To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on March 16, 2021.
Alison Southwick: This is Motley Fool Answers. I’m Alison Southwick, and I’m joined as always by Robert, Robi the money, Brokamp. Have we already done that one?
Robert Brokamp: I don’t know, I don’t remember, but I liked it.
Southwick: He’s the Personal Finance Expert here at the Motley Fool. In this week’s episode, we’re going to review some tools, I’m not letting you talk. In this week’s episode, we’re going to review some tools and apps to help you track your spending, investment returns, and goals for retirement. All that and more, I promise I will let Bro talk, on this week’s episode of Motley Fool Answers.
So, Bro, what’s up?
Brokamp: I got a couple of things here, just a couple. Let’s see No. 1, save that stimulus. A couple of weeks ago, we revealed the latest average 401(k) balances according to Fidelity, but a 401(k) is just a single slice of a household’s finances. Net worth would be a more comprehensive measure, and fortunately, we have some numbers from the Federal Reserve that are sort of recent. Every three years, the Federal Reserve does its survey of consumer finances and last time was in 2019 and the results were at least last fall. Here they are.
This is median net worth by age. Remember, median is where half the people have more and half the people have less. In the 35-44 age group, $91,000; 45-54 age group, $169,000; 55-64, $213,000; 65-74, $266,000. Now, by net worth, what we mean is everything you own, which is your brokerage account, your IRA, your house, your vehicles, minus everything you owe, so you take out your debt. Now, that’s the median. By the way, the average is about 4-5 times higher. Just as an example, remember 45-54, the median was $169,000, the average is $833,000. That’s because you have a concentration of wealth in the upper echelons here in America where they throw off the average. So median is probably a better measure. Overall, the median net worth grew 16% from 2016 to 2019, and given how much stocks and home prices have grown over the last year despite the recession, I suspect it’s even higher now. However, for many families, it’s still not enough, so you consider that median net worth of $213,000 for families in the 55-64 age group. These are people who are right about to retire or already have retired. A large percentage of that figure is home equity, which isn’t easy to spend. But even if all that money were in an IRA that could be used for retirement, it still would provide less than $10,000 in annual income.
Of course, some of these people have pensions, most have social security, but the typical American is still behind in saving for retirement, which brings us to the economic impact payments, otherwise known as the stimulus checks. You could see if you’re eligible, and if so, into which bank account it will go, if you have that on record with the IRS, by visiting the Get My Payment tool at the IRS website. Payment is $1,400 per eligible person, so a family of four could receive almost $6,000. But regardless of your payment status, you should take steps to make sure your savings goals are on track, and we’re going to talk a little bit about ways to do that later in this show. If you’re behind and you’ll get a payment, consider putting that money in an IRA. You still have time to do it for 2020. Or if you have kids who are going to go to college, you could put it in a Coverdell or a 529, but you’ve got to make sure that you take care of your retirement first. Of course, this is just a one-time deposit. Ideally, you’d find other ways to boost your savings each month if you’re behind.
Moving on to item No. 2, I referenced it earlier, and that is, home prices are up but rents are down. Holy shaving cream, in the market for putting a roof over your head these days is in unprecedented territory. Let’s first start with the home prices. According to Realtor.com, the February national median listing price was $350,000, that’s up almost 14% compared to last year. In 2020, homeowners gained an average of $26,000 in home equity according to CoreLogic. According to Zillow, home prices increased in each of the 100 largest metro areas, yet the cost of rent in many of these areas is actually going down. An article by Derek Thompson in The Atlantic quoted Jeff Tucker, who is the senior economist at Zillow as saying, “I can’t think of a time when anything like this happened before. This is unprecedented.”
