Free Wealth Management

Dear Financially Empowered,

For all of you who want to get a better hold of your finances, I recommend signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can get a holistic view of your finances. The company is based right here in my hometown of San Francisco and was founded in 2011 by Bill Harris, former CEO of Intuit and Paypal. I believe in Personal Capital so much that I decided to come out of early retirement and consult for them starting in 2014.

Seven Reasons To Join Personal Capital

1) Simplicity And Less Stress. Before Personal Capital, I had to log into eight different financial institutions to track over 30 different financial accounts ranging from brokerage accounts, money market accounts, CD accounts, checking accounts, IRA, and my 401K. My finances were a mess, and I’m sure your finances could use some organization as well. Now I can just log into Personal Capital to see how everything is doing in one place. It’s important to have a holistic view of your overall financial health so you know where to allocate resources. It takes less than one minute to sign up and their system is safe and secure.

2) Net Worth Overview. Gone are the days where you have to use an Excel spreadsheet to manually update every single asset and liability line item to calculate your net worth. Personal Capital updates your net worth automatically as soon as you log in because all your accounts are linked. They provide a pie chart of your assets as well as gives you a historical chart of your net worth progression. If you cannot find an account in their database, you can simply add it yourself. Personal Capital will also conveniently e-mail you a weekly snap shot of your latest net worth along with how the markets did, upcoming bills, latest insightful blog posts and accounts that need your attention. Below is a sample headline snapshot.

Personal Capital Net Worth E-mail Updates

3) Tracks Your Cash Flow. It’s important everybody has at least a basic budget and knows where their money is going. Personal Capital aggregates all your spending and compartmentalizes your spending into various categories for you. Over time, you will see a bar chart that can provide a snapshot of whether you are on track, or need to dial things down a notch. Income is also tracked and aggregated. Below is a chart where an individual made $8,386 but reduced savings by $44,640 because he spent $35,000 on a CD, $14,248.14 in taxes, and so forth.

Cash Flow Tracker Personal Capital

4) Helps You Balance Risk. With all your accounts in one place, you will get an overview of what asset classes your net worth is spread across. With so many accounts, it’s often hard to see exactly what’s going where. For example, so many people were too overweight stocks before the financial crash in 2009. With Personal Capital, you can easily see where the imbalances are in your net worth so you can make smart adjustments. Their new Investment Checkup tool analyzes your portfolio’s holdings based on size, style, and sector.  Personal Capital excels for those who have assets in the stock market. Personally, I like to maintain a 35%, 35%, 30% split between stocks, real estate, and CDs/bonds.

Portfolio Risk

5) Helps Reduce Fees. One of my favorite tools Personal Capital provides is their Portfolio Fee Analyzer. I ran my 401K through their fee analyzer and discovered that I am paying over $1,750 a year in management fees. I had no idea that my Fidelity Large Cap Growth fund cost $1,200 a year due to a 0.74% expense ratio compared to sub 0.3% for my Vanguard Funds. As a result, I found a similar Large Cap index fund instead and am now saving $1,000 a year. Without Personal Capital, I would have spent over $40,000 in excessive fees over the next 20 years. Take a look at my example below. Portfolio fees are a serious problem which will rob you of your retirement wealth if you are not careful. Don’t let ignorance rob you of your financial well being.

Mutual Fund Fees Graph Personal Capital

6) Shows Your Portfolio’s Investment Efficiency. Based on your risk tolerance and investment objectives questionnaire, Personal Capital will give you an idea of where your current allocation is on the Efficient Frontier Curve. The Efficient Frontier Curve is the best returns for a certain level of risk. You want to be on the curve and not above or below.

Risk Return Personal Capital

7) Recommends Specific Dollar Amounts To Invest. Financial advice is useless if there is no actionable advice. Personal Capital will recommend the specific dollar amounts to invest or reinvest in each asset class to get you to an optimal asset allocation. In this example below, the investor is too heavily weighted in cash. In order to get to his recommended target allocation the investor needs to increase stock holdings by roughly $200,000 and bond holdings by roughly $100,000. The fun part is figuring out which index funds to invest in each category. All investment related charts and analysis can be found in the Investing tab.

Personal Capital Recommendation Of Assets

Bottom Line

When you know where your money is going and where it’s being invested, you gain a tremendous amount of confidence in your financial well being. One of my biggest goals on Financial Samurai is to help everyone achieve financial independence sooner, rather than later. You may not be wealthy now, but just knowing you’ve got your finances in order and have a financial plan tremendously increases your chances of financial success. Once you are financially secure, you free to do whatever you truly want.

Get a handle on your finances by signing up with Personal Capital and aggregating all your accounts. The financial management tools are free, takes less than a minute to sign up, and allows you to even find a personal financial advisor if interested. I spent the past 13 years meticulously tracking my own finances to achieve financial freedom. If I discovered Personal Capital earlier, I think I would have reached freedom even sooner!

About the Author: Sam began investing his own money ever since he opened a Charles Schwab brokerage account online in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college on Wall Street. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. He also became Series 7 and Series 63 registered. In 2012, Sam was able to retire at the age of 35 largely due to his investments that now generate over six figures a year in passive income. He now spends time playing tennis, hanging out with family, and writing online to help others achieve financial freedom.

FinancialSamurai.com began in 2009 and is now one of the web’s largest personal finance sites with over 550,000 page views a month.