In order to grow your wealth, you’ve got to understand where your money is going. That’s why we recommend signing up with Personal Capital, a financial tech company with the most sophisticated and free financial tools on the web. They’ve been around for over five years, and was founded by Bill Harris, the ex-CEO of Paypal and Intuit. Personal Capital has nearly 1 million subscribers, tracking over $100 Billion in assets.
Here are our favorite features about Personal Capital’s free financial tools.
#1 HIDDEN PORTFOLIO FEE ANALYSIS
This is one of the most interesting features on the website. Instead of being forced to learn all of the tricks on how mutual funds charge fees… the software on Personal Capital will run the numbers *for you* by clicking on the Portfolio Fee Analysis tool.
If you are running in blind, not knowing what you are being charged, you could lose out on hundreds of thousands of dollars over the next 10+ years.
Notably, we are not saying that there is anything “wrong” with paying a fee. Just make sure you are paying fees for a *reason*. If your fund manager is generating returns that are 5% above the benchmark, then there is nothing wrong with a 1% extra fee. However. If he is only giving you returns that *meet* the benchmark… Every single penny in excess fees is being flushed down the drain.
The chart above is a good depiction of how much a 0.62% difference in additional fees can make:
1) If you have $1.4M in contributions and you are being charged 0.62% in extra fees, this would lead to $1.5M in total fees paid over the next 35 years!
2) At the bottom, you can see that they will show your expense ratios for every single fund you own. This will help you move money around and avoid paying additional fees based on your risk tolerance
3) Finally, by analyzing your total fees, you’ll get a quick snapshot of how much *time* is being lost due to an incorrect asset allocation set up
#2 INVESTMENT PORTFOLIO ANALYSIS
Everyone reading this page is going to have a different risk tolerance. Some may be financially independent. Some people are looking to simply protect their assets. Others may want to grow their portfolio aggressively. We don’t know. The good news is that regardless of your strategy you can look at all of your assets under a single snapshot when your accounts are spread across multiple brokerage firms.
Here you’ll see a clear breakout of your portfolio. The general thesis is that most people should take more risk up front when they are younger (smaller caps/mid caps) then work to larger caps/bonds as they get older. Without opening up a single excel sheet to calculate your weights you can simply login to the interface and find your portfolio mix.
#3 INCOME AND EXPENSES MANAGEMENT
The other benefit of linking all of your accounts in a single place is that you can track all of your transactions and all of your fees in one place. This means you don’t have to create elaborate excel sheets and use another piece of software to track your spending habits.
In short? It is an organized snapshot of what you are doing on a monthly basis.
With an ability to track all of your *cash flow* you will save time managing your working capital. This is particularly true for those of you that operate a medium to large scale business. Tracking all the inflows and outflows of cash is paramount to making sure you keep your credit rating high, keep your stress levels low and keep your business running smoothly. For fun, this is particularly important if you work in affiliate/internet marketing.
#4 NET WORTH TRACKER AND PORTFOLIO RETURNS
Now that we’ve covered the downside piece: fees, bills and credit management… The next key is tracking your overall progress in terms of net worth growth. You can get a clear sense of where your net worth increase is coming from: 1) investment gains, 2) business growth, 3) career promotion etc.
If you are someone with $100K+ in assets and do not know where to allocate resources, the Company will also give you a consultation. For *free*. We have received many requests for personal finance consulting and simply do not have the time to do so (we will never trade time for money). That said, we can recommend personal capital as a way to get an idea of risk tolerance, expected returns and asset allocation. If your net worth is well into the six figure range, it makes no sense to have all of your money sitting in cash earning 0% (losing 2% due to inflation).
In short? We’re never going to do financial consulting so we’re happily recommending Personal Capital to fill the void.
The best way to grow your wealth is to stay on top of your money. You can’t optimize your finances if you don’t know where your money is going. By signing up with Personal Capital for free, not only can you easily track your net worth, you can also analyze your portfolio for excessive fees through their Portfolio Fee Tracker tool, and run a Monte Carlo simulation retirement cash flow analysis through their Retirement Planner.
Using Excel is so old school. Why not benefit from hundreds of millions of dollars flowing through to the financial technology industry to help consumers with their finances? There’s no better free financial tool out there that has helped us grow our net worths over the years.
#1: Link up all of your financial accounts e.g. brokerage accounts, 401k, savings account, checking account, IRA, mortgages, real estate, etc.
#2: Click on Advisor Tools on the top right and then click on Investment Checkup to see whether your existing portfolio is weighted properly to Personal Capital’s recommended portfolio allocation based on your own risk tolerance answers.
#3: Click on Advisor Tools and then Retirement Planner to run a 5,000+ algorithm Monte Carlo analysis to see if your cash flow in retirement is on track. Play around with pro forma expenses such as a car, college tuition, etc. Adjust your numbers so that you have at least a 90% of success.
#4: Click Transactions on the top of the homepage to monitor your income and expenses. Personal Capital makes it easy for you to eyeball funny look expenses that could be fraud.
#5: Easily track your net worth and your portfolio performance from the dashboard. Once you link up all your accounts, you’ll have peace of mind knowing that you’ve got a handle on your finances.
Sign up for Personal Capital today for free. You’ll be happy you did.
Updated for 2017.