But how does Ladder work? Is it safe? And most importantly, should you use it? Our Ladder life insurance review will answer all of these questions and more.

Ladder Review Score

Name: Ladder

Description: is a term life insurance platform focused on providing you low-cost, flexible life insurance.

Overall

4.8

• Pricing
• User Experience
• Ease Of Use
• Customer Service

Summary

Ladder is a term life insurance platform focused on providing you low-cost, flexible life insurance.

Pros

• Quick and easy to apply for coverage
• Low-cost coverage
• Lots of flexibility in coverage amount
• No medical exams for up to $3M in coverage, just a few health questions
• Useful educational resources

Cons

• Can’t add policy riders
• Not everyone can get insurance via Ladder
• Inability to bundle life insurance with home or auto

• Get A Free Insurance Quote

What Is Ladder?

Ladder is a life insurance platform that focuses on term life insurance. The company is relatively new, launching their product in 2017, but it’s already available in all 50 US states. This means that wherever you are geographically, you should be able to apply to get coverage through Ladder.

Ladder does have a few restrictions on who can get coverage, such as limiting possible clients to those between the ages of 20 and 60. With these restrictions in place, it’s important to understand that Ladder may not be a possibility for you, depending on your age.

The main idea of Ladder, however, comes from their flexibility. As your needs change over time, you can adjust your coverage accordingly by “laddering” up and down, hence the name “Ladder.”

How Does Ladder Work?

Based on basic information about your habits, history of illness, and current financial situation, Ladder uses their online application to determine your life insurance eligibility and costs. This all takes place entirely through their website, which also means you can avoid a possible trip to the doctor’s office.

With this data, Ladder can give you a life insurance quote in just a few minutes! But, that’s not even the full extent of what makes Ladder unique.

What Makes Ladder Unique?

Ladder is unique in two main ways: first, they operate completely online. This means you don’t have to interact with human insurance agents to purchase coverage and instead they rely on answers to application questions and algorithms to determine your life insurance options. 

Second, Ladder lets you easily decrease or apply to increase your coverage as your needs change. Say you have a second or third child. Suddenly, your life insurance policy needs a greater death benefit (the amount paid out if you die during the term) to account for the additional person your income would have to support. If that happens, you can simply apply to increase your coverage and pay a slightly higher monthly premium (“laddering up”).

Let’s instead now say you bought your original life insurance policy ten years ago when your kids were pre-teens. Now, they’ve grown up and are off to college, the workforce, etc. and are financially independent. You probably don’t need as much coverage as you did when you were supporting them, and Ladder makes it easy to decrease (“ladder down”) your coverage.

If this feature doesn’t seem like that big a deal, understand that you would typically have to get an entirely separate life insurance policy to change your coverage amount. This not only takes a lot of time and effort on your part, but it also can cost a lot of money in fees.

Pros & Cons Of Ladder

Ladder Life Insurance Pros

• Quick and easy to apply for coverage
• Low-cost coverage
• Lots of flexibility in coverage amount
• No medical exams for up to $3M in coverage, just a few health questions
• Useful educational resources

Ladder Life Insurance Cons

• Can’t add policy riders
• Not everyone can get insurance via Ladder
• Inability to bundle life insurance with home or auto

How Much Does Ladder Cost?

Your specific life insurance quote will vary a lot, depending on your situation. However, if you compare Ladder to other term life insurance companies, Ladder has some of the lowest premiums available.

As we’ve discussed already, part of this is because they primarily operate as an online company. This lets Ladder save money on overhead costs like physical locations, which in turn passes on lower prices to you as a consumer. The other reason Ladder can offer lower premiums than other companies is because of their selectivity, but more on that later.

Is Ladder Safe?

The short answer to this is yes, Ladder is safe. They encrypt all of your information from the application, and important details like your SSN are kept entirely confidential. Any shared medical information is done so only for verification or auditing purposes. It is never sold to a third party.

How Does Ladder Make Money?

Ladder makes its money the way most insurance companies do: selling you insurance. They don’t charge hidden fees, and their employees are salary-based rather than commission-based. This means Ladder’s staff aren’t given a financial reason to sell you a specific product or service, so you can rest assured that their goal is to help you get a good deal.

How Is Ladder Customer Service?

Ladder has incredibly useful customer service. You can call between 8 am and 5 pm PST Monday through Friday, use their live chat feature, or submit a help ticket via a brief form.

The ability to call their customer service team makes it much easier to resolve any issues that may arise, and all in all, it’s a useful resource.

What I Wish Was Different About Ladder

I have very few criticisms of Ladder. But, the ones I do have are both related to the same issue: lack of accessibility.

If you are over the age of 60 or need to add insurance riders, Ladder won’t be able to meet these needs. While there is a benefit to the overall cost, since this selectivity is a big part of how Ladder can offer those it does cover such low prices, it’s still a shame more people can’t use it.

How Does Ladder Fare Against Competitors?

Ladder really doesn’t have any competition when it comes to providing adjustable term life insurance. As for insurance more broadly, Ladder does lack the ability to bundle life insurance with home or auto. However, this is made up for in the lower premiums Ladder offers for life insurance.

If you want to shop around for different types of insurance on your own, check out the comparison tool Policygenius.

How To Get Started On Ladder

When you first go to Ladder’s homepage, you’re greeted with a helpful “Get Started” button. This takes you to the start of their application, which lets you describe yourself in greater detail and gives you a relevant life insurance quote.

You then have to fill out relevant biographical information like age, sex, height, weight, tobacco usage, and history of family illness. This is all standard industry information and helps determine how much risk you might have.

Next, you start giving information about your financial situation. Questions like “what is your annual household income?” and “How many children do you have?” are important because they can determine how much coverage you should purchase.

After this point, you can choose the amount and duration of your coverage. The amounts range from $100,000 to $8 million. The durations range from 10 to 30 years, increasing in 5-year increments.

One nice thing Ladder does is provide an average coverage amount and length for people in similar financial situations. This is an incredibly useful baseline to use if you have no idea what to select in terms of coverage.

Now, you get an estimated price per month. For this Ladder life insurance review, I used similar information to the average American. With a household income of $52,000, and a $200,000 mortgage, 20 years of coverage for $500,000 cost around $28/month for a 30 year old male in good health.

Getting A Quote

After receiving a rough estimate, you must answer a few more questions to determine whether you can apply immediately.

First, Ladder asks if you plan to do any of the following in the near future:

• Skydiving
• Scuba diving
• Racing
• Mountain climbing
• Hang gliding
• Ultralight flying
• Other “Extreme Activities” (bungee jumping, rodeoing, etc.)

These are all high-risk activities that can impact your likelihood of death, and therefore your coverage.

Then, Ladder asks for information about any international or flying plans you may have in the next two years.

Finally, you have to answer a few more questions about drug use, criminal activity, rapid change of weight, medical history, and any prescription medication recently used. After that, you finished. Congratulations!

It’s worth noting that this whole process took me around 5 minutes to complete. There are no medical exams for up to $3M in coverage. If you’re applying for more than $3M, you may need to use a free saliva kit sent by Ladder to verify certain medical information.

Should You Use Ladder?

Although Ladder has some limitations in not allowing riders or people of certain ages, for most people, Ladder is a fantastic choice! 

Ladder offers low prices, a fast and easy to use online application, and a helpful customer service team to deal with any issues along the way. Combine this with the flexible laddering system and useful educational resources to learn more about life insurance, and you’ve got a phenomenal product.

That said, not everyone needs life insurance, but if you’re looking to get term life insurance, you should absolutely check out Ladder.

You might also be interested in reading our full reviews of a few of Ladder’s competitors, including Bestow and Haven Life.