Let’s talk about why this is happening, and most of what I’m going to mention comes from that Atlantic article subtitled Why America’s Housing Market Has Never Been Weirder, a New York Times article entitled Where Have All the Houses Gone? and the CNBC article with the headline The Housing Market Stands at a Tipping Point. First, why have home prices gone up? But we’ve mentioned it on the show before, historically low mortgage rates and very low inventory. In 2016, there were almost 1.5 million houses on the market. Today, it’s less than half million. The reasons for the low inventory are many, but here are the biggies. Even before the pandemic, fewer houses were being built, partially as a sort of a hangover from the Great Recession of 2007-2009, so inventory was already becoming a problem. But then came the pandemic, folks didn’t want prospective buyers traipsing through their homes, especially boomers and the older generation who owned most of the homes, and they also didn’t want to go looking for a new home either. Ralph Mclaughlin, the chief economist at Haus, H-A-U-S, which is a housing finance start-up, told the Times that, “Every additional home that gets pulled off the market incentivizes someone else to not sell their house. It’s a self-reinforcing cycle.”
Because if you think about it, if you want to sell your house, you check the inventory for where you want to go first, but if there’s not much on the market, you’re inclined to stay put. Those low mortgage rates have contributed to bidding wars that have driven up prices. According to Redfin, nationwide, 58% of home offers written by Redfin agents faced a bidding war and that is the ninth straight month in which more than half of all offers saw competition. But low rates can also encourage people to stay put, especially after they refinance or they see how much houses cost in the areas they want to go. This may become more problematic if rates continue to rise as they’ve done so far this year. If you think about it, once you have a 2.7% mortgage, it’s hard to let go of it. Michael Simonsen of Altos Research says that the low rates have also incentivized people to keep their first home as a rental property or as an Airbnb rather than sell it when they buy the second home. So those homes haven’t hit the market.
Also over the last year, you’ve heard about mortgage payments receiving forbearance and there have been moratoriums on foreclosures over the past year. That’s all good because we understand why that happened, but for many of these people in other times, they would have frankly been forced to sell their house due to financial difficulties, but instead, they’re able to stay in the house. Again, that’s another reason why more houses have not been sold. Then even the winter weather didn’t help. According to Realtor.com, severe winter storms across the country limited market activity resulting in newly listed homes declining by 25% year over year. Then finally, when it comes to inventory, wealthy Americans have been basically reliving their cabin fever by buying bigger or additional homes. According to The Atlantic article, “The typical 2020 homebuyer made nearly $100,000 a significantly higher income than the average homebuyer had in past years.” Jeff Tucker of Zillow said, “The pandemic and the feeling of not having enough space combined with low mortgage rates give a lot of higher income families a reason to pull forward home purchases that they were thinking of making in the next few years.”
That explains home prices going up, but why are rents going down? That probably starts with the K-shaped recovery where wealthier people have mostly recovered from last year’s downturn and frankly then some, whereas many lower income workers, who are more likely to be renters, are still struggling. Many have either downsized, they’ve doubled up, or they moved in with other family members. Immigration is down in this country and immigrants are more likely to rent, so that has also reduced demand. Many college kids, instead of renting a place near campus, have lived at home, and many younger folks such as recent college grads, have decided basically to live with their parents a little longer. Finally, many of the rentals are in cities where you pay up for amenities like restaurants and museums and clubs and sports. But most of those have been partially or completely closed so many people have decided it wasn’t worth paying more to live in the city.
During normal times, a divergence of home prices and rent prices hints that we could be entering a housing bubble as what happened in 2006. Certainly at some point, buying a house will just not be possible for many people at the current pace of price increases. Consider that material prices like lumber have gone up significantly. According to the National Association of Home Builders, higher prices for materials have added about $26,000 to the cost of building a new home. This is making new homes less affordable. Now, about 60% of all U.S. households are not able to afford a median price new home, again, according to the National Association of Home Builders. You throw in rising mortgage rates and you can’t help but think that prices at some point are going to level out, but as is often the case with soaring prices of any asset, it’s pretty hard to predict when that point will come. Mark Zandi, an economist at Moody’s, told The New York Times that we’re not quite yet in bubble territory. He said, “I don’t think it’s red flares, I think it’s yellow flares. But if we have another year like we had in the past year, we’re going to have a lot of red flares going up.” That, Alison, is what’s up.
