avoid this, number one, you need to start your job search with sources you know are legit. So sources like Indeed, for example, is a great place to start, but making sure you're not going to random websites that are going to put you on lists or sell your information to some of these other scammers or data brokers or things like that. Secondly, if you get these

Starting point is 00:28:45 texts, do not click on the links. If you think the text could be legit, I would contact the company directly using the website or the phone number that you know is real. And then I would do some research. So search online for the name of the company and words like review or scam or complaint and see if you find the company online. And if you do, steer clear. And then if you get those texts, make sure you start to block them because scammers send text designed to get your attention.

Starting point is 00:29:07 There's also some phone apps that will help you kind of block some of those unwanted texts. And so that's one for sure that you can also do. And then lastly, is removing your personal information. So making sure that you remove your personal information from the internet is going to be a really, really huge move for making sure that you don't get all these scam texts all the time, because a lot of times where they get this information is they buy your phone number or your data from these data brokers online. And so there's a service called Delete Me that will remove your personal information from these data brokers. It is my favorite service by far. We've partnered with them

Starting point is 00:29:41 for a very long time. And Delete Me actually goes to these data brokers, removes that information from these data brokers so that you are not on these lists anymore. So if you Google your name, Google your address, Google your phone number and quotations, you're going to see a ton of information about you, Papa. Well, Delete Me's job is to go in there and remove your personal information from these websites. And honestly, if you do this on your own, it's going to take you hours and hours of your time. Delete Me saves you so much time. So if you go to join DeleteMe.com slash PFP20, you're going to get 20% off of Delete Me.

Starting point is 00:30:15 it is, again, one of my favorite services that are out there because they save you so much time. Getting your personal information removed takes so much time. Delete me. We'll do it all for you. And they maintain it throughout the year. And for the amount that you're paying for Delete Me, it is absolutely an incredible deal. So again, go to join DeleteMe.com slash PFP20 if you want to check that out. Now, also, you can report these scams to reportfraud.fraud.ftc.gov. That's another place that you can report scams if you want to, or you can just move them to your junk folder, whatever's easiest for you. But those are the steps that I would take if you start

Starting point is 00:30:49 to get some of these messages, because the more that you block, the less likely you are to get more in the future. And so that's going to be a really, really powerful thing. But I would just follow each of those steps every time you get one in. And really, they're starting to become more difficult to recognize. But I think most people for these specific ones should be able to recognize them, or at least alarm bells should be going off every time you get something like this. All right. The next question is, Hi, I have a financial investment question. My son is in eighth grade and we currently have about $130,000 invested in his $529 account. Considering he has about four and a half years until he goes to college, would you consider at some point in the next few years of getting more conservative or

Starting point is 00:31:26 putting part of this lump sum in cash since some of it will be used his first year? But some won't be used until the following years. Much appreciated for any insight and guidance. Love, love, love your show and thank you for all the tips. So, amazing, amazing question. And this is something where first of all, again, congratulations. Man, you listeners are just crushing it when it comes to some of these goals. But having $130,000 in your son's $529 account is amazing because you just bought him a pass to not having student loan debt, depending on where he goes to college. I mean, I guess some colleges can be more than $130,000 a year.

Starting point is 00:32:00 But depending on where he goes to college, most likely you're going to be utilizing the majority of it from this account. So amazing that you have this. But with four and a half years left until he starts college, you're at the stage where risk management does become just as important as the growth. And so because of that, managing that risk is pretty important. So here's the way I think about this. Now, this is, you can do what you want. Again, not financial advice. Here's the way I think about this process, though. Since some of the 529 funds will be used in year one and the rest of it will be used in later years, the strategy should

Starting point is 00:32:32 focus on preserving capital for at least the early college years while allowing some of it for continued growth later on. So money that is needed for year one, which is four and a half years from now, you could put it in lower risk investments. You could kind of convert that to bonds. There's other things that you can do. But kind of reducing the amount of volatility that it has is something I would consider for the first year of college. So say, for example, you know the college is going to go to is going to cost $20,000 a year. Some of you may be like, you know, that's really cheap or some of you may be saying, oh, that's really expensive. It's just an example. So let's say it's going to cost $20,000 a year. Those that maybe, you know, a portion of that

Starting point is 00:33:07 $529 is going to start to become something where you want to preserve some of that capital for. that year. And so that's kind of how we consider it. And knowing that she's not going to grow as fast. And then some of the later year stuff, you could start to allow it to continue to grow. So here's kind of how I would think about it. If I was in a scenario where, you know, my kids were going to be going to college within the next four years or so, what I would probably do is move, you know, pay me 25% of it to a more conservative investment, maybe something like bonds, and then kind of keep reassessing that process. And so I'll look at it for year one. Maybe I'll move 15% to bonds and another 10% the second year.