FAQs

Lucas Woodley

Lucas is a personal finance expert, an undergraduate student at Harvard University and the founder of the Personal Finance and Consulting Group at Harvard College (an officially recognized student organization). He has spent much of his life working to increase financial literacy in his surrounding communities through independent financial research and curricula design, and he is currently studying economics with a secondary in music.

The post Ladder Life Insurance Review appeared first on Finance Plan Today.

What Is Robinhood?

Robinhood is an online stock broker that prides itself on offering commission-free trading of stocks, ETF’s, cryptocurrencies, and stock options, all through an easy-to-use mobile app.

Robinhood’s lack of account minimums or trade-based fees combined with their accessible and user-friendly mobile app makes them a solid choice for the new, casual investor who wants to engage in some DIY experimentation in the stock market or invest in cryptocurrency.

The ability to purchase fractional shares also provides a cheap introduction to buying and selling stocks and removes many barriers to entry that often keep out prospective investors.

Who Should Use Robinhood?

Though it may lack the same available information or investment options that other brokerage services offer, Robinhood’s commitment to commission-free trades, no minimum deposits, and fractional shares, all of which are put into one user-friendly app, makes them a good choice for someone looking for a low-commitment introduction to investing in the stock market.

As a low-cost, introductory tool to get started in the stock market, Robinhood is a good choice, albeit one that the more serious or long-term investors may find themselves outgrowing in favor of more feature-rich alternatives.

If you want a low stakes way to get involved in the stock market and learn more about how to invest, consider signing up for Robinhood.

That said, I recommend avoiding any of the paid premium accounts unless you’re an experienced investor and want to do a lot of active trading or buying on margin.

Whether or not Robinhood is a good fit for you will depend on what kind of investing you hope to do and how advanced you plan to get.

Who Should Look At Robinhood Alternatives?

If you were looking for a quick and easy place to practice your day trading, you might want to look at Robinhood alternatives. Robinhood limits the number of day trades to three trades per five business days unless you change your account from the standard one and pay a monthly cost.

Also, the current lack of educational resources and limited research information compared to what you could find elsewhere make other alternatives shine above Robinhood. 

For the long-term investor, the limited account and investment options start to reduce your benefits compared to other tax-advantaged options.

Ultimately, unless you’re looking for a casual, low-stakes, short-term introduction to investing, you’ll likely want to look at Robinhood alternatives.

What I Wish Was Different About Robinhood

My main issues with Robinhood are its lack of certain features. Though this doesn’t have to be bad since it makes for a clean UI and simple app, it limits Robinhood’s functionality as a serious investing platform.

If Robinhood had more educational material or walkthroughs, it might better fill the niche of a beginning investor’s go-to app.

On the other hand, if Robinhood gave you more analytical tools and day trades, it could break out as a platform for more experienced investors.

Or, Robinhood could let users use IRA accounts and index funds and try to become the ideal app for long-term investors who don’t want to get overly involved in their investments.

Unfortunately, because Robinhood focuses so strongly on simplicity, it ends up being a jack of all trades but master of none. It has a few features to offer almost everyone, but it gets outclassed by more specialized alternatives.

Now, all of these complaints are related to the features Robinhood offers. But, there’s another subject where more serious concerns lie. Robinhood has a big problem with outages.

Robinhood’s Technical Problems

During periods of heavy traffic, which also happens to be where timely access to your investments can be most important, Robinhood often experiences delays. Even worse, some users are completely unable to access their accounts for a brief period of time.

These issues of consistency have made a lot of investors very upset. And it’s easy to see why. When you lose money through no fault of your own without the chance to do anything about it, nobody will be very pleased.

But, these technical issues go even further than merely losing a bit of money. There’s a nasty little technical bug that sometimes shows only part of a trade executed. While this doesn’t have anything to do with the real value of your account, it can still cause some scary moments.

In the case of a 20-year-old, this glitch made his Robinhood balance look like it had dropped drastically. The final balance was around -$700,000. That’s right, negative seven hundred thousand dollars.

Unfortunately, this particular 20-year-old saw that balance and took extreme measures, ultimately committing suicide over the matter.

While this tragedy was obviously not the direct fault of Robinhood, I felt this article would be incomplete without mentioning this flaw and the sometimes drastic impacts that go along with it.

Features Of A Good Robinhood Alternative

Consistency issues aside, broadly speaking, you should look for apps that combine Robinhood’s most useful features with improved functionality.

One of Robinhood’s main selling points is their commission and fee-free trading. This might be tough to find completely free alternatives, but you should always aim for as low fees as possible. Though 5$ a trade might not seem like much, those costs can add up fast over the long haul.

Robinhood’s other key feature that many other platforms are starting to adopt is the level of simplicity. A common complaint against the worlds of finance and investing is that they’re overly complicated.

While a simple and straightforward platform doesn’t necessarily equal an easier time investing, the visual appeal and readability of a platform matter a ton. It’s easy to feel intimidated by a bunch of charts, graphs, and jargon. If you’re looking for a good Robinhood alternative, look for simple UIs. 

Now, to address the areas where Robinhood is somewhat lacking. If you’re a long term investor, look for an alternative that lets you invest in IRAs. This will give you a ton of tax benefits later on.

If you’re looking for a hands-off experience, a platform that helps you automatically invest may be your best bet. By making investing your default, you can help set yourself with healthy habits without ever having to give it a second thought!

Our List Of Robinhood Alternatives

There are a ton of alternatives to Robinhood out there. We’ve taken our picks for the five best platforms and explained the niche that they fulfill. 

Rather than find the app that does a bit of everything slightly better than Robinhood, this list will give you the best app for your individual investing needs.

Webull – The Robinhood Alternative For Experienced Investors

Webull is our pick as the Robinhood alternative for the more experienced investor. With a lot of useful analytical tools and information readily available, Webull lends itself better to a more active trader who is comfortable researching different investments.

The $0 commissions and fees also help make Webull a strong contender for an active trading platform. By avoiding these extra costs, day traders can save themselves a ton of money over the long run.

The sandbox mode on Webull also provides experienced traders the opportunity to test out different investing strategies. This is useful if you want to do some experimentation on your own without risking actual losses.

Webull also gives you a free stock when you sign up. And, if you deposit $100 or more into your account, you get a second free stock. Even better!

Acorns – The Robinhood Alternative For Brand-New Investors

Acorns is one of the more “gimmicky” platforms on this list. But, it’s a surprisingly good fit for someone who is brand new to investing, needs help building strong savings habits, or just wants an extremely hands-off experience.

Acorns’ main feature is its “round-up” way of investing. Whenever you make a purchase with a connected account, Acorns will round up the purchase and invest the difference. 

This helps you get into the habit of saving money if you’re someone who struggles to do so. By automating this process, you take out many of the hurdles that usually stand in people’s way.

Though you probably won’t make millions using Acorns, since the amount of money invested is so small, it can still be a useful way to learn more about how to invest and the habits needed to do so.

One other important note, however, is that Acorns charges a monthly fee of $1 – $3 per month. While this isn’t much, it’s still higher than some of the other options on this list ($0).

But, Acorns still plays a valuable role in helping you build good financial habits, If you’re looking for an app that can help with the other side of saving, budgeting, check out EveryDollar.

M1 Finance – The Robinhood Alternative For New Long-Term Investors

M1 Finance is our pick as Robinhood alternative for the beginning long-term investor. Following a brief questionnaire about your financial goals and current situation, M1 Finance will provide you with a pre-built portfolio that’s perfect for long-term investors.

These pre-built portfolios are designed with long-term investing in mind. They’re also highly customizable and automatically diversified. This means you’ll have a ton of freedom when it comes to creating your portfolio, but you also have a valuable safety net to keep you diversified.

Even better, M1 Finance takes care of a lot of the nitty-gritty of long-term investing. It automatically does things like portfolio rebalancing to help make the investing and management processes easier.

