I read that line somewhere, and I thought this was so true. My stereotypical idea of a wealthy retirement is a rich man in a yacht, dentures gleaming, sailing across turquoise waters with a nice panama hat on. Or something like that.
I think we’ll agree that most of us who dream of financial independence and early retirement know that there will be no yachts involved. Why?
a) We will be trying to live within the budget according to the 4% rule, which for most of us won’t stretch to yachts.
b) We are too sensible, and after being careful with money for years in order to achieve FIRE, it would be physically painful to part with the kind of cash a yacht requires, and all the upkeep and mooring costs.
I’m sure there will certainly be some of you who manage to achieve enough wealth that in theory you could buy a yacht if you fancied it, and if you already have, I have only one question…can I join you for a cruise at dusk around a tropical island?
Back to the blog at hand…I got more than a little carried away there, sorry…the point here is –
DON’T BE MAKING OTHER PEOPLE WEALTHY BEFORE YOU MAKE YOURSELF WEALTHY!
I know you think I must be completely gone off my rocker now – after all, who intentionally would do that? But it’s so easily done…overspending on things that don’t bring quality to your life, whether it’s expensive eating out or brand name clothes, or whether it’s choosing a brokerage that’s charging you a fortune to do your investing, because they have a big brand name.
Whose yacht is it anyway?
If you haven’t already started investing, do some good research on what’s what and who’s who when it comes to brokers. Don’t be buying your broker’s yacht! (Ok, I’ll drop the yacht thing now!).
Here’s a slice I lifted from Nasdaq.com to compare brokerages, however if you are (like me) a non-US citizen who is also a non US resident, you may find most of these are off limits to you anyway. There are a couple more US heavyweight names such as Schwab and Fidelity not listed here. To be honest, those that do allow us US aliens to use their service tend to want quite a hefty chunk of cash as a minimum account balance, up to 20K in some instances. For Joe Consumer like you and I who are have just arrived on the scene, this will be laughable in many cases.
If you’re like me of the generation where you like to be able to access your US investment accounts by app, for low fees, with no minimum balances required then I found IG and Drivewealth to be the most interesting.
IG allows lots of different types of trading such as shares, ETFs, Forex, CFD, spread bets, options, bonds, margin trading, commodities etc.
Drivewealth only deal in shares, ETFs and margin trading.
Here are their current costs, as outlined on their websites:
Drivewealth’s costs depending on your membership choice:
You do need to fill out a W-8BEN form if you are a non-US citizen who is also a non US resident; this keeps you out of the American IRS (tax) system. You must look after your own taxes here in Ireland. You do still however pay a U.S. withholding tax of 15% on dividends paid. If you do not fill out the form, you will be charged 30% withholding tax. Drivewealth make this form really easy as they get you to fill it out electronically in a much simpler format.
From my experience of IG and Drivewealth, and considering I’m only interested in shares and ETFs for now, Drivewealth is the winner for me. Even though IG have far more detailed and sophisticated analysis on the market and on individual companies, I found their user interface to be very difficult for someone just starting out with investing. In contrast, Drivewealth’s is actually over simplistic but does the job very handily. They also have low fees or no fees to fund your brokerage account. Both companies allow you to create practice accounts with theoretical balances which you can invest and try out their service. IG however do require you to start paying account management fees if you do not use your account within 2 years, so close that thing down if you open a practice account to try it out.
Shelling out a lot of money for stuff can feel good. Whether it’s picking up a brand name handbag or getting a pricey haircut, if you suffer from lifestyle inflation where your spending increases to match any increase in income, then this suffering feels good darnit! The truth however is, your haircut will grow out, your handbag will get ratty eventually. Why not have that money working for you instead, earning you more money?
Be careful with your broker. Apart from transactions fees, ensure you check out fees like any yearly account management fee, any fee to move your brokerage account to another firm and odd little fee which could eat into your profits. I can’t emphasise how important it is to read the terms and conditions. Look for online reviews of the broker your thinking of. Whoever you choose is potentially going to be more important to you than your bank, so choose wisely.