Southwick: Some of us can be downright obsessed with maximizing our money potential. Then others, like me, enjoy a more set-it-and-forget-it lifestyle. The good news is that there are many tools and apps you can use no matter where you are on your money journey. So today, we’ve invited a couple of Fools, Doug Reale and Lauren Boland, to share with us their experience with tools like Mint, Personal Capital and even the good old-fashioned spreadsheet. Doug and Lauren, thanks for joining us.
Lauren Boland: Hey, thanks.
Doug Reale: Hi, Alison. Great to be here.
Southwick: All right. Let’s start off by getting to know you two a little bit because you’re not necessarily on the front lines here at The Motley Fool. You’re more behind the scenes making our members smarter, happier, and richer. So Doug, we’ll start with you.
Reale: Hi. I’m a product and tech lead. I work between our business leaders and our tech leaders to build the solutions that make it possible for you to see your investment recommendations and read our articles.
Southwick: That’s awesome. Tell us a little bit about your money journey. Have you always been fastidious with your money?
Reale: No, not at all. I’ve come a long way, I’m 35, and I feel like I just became good at managing my money and budget. It was a process that started after college when I had my first job that didn’t pay so well. I got into some trouble with credit card debt. But then once my income grew, I really wanted to get out of that credit card debt and then set myself off for long term financial success. I’m now a master of budgeting, and because I’m a product manager, I love testing out new tools, so I’ve tried them all.
Southwick: Awesome. All right, Lauren, how about you? What do you do at The Fool?
Boland: I am a software developer for the Wealth Management group at The Fool. I generally build the tools that allow our clients to see their money that we invest for them and the tools that allow our financial planners to look and sound smart when they’re talking to the clients.
Southwick: Lauren, I think you’re one of the first people that I heard talk about the FIRE movement. Have you always been focused on that idea of Financial Independence, Retire Early?
Boland: Yeah, I think I have. I think very soon after graduating college, I discovered my now in-laws who were retiring at the age of 51. I honestly didn’t know that that was possible until that point in my life. Ever since then, I’ve been really focused on trying to make things like that happen in my financial life.
Southwick: Today, we’re going to talk about a number of tools for our listeners no matter where they are in their financial life. Some tools or apps that can help them track their spending or track their portfolio returns or track their goals. Let’s start with budgeting and tracking expenses. Bro, do you want to give us the basics on just what does it mean to even budget?
Brokamp: Well, it’s basically having a spending plan. You could have your money coming in and you have your money going out. You’ve got to make sure that they are generally in agreement. Plus, I would say it’s also important because some of that out money has to be going to money that is the place you want to save. We talked about investing here at The Motley Fool. I like to think of investing as buying companies. When you’re buying shares of things like Disney, a stock I own, for example, I think of that as buying part of that company. But before you do that, you’ve got to get your spending and your income lined up well, so you have that extra money so that you can invest for your future.
Southwick: I know, Doug, you said that you got into some trouble in your 20s, who didn’t? You, I believe, started with Mint. Why don’t we start with Mint and talk about Mint, what it does, and what it can do for our listeners?
Reale: Absolutely. My problem starting out was that I had no idea what I was spending. I knew what I was making, but not really paying attention to what my net cash was every month. I had no idea what I was spending, and that’s how I got in trouble with credit cards. I thought I was doing OK, I was buying things that I needed or some things that I wanted, and that added up over time as I did not have the cash to pay the bill every month, and then after a few months, I realized, oh, this balance is growing, I need to do something about that.