Combine all of that with the ability to use IRAs and a total lack of fees and commissions, and it’s easy to see why M1 Finance is our pick for the long-term investor.

E-Trade – The Robinhood Alternative For Investors Who Want To Learn

E-Trade has a strong case to be on this list in several positions. It offers $0 commissions and fees, pre-built portfolios, mutual funds and ETFs, IRAs, options trading, etc. 

While all of these features are fantastic, the reason E-Trade is on this list is because of their excellent educational resources.

In addition to being a free investing platform with a ton of features, E-Trade offers tools to help you learn how to invest. Their articles cover beginning information like, “What is asset allocation?” and give advice on how to invest based on different time periods.

As you get more experienced, E-Trade has the resources to keep up. Their advanced articles cover everything from how to diversify your portfolio using futures to how to sell covered calls. 

While these articles don’t cover the most extreme trading strategies, they’ll be more than enough to introduce you to more advanced techniques and ideas.

Most impressively, however, E-Trade even has guides for retirement and tax planning. Even though these aren’t explicitly investing topics, they still have a ton of value to investors. 

This commitment to going above and beyond to provide useful educational tools earns E-Trade a spot as one of our best Robinhood alternatives.

Fidelity – The Most Accessible Robinhood Alternative

If you’re new to investing, this one may come as a bit of a surprise. But, Fidelity is one of the best available options for low-cost investments.

In addition to educational resources and data, Fidelity has a handful of investment options that are incredibly attractive to investors. We’re talking about Fidelity Zero.

Fidelity Zero is the name given to investments with $0 minimum investments and a 0% expense ratio (annual fee for managing your portfolio). 

Most platforms have expense ratios ranging from 0.05% to 1-2%. But, Fidelity Zero investments have none. This difference results in serious gains over several years and makes it easier than ever to start investing long term.

This focus on no fees combined with useful tools to help analyze your investment strategy makes Fidelity our choice for the most accessible Robinhood alternative.

Lucas Woodley

Lucas is a personal finance expert, an undergraduate student at Harvard University and the founder of the Personal Finance and Consulting Group at Harvard College (an officially recognized student organization). He has spent much of his life working to increase financial literacy in his surrounding communities through independent financial research and curricula design, and he is currently studying economics with a secondary in music.

The post The Five Best Robinhood Alternatives appeared first on Finance Plan Today.

How To Make Money As A Teenager

We’re going to break down how to make money as a teenager into two categories: making money in-person and making money online.

Making Money In-Person

There are a surprising number of ways to make money in-person. This can be anything from part-time jobs to garage sales to mowing lawns. Let’s talk about the most typical way teenagers make money: part-time jobs.

If you’re over the age of 14 (or your state’s minimum age requirement), part-time jobs are a great way to earn a steady income.

Part-Time Jobs For Teenagers

Lifeguarding

Though it may be more of a seasonal job than a year-round part-time one, lifeguarding lets you earn a good amount of money. Even better, since lifeguarding happens during the summer, you can take advantage of your time off school.

Given how hard it can be to balance school, homework, extracurricular, and work, removing any parts of that equation can make your life way easier.

Camp Counselor

Working as a camp counselor is another job that’s usually seasonal rather than year-round, but it’s one of the few jobs that regularly pay above minimum wage. Granted, you will need a certain ability to work with young kids.

But, if you don’t mind working with children, summer camps give you a great chance to earn extra money. Plus, you can enjoy a lot of the fun parts of going to a summer camp⁠—meeting new people, building community, and exploring new hobbies.

Babysitting

While we’re on the topic of part-time jobs that involve working with children, babysitting is another well-paying way for you to make money as a teenager. Even though this isn’t always the most exciting job, babysitting is often much more relaxed and gives you more freedom than other options.

Unlike lifeguarding or camp counseling, babysitting lets you stay right in your neighborhood. Parents are often looking for opportunities to go out and have some alone time, so there’s a strong likelihood that you’ll be able to get jobs through word of mouth alone.

As one more bonus, you can often multi-task when you’re babysitting. Now, you obviously don’t want to risk neglecting the child or children you’re looking after. 

But, most babysitting jobs will involve a good amount of downtime where the kid is either asleep, watching TV, etc. During this time, you may have the chance to do homework or study up on a difficult subject. Imagine getting paid for the stuff you’d normally be doing for free!

Pet Sitting

If working with kids isn’t your thing, but you love animals, there are still lots of possibilities for you to make money as a teenager. One of the most popular part-time jobs is pet sitting, and it’s great if you enjoy being around pets.

Now, the work is usually less frequent than it is for babysitting since most people hire pet sitters for long stretches of vacation rather than daily occasions. But, if you’re able to find steady work, pet sitting can be a low-stress and fun way for you to make money.

Dog Walking

If you find yourself struggling to get enough work pet sitting, dog walking can be a useful addition to your part-time job list. Because dogs need to be walked at least once a day, the possibilities for work are much more frequent.

As an added bonus, walking dogs removes one of the biggest hurdles for teenagers 13 – 15: the ability to drive. Since you’re already walking around as part of the job, and most of the work you’ll find is likely local, your absence of a license or car won’t hinder you from being a successful dog walker.

Amusement Park Employee

Working at an amusement park is one of the jobs people often reflect upon as most fun. Now granted, this isn’t always the case, and there might not be any amusement parks near you. But, if you have the chance, it’s worth exploring.

Amusement park employees get the fun of working with the public in a location where everyone goes to have fun. Though you’ll definitely find the occasional angry customer, the amusement park’s security is usually quick to step in and bail you out.

But what is maybe the best perk of all is your access to discounted or even free admission to the amusement park. With these savings, you can spend your days off having fun riding roller coasters. What teenager wouldn’t want that?

Manual Labor

If you want a part-time job that doesn’t require a ton of interaction with others, manual labor might be the way for you. There’s no shortage of manual labor jobs you could get, even as a teenager.

Whether it’s mowing lawns, shoveling snow, landscaping, or washing cars, you can make a lot of money doing manual labor in your spare time. One of the advantages of this type of work is setting your own hours and choosing when and where you work.

The extra flexibility may not be a big deal for some, but if you’re struggling to balance other obligations and live a hectic schedule, consider more flexible jobs to make money as a teenager.

How To Make Money Online

All of the jobs we’ve discussed so far have some in-person aspect. But, we live in the age of technology. There’s an ever-growing number of ways to earn money without ever leaving the comfort of your own home.

Now, there truly are almost limitless ways to make money online, at any age. There are literally thousands of online surveys and apps that claim to pay you for almost nothing. 

Unfortunately, it’s becoming increasingly difficult to distinguish legitimate services like these from scams. So, for the purposes of giving you information that’s safe and consistent, we’ll focus on your other options.

Now, with that out of the way, let’s talk about how to make money online as a teenager.

Tutoring

So, yes, tutoring isn’t technically a job that you have to do online. But, it’s certainly one that you can do.

Of all the different odds and ends jobs I had growing up, tutoring was always one of the easiest and best-paying ones. Depending on what subject you tutor and the overall clientele you’re able to contact, you could make anywhere from $15 – $25 per hour!

As a teenager, that pay rate can translate to some serious money. In many places, people are willing to pay even more if you can tutor their child in a foreign language of some sort. So, if you happen to speak or are proficient in a second language, definitely explore this option.

Using Artistic Skills To Make Money

“But wait, what if I don’t want to tutor?”

If tutoring isn’t something you’re interested in or feel confident doing, you can still make money (even as a teenager) using any artistic skill.

It doesn’t matter if your particular talent is painting, drawing, singing, playing an instrument, graphic design, knitting, etc. Whatever it may be, odds are, there’s some way you can start a side hustle with it.

