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President Donald Trump is a very rich man. He says he barely pays attention to his money.
Asked on “60 Minutes” about a Forbes report that his net worth had climbed by $3 billion, Trump said, “I devote almost no time to my net worth. I don’t care.” The interview aired Nov. 8. (1)
He said most of his money is “given to the biggest firms on Wall Street to invest,” adding, “and they’re index funds.”
Trump brought up reports that his accounts had traded tens of thousands of stocks and said the firms handle it: “It’s all computer generated. I have no idea what the hell they’re buying.” (1)
He also said one of his sons “watches over money” for him: “I don’t even talk to him about it.” (1)
I’ll give the president this: Index funds are a smart place to park money. The SEC says passive funds usually mean less trading and “lower fees and expenses than actively managed funds.” (2)
But someone with Trump’s money can afford to shrug.
You can’t. I’ve been a CPA since 1981, and what you don’t look at can quietly cost you.
The SEC’s own example shows $100,000 earning 4% a year grows to about $208,000 in 20 years with a 0.25% annual fee, but only about $179,000 with a 1% fee. (3) That’s roughly $29,000 gone to fees.
Here are five things you need to know about your money, even if Trump doesn’t know about his.
1. What you’re paying
Most fees don’t show up as a bill. They come out of your returns, year after year, so they’re easy to miss.
Look up the expense ratio of every fund in your 401(k) and IRA. If you pay an adviser, find out the annual fee and how it’s charged. That $29,000 gap in the SEC example came from a difference of three-quarters of a percentage point. (3)
If someone manages your money, make sure they’re a fiduciary, which means they’re obligated to put your interests first.
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2. What you own
Trump says his money sits in index funds. Do you know where your is?
Pull your latest statements and write down what you own, in what account, and how much. An index fund follows a particular index, so you can look up what that index holds. (2)
If you’ve got a target-date fund, check the stock-and-bond mix. If you own individual stocks, check whether one of them has grown into too big a slice of your total. Once a year is plenty. Never is too little.
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3. Who’s handling it
Trump says he hands his money to “the biggest firms on Wall Street.” (1) Many of us hand ours to one person.
Before you trust anyone with your savings, look them up. BrokerCheck is a free tool from FINRA, and its reports show a person’s employment history for the last 10 years, current registrations or licenses, and customer disputes or disciplinary events. It covers investment advisers as well as brokers. (4)
It takes a few minutes. Do it for anyone new, and do it again for the person you’ve used for 20 years.
4. Who’d step in
Trump has a son who watches over his money. If you got sick, or a scammer got to you, who would know?
Ask your brokerage to add a trusted contact to your account. FINRA describes it as being like an emergency contact. The firm can reach out to that person if it can’t reach you or suspects you’re being financially exploited. (5)
Naming a trusted contact doesn’t give that person authority to act for you or make transactions in your account. (5) That’s the point: It’s an early warning, not a handoff.
5. Where your cash sits
Trump says he has “a lotta cash.” (1) If you keep a big cash cushion, too, know the limits on its protection.
The FDIC’s standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. (6)
If your bank balances are bumping against that, spread the money among different banks or ownership categories. And make sure the cash earns something. Cash in a checking account paying next to nothing can lose ground to inflation.
Bottom line
Trump’s stated choice, index funds run by big firms, isn’t a bad one. It’s the not-looking part I’d never recommend.
When you’re that rich, a fee or a bad holding is a rounding error. When you’re living on a retirement account, it’s your groceries.
So look. Once a year, sit down with your statements and answer five questions: What do I pay? What do I own? Who handles it? Who’d step in? Where’s my cash?
An hour a year is a small price for knowing.
Sources: 1. CBS News “60 Minutes”; 2. Investor.gov (SEC); 3. Investor.gov (SEC); 4. FINRA; 5. FINRA; 6. FDIC
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