Starting point is 00:33:43 And so you have 25% over the course of the next two years and then slowly starting to get conservative with the rest of the portfolio over time. And so that's kind of how I would think about it. If you're four or five years out, having something like 70, 75% in stocks is great. And then three years out, maybe you're starting to tailor it down a little bit more. And then two years out, maybe a little bit more. And you're just slowly kind of converting this every single year. That's the way I would look at it.

Starting point is 00:34:07 This is a great reason right here also to look at your financial situation. This is a great reason to talk to, you know, one of those advisors that will charge you like at an hourly rate and or your CPA, just kind of having a conversation with both of them would be a great option for something like this. These are great questions for them because it's a direct question on how you should really look at this and they can answer it pretty quickly or they should be able to without beating around the bush. And so this is one for sure. Once they look at your financial situation, they can say, hey, yeah, you can start to tailor this down some. And that's kind of how I would consider this for sure. Now, if your 529 plan, there's some of them that actually automatically adjust risk levels based on your child's age. And you can look at some of those too. And then what I would do is as you start to get closer to year one,

Starting point is 00:34:48 as you start to approach maybe, you know, three years out or two years out, then I'd probably go liquid on a portion for year one at least or maybe all of it. It depends on kind of how your risk tolerance is. But I would probably start to go liquid as you get closer and closer maybe by their junior year. that's kind of where I would start to approach going liquid with a portion of it for at least year one. And then when they're one year away, maybe year two is going liquid and that type of thing. So that you would just have that available. It's more important to be conservative at this point in time so you don't get a cut in half. The last thing you want is your 529 plan to get cut in half, especially if this is going to fully pay for their college. If it's going to fully pay for their college tuition, there's no reason to kind of continue to risk it all.

Starting point is 00:35:28 You know, you can just conservatively start to take it towards more bonds or less of volatile assets. And then eventually you're going to go. liquid with a portion of it or liquid meaning going to cash with a portion of it so that you can start to really preserve this wealth. So awesome, awesome question. In fact, what I think I'm going to do on this is I'm going to write a newsletter on this exact topic. That way you can kind of see exactly how I would do this with my own 529 plan and I'll use, I'll use some well-rounded number so that you can look at kind of how exactly I would allocate my portfolio with this. So if you're interested in that, again, join the Mastermoney Newsletter by going to

Starting point is 00:36:02 Mastermoney.com slash newsletter. But I think this would make a great, great newsletter. And so I'll write one on this because I think it's a really great topic. So again, some final thoughts on this. I would move some funds into cash and over to bonds over the next few years to reduce some of your risk. And the key is a gradual transition. So you kind of just pick a percentage every year and you just start to follow that plan. That's the way I would look at this is just picking a percentage and then every year kind of following that plan. And then check if your 529 automatically rebalances it might and adjust accordingly if needed. But that's how I'm thinking about it for my kids.

Starting point is 00:36:36 My kids are still really young. But as they start to approach that age, I will write in that newsletter exactly how to look at that as well. So awesome, awesome question. Thank you so much for sitting it in. If you have any other questions, please let me know. All right. So the last question here is great episode about investing in yourself. I'm working on building my Riz or charisma as my professional role involves building connections.

Starting point is 00:36:57 And I've noticed this is something I need to work on. Any suggestions on how to build charisma and resources to build this skill? Thank you so much. Yes. So, first of all, this is a great question. And for a lot of people out there, if you are introverted or you do not know how scientific having charisma is, it is actually something that is very scientific. And the way that I actually realized this is I read a book that was in the high performance

Starting point is 00:37:23 book club. If you don't know what that is, that's in the Master Money newsletter. We have this high performance book club where we, I talk about. a book that I'm reading every single week. And one that I read recently was fantastic. So it's called Q's Master the Secret Language of Charismatic Communication. And this book by Vanessa Van Edwards is absolutely fantastic. I want to get her on the podcast because she is incredible in terms of how she kind of teaches this stuff. And it's very scientific how she does this. But she talks about the small signals and how they have incredible impact on your charisma and how this is going to work. So the

Starting point is 00:37:57 core elements of charisma that you want to focus on is confidence because people are drawn to people who believe in themselves. And so this comes from preparation. This comes from body language. And this also comes from tone of voice. And in cues, she kind of talks about how that works to you. But secondly, is warmth and likability. So becoming a person who is warm or a person who comes off as warm and being genuinely interested in others and making them feel valued is really, really powerful. And then lastly, is presence. So giving your full attention to someone in conversations, making people feel like they are the most important person in the room is also a huge one. There's another book called How to Win Friends and Influence People. It was written a long time ago. I think it was in the 30s.