If you love making anything physical, such as paintings or other crafts, consider starting an Etsy shop. These are great ways for you to make money off of a hobby that you already enjoy doing!

If your talent is instead something a little less tangible, don’t worry. You could always try your hand as a musician or a performing artist.

Now, before you start a band with your best friends, it’s important to understand your options. You don’t necessarily need an entire band in order to get gigs. 

A lot of the time, you can get hired as part of another band. The consistency of work may vary quite a bit depending on how many musicians are around you and how much demand there is, but musical gigs can pay very well.

But, let’s say you don’t want to be a performer. Luckily for you, there’s always teaching. Music teachers can make a lot of money.

If you know a few kids in your neighborhood looking to learn guitar, drums, etc., it could be worth reaching out to see if you can turn that desire into some extra money.

Making Money Through Social Media

For those of you who don’t feel like you have any options thus far, there’s always the power of social media.

This money-making method isn’t as stable or surefire as some of the other jobs we’ve discussed, but that doesn’t mean it’s impossible.

If you have a certain interest or hobby and can draw others in and make yourself entertaining, you might just be able to earn money through sites like Youtube.

Again, you’ll need to establish a strong following to make any serious money, but the option is still out there if you want to give social media a try.

At the end of the day, however, how you make money won’t matter as much as how you spend it. Apps like EveryDollar can help you learn to budget, while Acorns can help you save, and M1 Finance or Robinhood are great to learn how to invest.

Remember: it’s not how you get the money, it’s what you do with it once it’s yours.

FAQs

Lucas Woodley

Lucas is a personal finance expert, an undergraduate student at Harvard University and the founder of the Personal Finance and Consulting Group at Harvard College (an officially recognized student organization). He has spent much of his life working to increase financial literacy in his surrounding communities through independent financial research and curricula design, and he is currently studying economics with a secondary in music.

The post How To Make Money As A Teenager appeared first on Finance Plan Today.

So, why not apply that same proven approach to your finances and give yourself a money saving challenge? Here are the top picks for money saving challenges that’ll help you find financial success in no time.

What Makes A Good Money Saving Challenge?

Each money saving challenge below has a clear purpose, lets you routinely check your progress, and gives measurable goals. There’s no sense in doing something if you have no clue what it is or if you’re even doing it right!

With our criteria set, let’s go ahead and dive in.

The 52 Week Money Saving Challenge

The 52 week savings challenge is one of the most popular methods out there. 

The premise is simple: in the 1st week, you save $1. In the 2nd week, you save $2. In the 3rd week, you save $3. Continue to add a dollar to your weekly savings goal each week for 52 weeks, saving $52 in the final week. 

Then, by the end of the year, you’ve saved a total of $1,378!

The main reason this challenge is so great is that it starts you off gently. It’s easy to start by telling yourself, “Okay, this week, I need to save $1.” That’s a goal that, for most people, is easily achievable and doesn’t even take any effort.

Then, for the next few weeks, you remind yourself to save $2, $3, and so on. By the time you’re saving double digits, you’ve been building up a savings habit for a whopping two and a half months!

Using the 52 week savings challenge, you let yourself build up the good habits while it’s easy to do. By the time you need to start making a more conscious effort to meet your savings goal (such as by making a budget), you’re already in the habit of saving each week.

“But, what if I don’t get paid every week?” If this question applies to you, here’s an adjusted version of the 52 week savings challenge.

The 26 Week Saving Challenge

The 26 week saving challenge (sometimes called the “bi-weekly saving challenge”) is an adapted version of the 52 week challenge.

The main idea here is that instead of saving every week, you just combine two weeks’ worth of saving together. This is a great way to save if you get paid every other week rather than every week.

So, when you receive your 1st paycheck, you save $3. This is because you’re saving $1 from week one and $2 from week two.

When you get your second paycheck, you will save $7. Here, you add the $3 from week three and $4 from week four.

This process continues until you get to your 26th paycheck in week 52. At this point, you’ve been building up your money skills all year. So, that $103 ($51 from week 51 + $52 from week 52 = $103) won’t seem anyway near as daunting as it might right now!

The No Spend Challenge

If you’re looking for a challenge that doesn’t ramp up steadily throughout the year, consider the no spend challenge. This money saving challenge is great for those of you who like to test your willpower.

The core concept with the no spend challenge is that you choose a day, week, month, etc. During that time, you don’t spend any money at all.

Think of it like running a sprint. Rather than starting slow and building up over a long period of time, the no spend challenge has you spend as little as possible in shorter bursts.

However, just like with exercise, you have to be smart about how you exert yourself⁠⁠—this is true whether you’re talking about your muscles or your wallet!

It may not be realistic for you to do the no spend challenge for an entire month or even a week. If that’s the case, don’t force yourself into it. 

You’ll gain so much more by choosing a day of the week and committing to spend as little as possible once a week than you would be trying to be as frugal as possible nonstop.

Similarly, understand that a day of no spending can’t make up for impulsive spending the rest of the week. You wouldn’t be healthy if you ran once a week and then ate a dozen donuts each of the other six days! The same goes for managing your savings.

Ultimately, what’s most important is to pick a duration that feels manageable. Remember that you can always increase the time later!

The 365 Day Money Saving Challenge

The 365 day challenge (also known as “The Nickel Challenge”) is like the 52 week challenge’s big brother.

Here’s how it works: on day one, save $0.05. Then, on day two, you save $0.10. On day three, $0.15. Just add 5 cents to your next day’s savings goal. Seems easy enough, right?

Well, this easy challenge helps you save a deceptively large amount of money. By day 100, you’re saving $5 a day. By day 200, it’s up to $10 per day. And, by the end of the one year period, you’re putting away over $18 a day!

All of this adds up to a yearly savings total of $3,339.75! Not bad considering you started with just $0.05 a day.

The 365 day money saving challenge is great for a lot of the same reasons as the 52 week challenge: it starts you off slow but builds up steadily over time. This is a great way to add to saving money to your daily routine, and this challenge forces you to save every day rather than every week.

If you’re looking for a slightly more extreme version of the 52 week challenge, try the 365 day challenge!

The Spare Change Challenge

The spare change saving challenge is one of the oldest and simplest ways to make saving money a habit. Whether in an old water jug or a random jar, the spare change money challenge involves taking your spare change from every purchase and setting it aside.

Over time, you’ll end up with a surprisingly large amount of savings!

But, if you’re someone who primarily uses a credit card because you’re interested in building up your credit score, you should look into the Acorns app.

With Acorns, any purchases you make with a card will automatically round up to the nearest dollar. This brings the spare change challenge into the digital era!

If you’re looking for an easy way to passively save more money and become more fiscally responsible, the spare change challenge might be exactly what you need.

The Routine Costs Challenge

The routine costs challenge applies the same principle used to make a good budget: prioritizing your spending.

The premise of the routine costs challenge is that you cut out those daily expenses that don’t actually add that much to your life. 

Do you have a bad habit of drinking Starbucks every morning when you could brew your coffee at home for 1/10th of the cost? Try bringing coffee to work from home for a week rather than go out.

Do you like to eat out at restaurants every night? Try doing meal prep for a week and cooking at home.

The point here is that it doesn’t matter which specific cost you try cutting. What matters is that you make a conscious decision about what expenses matter most in your life. 

If you ate in every night rather than go out and saved the difference, how long would it take for you to afford that cruise? Or maybe you could go to a concert that you’ve been waiting for? 

When you prioritize your spending, you can get a lot more enjoyment out of less money. That’s the goal of the routine costs challenge.

The 8 Week Vacation Challenge

Are you excited about taking that upcoming vacation? Looking for a way to give yourself some extra spending money in just a few months? The 8 week vacation challenge offers a fast way to save $1,000.