Mint as a tool is really great at seeing what money is coming in, what money is going out, and categorizing those into buckets that you can use to build a budget. Mint is a web app and a mobile app that’s now supported by Intuit where you connect all your different accounts. You log in to your bank account, you log in to your credit card accounts, and it automatically pulls your transactions in and uses AI and machine learning to categorize those things based on what it already knows about the merchant that you’ve swiped your card at. Over time, it will start collecting that information and help you put budget items together, like I want this much for groceries, I want this much for utilities, I want this much to go to my savings goal, and you do that on a month-by-month basis in Mint, and then you can see your performance over time. You can see how well you’re doing meeting your budget. You can see areas where maybe you are consistently going over budget and you might need to reassess what money you’ve allocated there. You can also get even deeper and track your net worth over time if you’ve connected all your accounts and put in all the value of your car and the value of your house. It’s basically a good tool to start with owning your financial life and knowing where every penny goes, which is such a valuable part of budgeting.
Southwick: Hey, Bro, you also use Mint, don’t you?
Brokamp: I do. I have used it in the past. I haven’t been using it quite as much. Things I like about Mint and the whole account aggregation process is that it is automated. You don’t have a spreadsheet where you’re manually inputting stuff. Mint has a couple of other pretty good features that keeps track of your credit score and gives you suggestions for how you can improve it. It will track your investments as well. It’s not known for that and it’s not the one that is probably the preferred tool for people who are really into investing, but it’s great for people who just want a general idea of where their investments are going and track their net worth. I would say overall, Mint is just a simple interface, a simple way to get a snapshot. I think because it’s not designed really for the real money nerds, I think it is perfect for the average person who just wants to keep on track of things. We talked about budgeting and making sure you don’t spend too much. You can set up alerts. If you’re getting too close to spend too much on a category, or if an account balance is too low, you can set up goals and it’ll track your goals. I think overall, it’s a great resource for the typical person, maybe who is a little bit of a set-it-and-forget-it, wants to check in just maybe once or twice a month.
Southwick: Lauren, I think I saw you on our money nerds Slack channel, it’s not called that, but you mentioned Tiller. That’s maybe one that’s a bit more for the money nerd who loves a good spreadsheet?
Boland: Yeah, I think it is a little bit more for the money nerd. Just to go back to what Bro said, I do love Mint for the set-it-and-forget-it nature of that. It’s very easy to set up. I think on the converse of that, Tiller, you can set it up automatically a lot like Mint where you connect all your accounts and all your transactions come into the application, but it actually feeds that information into a spreadsheet on Google Sheets or Excel. If you’re the kind of person that loves to use a good spreadsheet, you can kill it on the pivot tables, you love to make your own graphs, Tiller allows those automated transactions to load up and has some basic dashboard stuff already set up for you, but you can customize it to do lots of things. There are ways to track investments, write down what’s your capital gains, short term, long term for each investment, watching your net worth grow over time, which is a lot like Mint does, but you can basically make a detailed dashboard to your specification.
Southwick: Then how do Mint and Tiller make money? Do you subscribe to it monthly?
Boland: Yeah. I will say that this is one of my favorite topics in software. As a software developer, it’s my job to create software and do things that help people. Things like Mint are free. Mint is run by the parent company Intuit. You don’t pay any monthly or yearly fee for it. All the tools are there, it’s great for you. However, the famous quote goes, “If you are not paying for a product, you are the product.” Mint will use your transaction data to feed that information to third party providers and they can give you ads. They can see, hey, Doug has spent X amount of money on IKEA in the last year, maybe he really is increasing the furniture in his house, so let’s feed him ads about furniture. When you don’t pay for a product like that, that’s what you get. Tiller, on the other hand, it does cost money per year. It’s $79 a year at the time of this recording. They promise not to sell your data, it’s in their privacy statement. They don’t look at your transaction, they don’t log it, they don’t do any of that. There are differences, pros and cons to that.
Southwick: All right, Bro, we also have one more to talk about, Microsoft Money for Excel. This is one I have not heard of.
