Portfolio of my Mom

During the past 20 years, my dad (who passed away in 2009) and my mom focussed on one thing, paying off the debt of their house. They build their dream house for their kids and never focussed on growing their money. They used different financial advisors and bankers but did lack the financial knowledge to judge the given advise.

In January 2016 my mom asked me to review and take over her financial situation. The first thing you do when analyzing your current investments is how much cash flow do I get each year? If you do not understand what I mean, please read my Financial Strategy first.

The cash flow from investments for my mom is incredibly low. The first thing you do is reviewing which investments generate cash flow. She did have 3 broker accounts with 3 different banks, which all cost her money…banks advising their own products, mostly costly funds which costs between 3 to 6% per year. In addition she has a financial buffer on a saving account, which is the first step for every personal finance strategy.

Her financial situation can be described as follows. On average a pension payment in Belgium is on average 1200 Euro per month. Thank GOD, she doesn’t need that yet and she travels the world.

But when my mother would need to go to a pension care home, this would costs 1600 euro without extra’s and those costs will rise in the future. An estimate of 1750 per month minus the current pension of 1200 learns us quickly that on a monthly basis 500 euro per month cash flow is needed from investments in order to pay for that care. My mom’s current financial investments do NOT generate on a monthly basis 500 EURO extra. This means either she would need to sell her house in the future or find other means to fill the financial gap.

Her current portfolio is a mixture of funds and stocks advised by different banks. Some stocks pay dividend, such as Proximus, the Belgian telecom. Some funds are really bad investments and do not generate any financial return. They only cost money and generate income for the bank. I am doing an interesting exercise to request advice at several banks what to do with this portfolio. I will post my research in a later timeframe.

The goals for my mom are vey simple and twofold :

  1. Decrease the cost of bank fees
  2. Increase the cash flow of current financial investments to 800 $ per month

So how to tackle goal number 1 ? Well today there are 3 broker accounts with big Belgian banks. They charge 30 euro per year or more for the “storing” of your stocks. What do they actually do for this kind of money? Nothing right…! Thirty euro per bank is 90 euro per year. Doing this for the past 10 years, is easily almost 1000 euro, right? To get 30 Euro Savings account money on a 0,1% savingsaccount, you need to have 30.000 euro sitting on that account. Poor return on investment….

So the first action I am currently working on, is to move all investment portfolio’s to an Internet broker account. They charge nothing. This is easy money saved. This process is still ongoing. The costs for moving the money to the new broker can be refunded by your new broker such as Binck Bank, Keytrade Bank or others. Just ask and they will tell you how! If you use Keytrade Bank, they GIVE you money for using their regular acccount. How about that ??? Rule 1 : limit your costs (bank fees) for all your investments !

The second goal will slowly kick in during 2017. I will apply the Defensive strategy from my Dividend Cake Portfolio Investment strategies and start a passive dividend income portfolio. You can read all about it going forward on this blog.

Keep following us on the blog with new blog posts on my mom’s portfolio and how I increase step by step her cash flow position. Stay tuned ! I want to make sure my mom does NOT have to sell her house to be financially solvent and live a financially worry free life going forward.