The idea here is you save money each week in the following pattern:

• 1st Week: $50
• 2nd Week: $75
• 3rd Week: $125
• 4th Week: $250
• 5th Week: $250
• 6th Week: $125
• 7th Week: $75
• 8th Week: $50

The nice thing about this money saving challenge is that it’s most intense in weeks four and five. With this strategy, you get a gentle introduction (only $50 the first week). 

But, over time, you ramp up your savings to $250 in the middle of your eight week period. Then, as your vacation gets closer, you allow yourself to loosen up and save less money.

By the time your vacation rolls around, you’re no longer stressing about how much to save since you’re back down to an easy $50. The last thing you’d want to do is go on vacation still tense over your savings plan!

If you have a vacation or other planned time away from work in the coming months, consider the 8 week vacation challenge. It’s a great way to give yourself some extra cash while still affording enough time to wind down before relaxing. 

FAQs

Lucas Woodley

Lucas is a personal finance expert, an undergraduate student at Harvard University and the founder of the Personal Finance and Consulting Group at Harvard College (an officially recognized student organization). He has spent much of his life working to increase financial literacy in his surrounding communities through independent financial research and curricula design, and he is currently studying economics with a secondary in music.

The post The Ultimate Money Saving Challenge appeared first on Finance Plan Today.

Which is better? What are the pros and cons of both? And, most importantly, should you use Betterment or Wealthfront? Find out the answers to all of these questions and more in this Betterment vs Wealthfront comparison.

RELATED:
– Read our full Betterment Review
– Read our full Wealthfront Review

What Is Betterment?

Betterment is one of the most established robo-advisors that’s around today. It was founded back in 2008 and has grown to its current status as one of the top robo-advising investment platforms available.

With more than $22 billion of assets under its management, Betterment currently has the third-most assets of any robo-advisor, behind only Schwab Intelligent Portfolios and Vanguard Personal Advisor Services.

This sustained growth has been fueled largely by Betterment’s commitment to using the best technology and strategies available.

What Is Wealthfront?

Wealthfront is a robo-advisor geared towards helping the average person invest. By providing high-quality advice through Wealthfront’s online questionnaire, you can learn how to invest and set yourself up for financial success without a traditional financial advisor’s high costs.

One of the biggest draws to Wealthfront is its wide range of expertise. Compared to many alternatives, Wealthfront helps you plan for your future using a more complete picture of your financial life.

Betterment Pros & Cons

Betterment Pros

• Flexibility in asset allocation
• No account minimum
• Low management fees
• CFPs available
• Can invest in value stocks
• Well-diversified portfolios
• Automatic portfolio rebalancing
• Tax-loss harvesting
• Fractional shares

Betterment Cons

• Financial advisors have a higher annual fee and $100,000 account minimum
• Hands-on investors will likely feel crippled
• No real estate investments (REITs)

Wealthfront Pros & Cons

Wealthfront Pros

• Low-cost ETFs
• Tax-loss harvesting
• Portfolio rebalancing
• Accounts for 529 accounts and college funds
• Cash accounts for liquid money
• Automatic diversification
• Real-estate investing

Wealthfront Cons

• Lack of flexibility in investments
• Inability to invest in fractional shares
• $500 account minimum

Pricing & Fees

Both Betterment and Wealthfront have 0.25% annual management fees. So if, for example, your portfolio has $10,000 worth of assets in it, you would pay $25 for the year with either service. 

However, Betterment also has a premium service with access to CFPs. This extra level, Betterment Premium, has a higher annual fee of 0.40% and a $100,000 account minimum.

Account Minimums

While Betterment’s premium account has a $100,000 minimum, the standard option has no account minimums at all. Since Wealthfront has a $500 account minimum, this puts Betterment ahead of Wealthfront in our Betterment vs Wealthfront comparison.

Features & Tools

This is where the differences between Betterment vs Wealthfront start to really show.

On the one hand, Betterment’s fractional shares, combined with a $0 investment minimum, give it an advantage over Wealthfront as an introductory tool for investing. With these features, Betterment has lowered the cost needed to start, which is another common obstacle people face when learning how to invest.

At the other end of the spectrum, accounts with over $100,000 can access professional financial advisors through Betterment. Wealthfront does not have any such features.

But, on the other hand, Wealthfront helps you save for college using 529 plans. Plus, anyone can use Wealthfront’s free alternative to traditional financial planners: Path.

Path is an advice engine that acts as an automatic version of the advice you’d receive from traditional financial planners.

Thanks to this automation, Wealthfront can give you the same or similar information as an in-person financial planner without all the costs.

Despite these differences, however, there are still a number of similarities between Betterment and Wealthfront. Both services rely mostly on computer algorithms to determine what your portfolio should look like.

Beyond overall asset distribution, Betterment and Wealthfront both automatically rebalance your portfolio. This removes the burden of managing your portfolio and making sure your assets stay proportional over time.

Betterment and Wealthfront also take advantage of tax-loss harvesting, which is a modern financial technique that involves buying and selling assets in a way that minimizes your tax bill. 

Investment Options For Betterment Vs Wealthfront

But, maybe most importantly, both companies focus on low-cost ETFs for investment options. These are some of the best ways to invest over a long period of time since they basically offer small portions of several different stocks, bonds, or other assets.

In short, ETFs can do wonders for diversification.

Now, although the core product is the same for Betterment and Wealthfront, there are still some differences between the investment options each offer.

Wealthfront Investment Options

For starters, Wealthfront lets you invest in real estate. This can be a good way to diversify your portfolio further, so the fact that Wealthfront has this option is excellent.

Beyond real estate, there’s also Wealthfront’s Risk Parity Fund. This is a mutual fund from Wealthfront with an annual fee of 0.50% and an account minimum of $100,000.

In exchange for this additional fee, you’ll be able to invest in assets that reportedly give higher returns for a similar level of risk. This means that, at least in theory, you can earn extra money on your investments.

It’s also important to note that Wealthfront limits the percentage of your total portfolio that you can put in their Risk Parity Fund. Qualified users can only have up to 20% of their assets in the mutual fund.

Betterment Investment Options

We’ve already talked about Betterment’s fractional shares, which are a great way to invest with smaller chunks of money. In addition to fractional shares, Betterment lets you engage in socially responsible investing.

Socially responsible investing is when you only invest in companies that align with your non-monetary goals. If you care a lot about climate change, for example, you might opt to invest specifically in companies that implement green initiatives.

While this doesn’t have huge impacts on the dollar amount of your investments, some people find this feature incredibly valuable.

Customer Service

Both Betterment and Wealthfront rely heavily on online FAQs for answering questions and lack chat features. However, they each have their own customer support team that is accessible via phone.

Wealthfront’s phones are available from Monday through Friday from 10 am to 8 pm ET. Betterment’s phones are open from Monday through Friday from 9 am to 6 pm ET.

But, Betterment also has an email service that gives you access to customer support on weekends. Their email is open during the same hours as their phone on Monday through Friday, but on Saturdays and Sundays, you can email from 11 am to 6 pm ET.

Security

Simply put, both Betterment and Wealthfront are safe. 

All accounts with Betterment and Wealthfront have SIPC insurance, which covers up to $500,000 in securities or $250,000 in cash. This means your investments and accounts are safe in the unlikely event that either company declares bankruptcy.

While a security breach is always possible with any company, Betterment and Wealthfront encrypt your personal data. In most situations, this encryption is enough to prevent any major issues.

But, Wealthfront goes one step further when it comes to security. With Wealthfront, you can set your account to a read-only setting. This means anyone who does manage to get your information won’t be able to transfer any payments.

Plus, Wealthfront doesn’t allow its servers to store your account’s password, meaning any leaks would not compromise your account. This means, although using either Betterment or Wealthfront to invest involves minimal security risk, Wealthfront wins the battle of security.