Starting point is 00:38:35 And it is a fantastic book on presence and how to give full attention and conversations and those types of things. Very, very good one as well. Now, practical ways to build charisma is first is mastering nonverbal communication. In fact, if you can master this having strong eye contact, having open body language, having powerful posture, those three are going to be really, really big. But also improving the way that you speak. So reducing the amount of us or ums that you have, using pauses to make sure you emphasize your point. One thing I really struggle with, if you haven't noticed, is I struggle with talking too fast sometimes because I want to get my point across and I really need to learn how to slow down. I'm doing it very methodically

Starting point is 00:39:14 right now, but I want to make sure that I slow down a little bit more for certain people. And then varying your tone and pace. So monotone speech will kill your charisma. You want to make sure that you're varying your tone and pace so that you're speaking in an interesting way. And then a big one is being a better listener. Half of having charisma is just paying attention to someone and asking the right questions so they feel like they are very well liked and that you're actually engaged with them. And so that's a really huge thing. And there's a conversation trick that I learned a long time ago. It's speak 30 to 40% of the time and let the others speak 60% to 70% of the time and then match their energy. If they're really energetic, you can start to

Starting point is 00:39:53 match some of that energy. But if they're a little bit more reserved and drawn back, kind of slow down what you're doing. That's going to make sure that they don't feel overwhelmed or feel like you are trying to take control of the conversation. Instead, try to match their energy and you can really, really do that. Another thing, though, is to practice telling stories. So becoming a good storyteller is going to help your charisma significantly. And there's a lot of great YouTube videos on this and lessons on how to do that. And then another one is to be authentic. I think that is huge for a lot of people is learning authenticity and how to be authentic. Your energy is contagious. And if you're excited about something, others will be too. That's my

Starting point is 00:40:29 entire goal with this podcast. If you haven't noticed, I am half the time yelling in the mic and I'm super excited and super engaged. Some people don't like that. But that is the way that I like to teach this stuff because otherwise, I'm trying to make it not boring for you, but also at the same time, I am really, really passionate about this. So those are some to definitely read. Another great book is called the charisma myth. And this is the science behind charisma and how to develop it. There's also some TED Talk. So there's one called your body language, shapes who you are by Amy Cuddy. And this kind of talks about your body language and your confidence. And then there's some things I would do daily. So if you really are serious about this, I would record

Starting point is 00:41:07 yourself speaking one and notice your voice tone. I would notice your pacing. I would notice your filler words like the ums and Oz and how often you do that. And kind of practice is even five minutes every single day. Maybe it's while you're getting ready in the morning. You're just kind of having these conversations in the mirror and recording yourself talking. This is going to help you over time. Creating content is a great, great way to practice this kind of stuff too. And then forcing yourself to talk to three new people a day, kind of becoming, engaging in more conversations is just practice. And the more you practice, the more you're going to be able to do this. And then another thing that I like that a lot people have told me to do is to join something like Toastmasters. So Toastmasters is a public speaking

Starting point is 00:41:45 group. It's kind of like a club, and they will practice public speaking. They will work on your public speaking. They will help you with public speaking, and it is a great place for developing confident presence. So all of those to say, those are some of the things that I would work on, but I think you're on the right track of even thinking through this process, and it is absolutely amazing that you want to work on this. So again, thank you for the amazing question. So if you guys out there have any questions, you can join the Mastermoney Newsletter by going to mastermoney.com slash newsletter and you can ask your questions there. If you're getting value out of this podcast, consider sharing it with a family member or friend. I cannot thank you guys enough for being here

Starting point is 00:42:20 on this episode. I truly, truly appreciate each and every single one of you for being here. And we will see you on the next episode.

The Personal Finance Podcast - Are You Truly Diversified? How to Protect Your Wealth for the Future (Money Q&A)

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