Brokamp: It’s relatively new. There used to be a program, Microsoft Money, and it was a competitor quickly, and then they discontinued it. But then in June, Microsoft basically released a free spreadsheet, as long as you have Office or you have the 365 subscription to Microsoft. It’s an Excel budget spreadsheet, but like Tiller, it can pull in information from your account so you don’t have to manually enter it. It’s relatively new, so I did not see many great reviews on it. I downloaded it. I didn’t do the account aggregation. It’s basic, but again, if you love the bare bones of what they’re giving you and then you want to customize it, it’s great. Since we’re on the topic of free spreadsheet templates, I’ve got to mention a site that is under the umbrella of Motley Fool sites, and that is budgetsaresexy.com. Used to be run by our colorful fellow named J. Money now by another fellow named 5am Joel. Just go to budgetsaresexy.com, you’ll see a tab for free budgeting templates. They have all kinds of free ones there for Google Sheets as well as Excel. I have to plug the fact that in the next episode, J. Money is going to be on the show talking about, I guess, why budgets are sexy, but also one of his later ventures for The Motley Fool called All-Star Money, where he is everyday publishing three of the best personal finance blogs he finds every day. You have that to look forward to, folks.
Southwick: Then last one we’ll talk about before we move on is You Need a Budget?
Brokamp: Yes. Often referred to as YNAB. It is really purely a budgeting tool. It has a very loyal following. One reviewer called it actually a cult following. The great thing about YNAB is it’s not just a tool, it’s a methodology. It has a philosophy, it has four rules, give every dollar a job, save for a rainy day, roll with the punches, and live on last month’s income. It’s got something called the age of money. When you log in, you’ll see the age of your money. Here’s how they explain it. YNAB’s age of money tells you how long your dollars have been in your possession before you spend them. If your age of money is 14 days old, that means you’re spending money you earned two weeks ago. Once your age of money hits 30-50 days, you’re living on last month’s money and are no longer strictly living by a paycheck. I think that kind of describes what they’re looking for, they’re looking for you to get to a point where you’re not living paycheck to paycheck. The whole purpose of the give every dollar a job, you’re sending that dollar to some specific item of your budget. If you go over that budget category, you have to pull money from somewhere else and the alert doesn’t go away unless you’ve figured it all out. It does not track investments. So really, it’s a budgeting tool. You can try it for 30 days free but then you do have to pay for it, the annual plan is $84 a year, monthly $11.99 per month. But as I said, the people who use YNAB really love it and you’ll find lots of videos on YouTube of people singing the praises of YNAB.
Southwick: As you mentioned, some of the tools we talked about before, they maybe aren’t good for tracking your portfolio and your investments or maybe they don’t do it at all. Let’s dig in to some tools that are better for those of you out there who are wanting to track your portfolio and your investment returns in a nerding out sort of way. Doug, let’s start off by talking about Personal Capital.
Reale: Sure. Personal Capital is really interesting because it lets you aggregate your investment accounts into one place, where Mint will aggregate your checking account and your credit card accounts, it will also look at your investment accounts but the features aren’t so great. What Personal Capital does is let you log in to your brokerage account, your employer-sponsored retirement plan, your online savings accounts, and track those assets in one tool versus having to log in to multiple different accounts just to see how your holdings are performing. When you have all your information in one tool like Personal Capital, there’s another one that’s very similar called SigFig, what you can do is you can really get a sense of what your asset allocation is, what your exposure is to different sectors or to different asset classes that you might not be able to easily do if you have a brokerage account at TD and then you have a retirement plan with your employer that’s a 401(k) at Schwab, you’d have to log in to all those different tools to see that.
Maybe you’re like me and you have multiple brokerage accounts because you inherited one or you have one from a marriage, or you have multiple IRAs because you and your wife both have IRAs. The situation I was in is I wanted to see all that information in one place, and Personal Capital is great for that. Then once the information is there, like I said, there’s all sorts of things you can see. You can see your performance over time, you can see how you track versus benchmarks. Personal Capital really lets you drill through different time frames to see how you’re performing against the S&P 500 or against the total U.S. stock market. If you’re one of those people like me that your primary goal now that you’ve got a budget in place is to beat the market and make the most money you can, Personal Capital tool is going to help you do that by tracking your assets across multiple accounts.