How To Get Started On Betterment

Betterment is well known for having one of the easiest start-up processes of any robo-advisor. They even state at the start of their sign up process that it should take at most three minutes!

To create an account, first fill out some basic details like your email address, address, and income. Then, you can pick your financial goals. These can be anything from education to retirement.

Once you have selected your goals, Betterment lets you play around with different asset allocations and shows you how risky various investments are. Once you’ve determined what balance you want, it’s time to connect any bank accounts and get started!

It’s an incredibly simple process, and from start to finish, it only took me two minutes to complete.

How To Get Started On Wealthfront

Getting started on Wealthfront is easy and only takes a few minutes! 

When you first open Wealthfront or go to their website, you’ll create an account with a username, password, and email address. Next, include your current savings and pre-tax income and pick your investment goals. These goals can be anything from retirement to a down payment on a house.

Then, go ahead and add any of your bank accounts that you want to be included in your portfolio. 

Wealthfront has many of the most popular banks to choose from, including Chase, Bank of America, and Wells Fargo. You shouldn’t have any trouble finding your accounts.

After linking your accounts, you’ll fill out a brief questionnaire to determine your risk tolerance and viola! You’re ready to use Wealthfront.

Which Is Best? Betterment Vs Wealthfront 

Let’s make one thing clear: although we’ve been comparing Betterment vs Wealthfront, both are phenomenal services! A lot of the differences between the two are relatively minor when it comes to the broader landscape of robo-advisors. You truly can’t go wrong with either one!

That said, if you’re an investor who cares about socially responsible investing, wants to utilize in-person professional advisors, or is excited about investing in value stocks, you’re probably better off with Betterment. 

Similarly, if you don’t have $500 already saved up or can’t invest in large sums, Betterment’s fractional shares and lack of account minimums will be an attractive draw.

But, if you’d rather just get a financial advisor’s advice without the in-person aspect, Wealthfront and Path are more than likely your best bet. And, if you want to invest in real estate or take advantage of their 529 college accounts, you should definitely check out Wealthfront.

Sign up here for Betterment now!

Sign up here for Wealthfront now!

FAQs

Lucas Woodley

Lucas is a personal finance expert, an undergraduate student at Harvard University and the founder of the Personal Finance and Consulting Group at Harvard College (an officially recognized student organization). He has spent much of his life working to increase financial literacy in his surrounding communities through independent financial research and curricula design, and he is currently studying economics with a secondary in music.

The post Betterment vs. Wealthfront appeared first on Finance Plan Today.

Money skills, simply put, are habits built up over time that help you find financial freedom. More specifically, they can be broken down into a few different categories.

Some money skills are geared towards helping you save more money. Other money skills focus on keeping you out of debt. Others still emphasize managing your money so that you can maintain that balance once you’ve found it.

Ultimately, all of these different classes of money skills are useful in their own ways, and it’s vital that you have a solid understanding of what they are and why they matter.

Why Money Skills Are So Important 

If your car gets a flat tire, a bit of discipline and prior planning can be the difference between a day’s inconvenience and the start of a long downfall.

If you happen to have the savings ready to buy a new tire, you’ll be up and running again in a few days. A month from now, you’ll probably barely be able to recall that moment.

On the other hand, if you never developed your money skills and don’t have any cash or savings, you’ll probably have to use credit cards or payday loans to fix your car. Then, because you didn’t plan for this unexpected cost, you’ll have a higher credit card bill at the end of the month.

If you can’t quickly pay this off, the high interest rate on your credit card will soon make this debt snowball out of control. Or worse, you might not be able to repair your car or get to work.

A month from now, you could find yourself without a job or in fast-growing debt, cursing that one flat tire for being the thing that set you back years in your financial plans.

While that situation may seem extreme, it illustrates the point. Strong money skills give you the confidence to spend money when you want without worrying about crippling your financial future.

What Money Skills Do You Need To Have?

At its core, money skills are meant to help you have more money to enjoy life. Even though money can’t buy happiness, it’s still a useful tool.

But, learning everything you need to know about money can feel incredibly daunting. To simplify this process a bit, we’re going to break money skills into four categories⁠—saving, investing, managing debt, and boosting your income.

Money Skill #1 – Making A Monthly Budget

First things first, you need to learn how to make a budget if you don’t already have one. This is so important because it lays the groundwork for everything else you’ll be doing later and makes it easier to save money.

Without a budget, you can’t keep track of how much money you’re earning or spending, where it’s going, or how much or little progress you’re making towards your goals. 

It’d be like building a bed blindfolded. You have no clue what kind of mess you’re currently making, and you’ll eventually have to lie in it.

So, how do you make a budget and stick to it?

Pay Yourself First

While there are several different ways to make a budget, there’s a common theme that emerges across a lot of them. It’s called “pay yourself first.”

At the beginning of the month, you decide how much money you will set aside for savings and investments. When you get your paychecks, you’ll set aside the money and pay yourself first before spending the money on anything else.

If you need it, you can use the Earnin App to get your paycheck more quickly.

Now, you’ll spend whatever is leftover on whatever needs to be paid—rent, bills, food, movies, games, trips, etc.

It’s important to note that this won’t work for everyone, but it still provides a useful change in mindset. By setting aside money to save at the start of your budget, you make sure your long-term goals are met.

If your next long-term goal is to buy a house, the money that you set aside should go towards a down payment. That way, you can have a constant reminder of the reason why you’re budgeting and saving in the first place.

It may seem trivial, but a lot of the time, we need to trick our brains into thinking rationally. Paying yourself first is simply one of many tools to help do so.

Know Your Savings Rate

Your savings rate is the proportion of your after-tax income that you save or invest. But why should you care about it? How do you calculate it? And, what is a “good” savings rate?

First, your savings rate is important because it gives you a rough estimate of whether you’re saving enough to meet your financial goals. 

If you find you have a savings rate of, say, 0%, it doesn’t matter how much money you’re bringing in. You’re not setting yourself up for financial success.

Most financially successful people save between 15% – 20% of their after-tax pay. For most people, this is a good range to aim for. 

Now, how can you calculate your savings rate? You take the total amount you save or invest and divide it by your after-tax income.

For example, let’s assume you earn $2,000 in after-tax income, and you contribute $300 to a 401K, $200 to a Roth IRA, and $50 to your savings or emergency fund. That’s a total of $550 that you’re saving or investing!

The remaining $1,450 will pay your rent, buy your groceries, clothes, and cover your utilities and other everyday expenses. If we take the $550 and divide it by your post-tax income of $2,000 we get a monthly personal savings rate of $550 / $2,000 = 27.5%.

A savings rate of 27.5% is great if it’s sustainable. This leads us to the next part of our money skills, finding a healthy balance.

Finding A Healthy Balance

When a lot of people think of being frugal, they picture penny pinchers who haggle over even the smallest expense. This is not only an incorrect view of healthy budgeting, it’s downright unhealthy. 

You work hard for your money. You shouldn’t have to hoard it all away. Trying to force yourself to live on only the bare necessities when you have enough money to spend a little more is probably not the best decision.

Taking such a rigid approach usually makes people miserable, and it also makes their budget short-lived. By instead searching to find a balance, you’re actually doing yourself a favor!

Now, let’s talk about the other extreme. Just like it’s possible to be unnecessarily cheap and make yourself miserable in the short term, it’s equally possible to spend like there’s no tomorrow.

This way of building a budget is just as bad because it leads to misery in the long-term. Most people don’t want to be in their mid-80s and still have to work a 9-5 job every day because their past self didn’t know how to manage money.

Many people spend their lives bouncing between these two extremes. They spend thoughtlessly, usually on things that don’t even make them that much happier.

