Free Wealth Tool

For those that want a free way to manage their finances leading up to and in retirement, I recommend signing up for Personal Capital. They are an online software where users can link all of their accounts to track their portfolio, income, expenses, and much more. The best thing about this software is that once you link all of your accounts, you can run all sorts of reports that really put you ahead of the game.

Here’s why I’m a raving fan of Personal Capital:

Link Accounts – Track Net Worth

Like Mint and Quicken, you can link your accounts. Checking, Brokerage, IRA, 401(k) – you name it and it links into the Personal Capital Dashboard. I had to add one account manually because I didn’t have my mortgage account login on the bank’s website – I was just using web bill pay for it. So you may have situations where you have to add an account manually. If so, click on the plus sign at the top left of your screen, then go to the “more” button at the bottom right of the pop up.

Personal Capital - add account

Now that you’ve got all your accounts uploaded, the fun starts. This is where the real power of Personal Capital is on display. This software automatically updates your net worth and is always displayed in the top left of your dashboard. After you’ve been on Personal Capital for a while – say, several months – click on Net Worth in the top left corner. You’ll see a chart with time on the x axis and your net worth on the y axis. Hopefully, as time goes by you’ll see a slow and steady line up and to the right.

Retirement Planner

Go to Advisor Tools on the main dashboard and click on Retirement Planner. Personal Capital automatically generates a retirement report based assumptions which you can change.

Personal Capital - retirement planner

For you soon-to-be retirees, this tool is great to see if you’re on track to retire. The closer you get to retirement, the more accurate the forecasted percentage chance that your portfolio will support your goals (expenses) in retirement. And of course you can change the numbers around to see what you’ll need in order to get your percentage in the high 90’s.

Investment Checkup

Go to Advisor Tools on the main dashboard and click on Investment Checkup. Since Personal Capital links to all your accounts, the software can see what your investments are. What most software lacks are actionable steps so you can correct potential issues in your portfolio. Investing in high-flying tech startups and oil futures? They pick it up and analyze it against their model portfolios. Again you don’t have to follow their advice, but it does give you some ideas as to where your blind spots are.

Personal Capital - Investment checkup

Personal Capital thinks my asset allocation is too aggressive! How dare they! Well, they’re absolutely right. I’m a bit over allocated to stocks and in particular domestics stocks.

Personal Capital - too aggressive

It really opened my eyes as to how concentrated I am in consumer defensive stocks too (at over 40% of my holdings!). And again, you don’t have to make a change, but it definitely makes you aware that your portfolio may be mis-allocated. I plan to change my sector allocation but am happy with my performance and my current position. Though I tend to be a bottom up stock picker that looks for deals in any sector.

Personal Capital - sector allocation

Retirement Fee Analyzer

Go to Advisor Tools on the main dashboard and click on 401k Fee Analyzer. This tool is worth its weight in gold.

It tells you if you’re paying too much for your 401(k). Now that’s actionable advice! If you’re carrying old 401(k)’s, you can roll them into a lower cost provider. If you’re getting ready to retire and your 401(k) has outrageous fees, then fire them and roll over to Vanguard, Fidelity, T Rowe Price, or Charles Schwab. You may have one of these plans but it’s possible you’re still paying too much. This tool will help and it’s totally free!

retirement fee analyzer

Portfolio Positions

Go to Portfolio on the main dashboard and click on Holdings.

Personal Capital - portfolio holdings

At this location you can see your entire portfolio in one place. You can also track your holdings against an index like the S&P 500 or DJIA.

Efficient Frontier Curve

The Efficient Frontier Curve shows the best returns for a certain level of risk. You want to be on the curve and not below or above. I’m just below the curve as I write this. It gives you a good idea if you’re taking too much risk based on your expected return.  You could reduce your risk without sacrificing too much return.

efficient frontier

Take Control of Your Finances

Signing up for Personal Capital is the first step in taking control of you finances. Once you link your accounts, run all the tools mentioned above to see how your portfolio measures up and if there are areas for improvement. It only takes a minute to sign up and several more to link your accounts. I wish they would’ve invented this software earlier. I’ve spent years updating spreadsheets and trying to figure out the best allocation manually.

 

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