Southwick: We just talked about Personal Capital, you mentioned SigFig. You use SigFig, is that right? Why do you use SigFig over Personal Capital?
Reale: I use them both actually because there are different things that they’re each good at. Personal Capital has really strong benchmarking and it has a great way of seeing your allocation across different sectors and across different asset classes, so bonds, stocks, cash, things like that. SigFig has a better app for tracking your performance day to day. If you’re the kind of person that wants to see how your stocks are performing today, then the SigFig app lets you see those gains and losses on a specific day as the market goes through the day. It also has really great email notifications. One of the things SigFig does well is you can get daily or weekly emails that tell you how your portfolio has performed, it will tell you your top gainers, your top losers, some featured news stories about the largest positions in your portfolio. It also keeps track for you week to week of your performance against your benchmark. I can see week to week like, I’m beating the market now. This is great, I’m doing exactly what I want to do.
Brokamp: To add a couple of things about Personal Capital, first of all, it’s free, but as Lauren said, you’re the product. What you’re going to be marketed is Personal Capital’s wealth management services, which if I understand it, you have to have a minimum of $100,000, and then you pay an annual fee. As long as you can handle that marketing, everyone’s, wow, it’s fine. The other thing I’ll say is it’s owned by Empower Retirement, which is one of the biggest retirement plan providers for employers. It’s got a particularly good retirement planning tool. If you like a good retirement calculator built into your aggregated accounts and it uses all your individual information into the retirement planning tool, Personal Capital is also known for that.
Boland: I think it’s worth noting to listeners who maybe haven’t put it together yet, but the common theme in a lot of these tools is visibility. If you have everything in front of you and you’re used to just making it through the month and knowing that your bills are paid, and now, all of a sudden, everything’s in front of you, I think your situation improves a lot.
Brokamp: Do we know what’s the pricing for SigFig, is that free or do they charge?
Reale: It’s the same as Personal Capital where they have asset management, wealth management. If you don’t turn the email notifications off, you’ll get pinged every couple of weeks to make an appointment with an advisor who is going to try and sell you their solutions.
Southwick: All right. Doug, you use these tools, but you also like to geek out a little bit more. With that, you use Excel spreadsheets? What does an Excel spreadsheet help you do that SigFig and Personal Finance aren’t going to be able to help you do?
Reale: As my financial knowledge has matured and as my income has grown, I’ve found new problems that need to be solved. Initially, I needed to make a budget, so Mint was a great tool for that. Then I wanted to see my assets and performance across all my accounts, and Personal Capital and SigFig were good tools for that. But then as I kept investing in taxable accounts and kept adding to positions and following Motley Fool guidance of adding to my winners and not being afraid to enter regardless of what the price is, I ended up with lots of different positions. My largest holding is Roku, I have more than a dozen different lots that I’ve purchased over several years. I would like to see the performance of each of those because for tax reasons, if I have to sell those, I want to know what my capital gains are going to be, if it’s long or if it’s short.
So what I use spreadsheet for is putting all of my different lots in a spreadsheet based on the purchase date, the cost basis, and when what Excel and Google Sheets can do is there are built-in formulas where you can pull in real-time price information. You save the information about your trade, and you know I added 12 shares on this day at this cost, and you collect that over time and see the total value of your position, you can even throw a pivot table on it and see what weight each of your positions is in your portfolio. But what I do, which I think is really good visibility, is I use formulas to know if a certain position is short or long based on the trade date and today. Then I know what my marginal tax bracket is, I know what my state income tax bracket is. I make the formula once and then every time you add your trades, you know if I sold this today, this is what my tax liability is going to be. It really helps you plan your tax efficiency and knowing what it’s going to cost you if you have to sell a position.
Southwick: Bro, what are some other tools that go beyond basic budgeting?