Then, they think, “Oh crap, what have I done?” and over-correct. Some people get scared by a large credit card bill at the end of the month. Others feel guilty when they see a low balance in their savings account.

Whatever the reason may be, it causes a lot of people to subject themselves to an unrealistically strict lifestyle. And sooner or later, it becomes too much, and they break down to go back to their old ways.

Help your future self by finding a healthy middle ground and breaking this tiring cycle.

Money Skill #2 – Managing Your Debt

Notice that the title here says, “managing your debt,” not “eliminate your debt.” That’s because we’re going to talk about the difference between “good” debt and “bad” debt, and how you can use debt-managing money skills to your advantage.

Note: irresponsible debt is always bad debt. You should exercise strong caution when managing your debt, and this shouldn’t be used as a license to take on debt at-will.

Bad Vs. Good Debt

Excluding irresponsible debt, how can you tell the difference between good debt and bad debt? Well, the main distinction between the two comes from whether it adds or subtracts value.

Using Your Money Skills To Pay Off Bad Debt

Bad debt is a bit more straightforward than good, as many would argue all debt is bad debt. When it comes to your debt management money skills, we define bad debt as debt that has a high interest rate or loses value over time.

A fantastic example of high interest debt is credit card debt. This is one of the reasons it’s so important to know what credit cards are and how credit cards work. Most have very high interest rates (10+ percent per year), so any credit card debt you may have will grow incredibly fast.

An example of debt for things that lose value over time would be taking out a loan to buy a new car. New cars are infamous for rapidly depreciating in value. So when you borrow to buy one, as soon as you drive it off the lot, odds are you already owe more on your car loan than the actual car itself is worth.

If you’re allowing debt to grow faster rate than you can keep up, or you repeatedly take out loans to buy things that aren’t worth their value, you’re being less efficient than you could be.

If you instead paid off that credit card debt, you’d save yourself money in forgone debt payments. Likewise, avoiding a car loan for a new car will help you lose less money as a used car depreciates in value slower than a new one.

These principles basically boil down to this: don’t be wasteful with how and when you choose to take on debt.

Using Your Money Skills To Utilize Good Debt

On the flip side, good debt is debt that adds value. This would include loans for education or buying a home, as each is an investment in your future and has the potential to earn you money.

An education will often give you more marketable skills, and so taking out a loan to fund it will usually benefit you in the long run due to higher wages. 

Consider the wages of most college graduates compared to high school graduates. On average, college graduates tend to earn more than high school ones. Even though those college grads had to pay to attend college, their higher wages mean they’ll be able to make up for it later on.

Now consider buying a home. This is often considered another type of good debt but in a slightly different way.

Yes, it’s always possible for your home to increase in value, in which case you’ll earn a profit when you decide to sell it. But, even if your house doesn’t increase in value, you still benefit.

If you buy your home for $100,000 and live in it for ten years before selling it to someone else for $100,000, you’ve essentially gotten to live somewhere for free for the last decade! That’s still a major benefit, even if it’s not as immediately obvious.

Ultimately, good debt boils down to borrowing to pay for things that will either grow in value in the future or provide enough benefit to offset any depreciation.

Money Skill #3 – Making Smart Investments

This is where most people start to get either very nervous or very excited. On the one hand, you get to grow your wealth and make your money work for you. On the other hand, investing can seem very complicated from the outside. 

If you’re interested in a more in-depth breakdown of how to start investing, we’ve got you covered. But for now, let’s talk about why investing is so important and a few easy things you can do to get started.

Why Invest?

First, let’s define what the word ‘invest’ even means. At a basic level, to invest is simply to spend money with the expectation of getting more money in return. That’s it. To invest, you simply buy something, hoping that you’ll earn more money later in investment returns.

This is important because it explains why it’s so important to invest. Let’s say you are worried about having enough money for retirement. You might be stocking away every dollar you can into your bank account so that it’s there when you turn 65.

But the problem with that is that your typical checking account or savings account pays virtually (or literally) nothing in interest. So your money is actually losing value due to inflation (the gradual increase in the prices of things at stores). A hundred years ago, a can or bottle of Coke or Pepsi cost 5 cents. Today, a bottle of Diet Coke could cost you $1.99. This increase in price is inflation.

So, if your money isn’t invested and growing, it’s actually losing value, since the prices of things will increase over time.

Another concern we’ve heard a few people say is that they don’t want to invest because they are afraid of paying more taxes. This is nonsense because you will usually only pay taxes on profits, so in the end, you will still have more money (after taxes) than if you hadn’t invested at all!

Investing is an excellent way to grow your money over time (hopefully it will grow much faster than inflation does) so that when you are ready to retire, you won’t have anything to worry about besides which new hobby you want to try out.

The Power Of Compound Interest

So, now we’ve established investing is a good way to grow your money. But to put into perspective just how powerful a tool it is, let’s take a look at compound interest.

To give you a broad overview, compound interest is so valuable because it lets your money grow exponentially. Over time, your original investment grows in value, and compound interest makes it grow faster and faster as it accrues interest. 

Putting some hard numbers to it, here’s a breakdown of how much a $1,000 investment would be worth over the course of 30 years. The interest rate is based on the average historical returns of the stock market.

Choosing How Long To Invest For

One thing to note from the table above is that the latest years are the ones with the most growth. This is again due to the power of compound interest, and it should factor into how long you choose to invest for.

To make things simple, the longer you choose to invest, the more money you’ll probably end up with. If you’re currently 23 years old and want to buy a house by the time you’re 35, then plan to invest over the next 12 years. 

While this doesn’t mean you should always sock away all of your money and not touch it for the next 50 years, it does mean thinking ahead now about your future financial goals will give you a head start on achieving them.

Different Investment Account Options

Equally important as how long you invest for are the accounts you put those investments into. For most people looking to develop their investing money skills, we recommend using IRA accounts for long term investments like ETFs and index funds.

IRAs are tax-advantaged accounts, which means you’ll save money by lowering your tax bill at the end of the year if you invest using them. If you’re curious to learn more about what an IRA is and if it’s best for you, check out our guide to IRAs.

Money Skill #4 – Boosting Your Income

Sometimes, knowing how to spend less isn’t enough. If you’re only making $15,000 a year, it’s going to be hard to save for retirement and other long term goals, no matter how good your other money skills are.

With that in mind, let’s talk about the fourth type of money skill—boosting your income. While there are a few obvious methods like renegotiating your salary to ask for a raise, let’s talk about a more creative way to earn some extra cash.

Getting A Side Hustle

One of the best and fastest ways to boost your income is to get a side hustle. This can be anything from pet sitting to opening an Etsy shop to graphic design.

A good place to start thinking about what you want your side hustle to look like is to consider what you’re passionate about. Do you love music? Try performing in a nightclub or lounge on weekends. Or maybe you love sports? You could work as a referee for a local sports team.

Whatever your passion, there’s probably some way you could use it to make a few extra dollars. If you’re struggling to get enough money to save, consider side hustles.

Finally, if you are in a crunch to save money, you can always try a money saving challenge to reach your goal!

Lucas Woodley

Lucas is a personal finance expert, an undergraduate student at Harvard University and the founder of the Personal Finance and Consulting Group at Harvard College (an officially recognized student organization). He has spent much of his life working to increase financial literacy in his surrounding communities through independent financial research and curricula design, and he is currently studying economics with a secondary in music.

The post What Money Skills Do I Need To Be Successful? appeared first on Finance Plan Today.

But what is Wealthfront, and how does it work? Is Wealthfront safe? And, most importantly, should you use it? Find out the answers to all of these questions and more in this Wealthfront review.

Wealthfront Review

Name: Wealthfront

Description: is a robo-advisor geared towards helping the average person invest. Thanks to their free tools and low fees, Wealthfront is a great way to passively invest.