Brokamp: I’ll go to Quicken which is the OG personal finance tool. The first version came out in 1984, used to be owned by Intuit but then Intuit bought Mint, liked Mint better, sold Quicken to a venture firm in 2016, though Quicken’s current CEO is Eric Dunn and he’s been working on it since like ’86, he was employee No. 4 at Intuit. Here’s the way I think it’s best to think of Quicken. We’ve talked about tools like Mint and YNAB, and they’re for budgeters. Quicken is for someone who has more of an accountant website. First of all, if you just look at it, it looks like something an accountant would use. It’s more detailed, it allows for all kinds of different reports, you track your spending and bills like the other tools but also loans, portfolios, even taxes. It’s particularly appealing to business owners. I should point out that there are versions of Quicken, there’s Starter, Deluxe, Premier, Home & Business. Premier, I think, is really the way to go. It’s normally around $78 a year. It’s on sale now for $47. It comes with BillPay. All these other tools will sell that bill alerts, but you can actually pay your bills through Quicken. You get a certain amount of storage and Dropbox through Quicken. If you are a business owner, you might want to look at Home & Business, which is more complex and built for setting up things like your inventory and your sales.
I will say though that the Home & Business version of Quicken is only available on the PC, not the Mac, which brings to another point about Quicken, and that is of these tools, you do download it to your computer. It does have a web-based feature that will update information and you could do some things on it, but it really is built for people to do on your computer, it’s software on your computer. The other thing I like about Quicken is that the tracking of investments is also more granular, more detailed than you will see in something like Mint. Part of that is you get Morningstar’s X-Ray feature, which is something I’ve talked about before on the show. The thing I love about Morningstar’s X-Ray is that you put in all your investments, it categorizes all of them, and lets you know how much you have in the U.S., international, large cap, small cap, in different sectors. But it also looks into your mutual funds and says besides, for example, your individual holding in Apple, you also own these three funds that own Apple. All told, 6% of your portfolio is in Apple, so it’s much more detailed. I have known people who have been longtime budgeters and they just swear by Quicken. They’ve tried all the other tools, but because of its ability to do things like taxes, and it’s also got a good retirement planner, they love Quicken.
Southwick: Lauren, your sweet spot for geeking out really comes around retirement calculators, setting long-term goals, retirement planning. Not so much investing in the individual stocks, you’re more of an index person. I don’t know a lot about retirement calculators. Should I just step back and let you and Bro just geek out together? I feel like that’s what I should do, is just get out of the way.
Boland: I mean, maybe. One of the things about retirement calculators that I really personally enjoy is that it’s really hard for the human brain to comprehend compound interest beyond a couple of years. If you think about inflation and how much something cost 30 years ago, it’s hard to comprehend what it’s going to cost 30 years from now and how your money is going to grow to meet that need. That’s why I feel like tools that can map things out far in the future and account for inflation are definitely worthwhile, and they are very visual and they can help calm any fears of the future. So yes, I’ve geek out on several different retirement calculators. I run my own retirement calculator website. That particular one is called cFIREsim. Terrible branding. But yeah, it essentially uses historical data, and your portfolio, and your spending numbers to determine whether or not your retirement would’ve survived the 1929 stock market crash or the stagflation of the ’70s. It’s a great visual tool. I have made it for myself honestly, originally, and just to see how the future holds, and plenty of people use it. There are similar things out there, like the, what’s it called firecalc.com, similar name, similar title, does a little less flexibility than what I have out there, but it’s a great, simple tool to use. Yeah, long-term planning is definitely my thing to geek on.
Brokamp: I’ve used Lauren’s tool. It’s great. I’ve recommended it in articles as well as FIRECalc. FIRECalc is like the original self-made retirement planner tool. When you go to that website, it’s just firecalc.com, FIRE standing for financial independence, retire early. It looks like it hasn’t been updated since 1999, but don’t be turned off by that. It’s still pretty handy. I’ll just mention a couple of others that I like. A really popular one is T. Rowe Price retirement income calculator. You can do lots of different things with that one. Then another one developed by CalcXML, and I like this one partially because they let me have some input into it. The downside is I have to give the URL, and it’s really long, and it’s unfortunately unwieldy for a podcast. But here it is. You’re ready?
Southwick: Here we go.
Brokamp: www.calcxml, that’s calcxml.com/calculators/retirement-planning?skn=606. Maybe we’ll actually even tweet that out. What do you think?
Boland: Yeah, and to add to that, I would say another tool that I really enjoy is something called i-ORP, www.i-orp.com. I believe it stands for the optimal retirement plan. It has everything to do with tax optimization. You put in whether you have 401(k), post-tax brokerage accounts, all those different tax advantage accounts, and then it will essentially try to simulate out the most optimal way to withdraw those things based on your situation and the current tax laws. It’s updated every year. Like Bro mentioned, the FIRECalc website, i-ORP looks like it was from 1996, but it is very cool on the back-end of the calculations.
Southwick: I feel like that’s what it means to be a retirement calculator geek. It’s like the rougher the site looks, the better it is behind the scenes. Well, all the tools we talked about are just some of the tools. There are a ton of tools out there. Lauren, you brought up a good point in a planning meeting that a lot of these tools that you pay for, they actually have a trial period, so you can take them for a test drive.
Boland: Absolutely. I would definitely recommend to any listeners that you be patient with yourself. Taking the first step to use one of these tools is a big step, but they’re all made for different kinds of personalities and situations. Take the time to do the trial, listen to videos about it, work your way through the trial, and get everything set up. If it doesn’t work for you, your personality, or your use case, move on to the next tool. I’ve used almost every single tool we’ve talked about here. YNAB just wasn’t for me. It has a very high learning curve and didn’t fit my personal use cases, but I eventually went to Mint and I have used Personal Capital, and now, I’m using Tiller. Find the one that works for you.
Southwick: All right. Before we go, what’s something beyond a tool or an app, Doug and Lauren, that you use to stay on top of personal finance news or just learn more tips and tricks for how to manage your money? Doug, do you want to go first?
Reale: I usually just Google my question. What’s interesting about that is there are a lot of great personal finance sites like Financial Samurai and Mr. Money Mustache, Budgets Are Sexy, some of the other sites under The Motley Fool. But sometimes, you have a very specific question, and maybe this is wrong, but I tend to trust Google’s algorithm helping me find the right answer for my specific question. I’ve never followed any particular blog, but I’ve learned different things across a lot of different blogs. If you are just starting out, there is a great book called The Index Card, which I think is very useful for understanding what to do with money. It’s a little more heavy toward investing. You have to have a foundation because if you’re not budgeting, if you don’t know where every penny goes, then you can’t have later success. So really just figuring out what your problem is and finding a solution to your problem.
Southwick: Lauren, how about you?
Boland: Yeah, I’m a big fan of communities in general. I am a power user of Reddit, which you basically can make a community on your own. There’s Personal Finance Subreddit, there’s a FIRE Subreddit, there’s specific ones for budgeting where you can ask those questions and have real people have a full conversation about it. I would be remiss if I didn’t mention in this month that we talked a lot about women’s history, that there’s a community out there called the womenspersonalfinance.org. It’s set up for women by women talking about all things, personal finance related, not just FIRE or anything, and a welcoming place for people who have maybe historically been shunned from doing financial things.
Southwick: Doug, Lauren, thank you so much for joining us and sharing your experience and expertise on some of these money tools. We’d love to have you back again someday.
Boland: That was great, Alison. Thanks.
Reale: Thank you. This was fun. I would like to say, Lauren, the ads that I would be getting from Mint, those would definitely be Lego ads.
Southwick: Well, that’s the show. It’s edited auto-magically by Rick Engdahl. Our email is firstname.lastname@example.org. Robert Brokamp, I’m Alison Southwick. Stay Foolish, everybody!
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.