Overall

4.6

• Pricing
• User Experience
• Ease Of Use
• Customer Service

Summary

Wealthfront is a robo-advisor geared towards helping the average person invest. Thanks to their free tools and low fees, Wealthfront is a great way to passively invest.

Pros

• Low-cost ETFs
• Tax-loss harvesting
• Portfolio rebalancing
• Accounts for 529 accounts and college funds
• Cash accounts for liquid money
• Automatic diversification

Cons

• Lack of flexibility in investments
• Inability to invest in fractional shares
• $500 account minimum

• Sign Up

What Is Wealthfront?

Wealthfront is a robo-advisor geared towards helping the average person invest. By providing high-quality advice through Wealthfront’s online questionnaire, you can learn how to invest and set yourself up for financial success without a traditional financial advisor’s high costs.

One of the biggest draws to Wealthfront is its wide range of expertise. Compared to many alternatives, Wealthfront helps you plan for your future using a more complete picture of your financial life.

One of Wealthfront’s largest competitors is Betterment, and you can read our full review on that company to learn more!

How Does Wealthfront Work?

Wealthfront uses its free, online form to assess key factors that help determine how you should invest. This includes how much risk you’re willing to take, as well as what type of account you want to invest in.

After gathering this information, Wealthfront can choose a portfolio that best suits your preferences. 

Although these can vary in terms of which specific assets your portfolio has, you can rest assured knowing that Wealthfront does an excellent job managing diversification. This means that regardless of how much risk you choose to take, you’ll be protected against extra unnecessary risk.

Using their computer algorithm, Wealthfront also takes care of a lot of the nitty-gritty details that come with managing an investment. Things like portfolio rebalancing and tax-loss harvesting are all done for you.

All of these services are paid based on a small percentage of your portfolio’s total worth. This is pretty standard practice across robo-advisors, but there are free options like M1 Finance currently available.

What Makes Wealthfront Unique?

Wealthfront is likely your best bet for a robo-advisor that can help plan all aspects of your financial life. 

Although Wealthfront has a $500 minimum to start investing, it also has a relatively low management fee. This means you’re paying less to invest with Wealthfront than you would with many other brokerages.

In exchange for the management fee, your portfolio gets the benefits of modern portfolio theory. This includes buying and selling investments in a way that keeps your tax bill as low as possible and buying ETFs that have special low costs.

Plus, Wealthfront is exceptional at creating well-diversified portfolios. There’s no shortage of information about why you need to diversify, but the short answer is that it helps give you the best bang for your investing buck.

But, Wealthfront’s specialty is far and away its free financial planning service: “Path.” Path is an advice engine that acts as an automatic version of the advice you’d receive from traditional financial planners.

Thanks to this automation, Wealthfront can give you the same or similar information as an in-person financial planner without all the costs.

If you’re at all interested in learning more about best investment practices, or you like the extra flexibility given by a more traditional financial planner, you’ll love Wealthfront and Path.

They also recently announced Autopilot, which is a service which you can use to automatically invest excess cash that you have in the bank. Put simply, you can tell Autopilot that you only need $2,000 in your bank account and they’ll monitor your account and invest any extra cash that might enter your account.

But don’t worry, you’ll have 24 hours to cancel the transfer in case you decide you need the extra cash on hand.

This automatization of investing is an incredibly powerful tool, and is backed by Nobel prize winning economic research that shows that automating financial decisions like this will greatly improve your ability to invest more money over time.

Which means you’ll likely build more wealth than if you did it all on your own!

Pros & Cons Of Wealthfront

Wealthfront Pros

• Low-cost ETFs
• Tax-loss harvesting
• Portfolio rebalancing
• Accounts for 529 accounts and college funds
• Cash accounts for liquid money
• Automatic diversification
• Autopilot service

Wealthfront Cons

• Lack of flexibility in investments
• Inability to invest in fractional shares
• $500 account minimum

How Much Does Wealthfront Cost?

For Wealthfront’s standard accounts, you’ll pay a 0.25% annual advisory fee. So if, for example, your portfolio has $10,000 worth of assets in it, you would pay $25 for the year. Although these types of fees can certainly add up over time, Wealthfront has one of the lowest ones out there.

If you happen to use Wealthfront’s special Risk Parity Fund, a mutual fund that invests in assets known for higher returns, you’ll pay 0.50% annually rather than 0.25%. 

Part of this fee does go directly to Wealthfront, but the Risk Parity Fund is reserved for people who have at least $100,000 in their account. So, for anyone just starting out, you likely won’t be dealing with this.

Also, if you do have at least $100,000 but don’t want to invest in this fund, you can always opt-out. 

It’s worth noting that you can still use Path without having your account managed by Wealthfront. This means you always have the option to get professional-grade advice without paying anything at all. That’s a pretty sweet deal if you ask me!

Is Wealthfront Safe?

The short answer is, yes. All accounts with Wealthfront have SIPC insurance, which covers up to $500,000 in securities or $250,000 in cash. This means your investments and accounts are safe in the unlikely event that Wealthfront declares bankruptcy.

While a security breach is always possible with any company, Wealthfront encrypts your personal data via a third-party.

Plus, Wealthfront doesn’t allow its servers to store your account’s password, meaning any leaks would not compromise your account. This means using Wealthfront to invest involves minimal security risk.

How Does Wealthfront Make Money?

Wealthfront makes most of its money through its annual 0.25% fee. Though it also earns money with its Risk Parity Fund, this is a less commonly used option and doesn’t factor heavily into Wealthfront’s bottom line.

How Is Wealthfront’s Customer Service?

The bulk of Wealthfront’s customer service takes place online. This means you’ll mostly be using the FAQs on Wealthfront’s site to get help. 

But, if you do find yourself in need of some more personal assistance, Wealthfront also has an over-the-phone support system that’s available from 10 am – 8 pm ET, Monday through Friday.

While the combination of these two services was enough to answer all of the questions I myself had, if you prefer speaking with an in-person advisor or want a live chat system, you’re unfortunately out of luck.

What I Wish Was Different About Wealthfront

Outside of increased ways to contact their customer service team, my main grievance with Wealthfront is their lack of flexibility in picking your own investments. In a way, this is also its strength.

Wealthfront doesn’t allow you to handle many specifics of your portfolio. This is great if you’re just looking for a way to invest passively, but for someone who wants a more hands-on approach, you may be disappointed.

How Does Wealthfront Fare Against Competitors?

Wealthfront recently made our list as one of the best Robinhood alternatives currently available. In terms of low-cost, passive investment platforms, Wealthfront is difficult to beat. The inclusion of Path as an entirely free feature also helps put Wealthfront ahead of the competition when it comes to planning out your entire financial picture.

But, that’s not to say there isn’t some great competition out there. M1 Finance has no annual fees whatsoever. Betterment is an extremely popular robo advisor as well. Robinhood offers fractional shares and no account minimums. And, Webull has a ton of technical tools for someone who wants to be a more active investor.

See how Wealthfront stacks up against Betterment: Wealthfront vs Betterment review

At the end of the day, Wealthfront is going to do well against the competition in terms of making investing easy and handling the most difficult parts. Just know that it’s not the only great option out there.

How To Get Started On Wealthfront

Getting started on Wealthfront is easy and only takes a few minutes! 

When you first open Wealthfront or go to their website, you’ll create an account with a username, password, and email address. Next, include your current savings and pre-tax income and pick your investment goals. These goals can be anything from retirement to a down payment on a house.

Then, go ahead and add any of your bank accounts that you want to be included in your portfolio. 

Wealthfront has many of the most popular banks to choose from, including Chase, Bank of America, and Wells Fargo. You shouldn’t have any trouble finding your accounts.

After linking your accounts, you’ll fill out a brief questionnaire to determine your risk tolerance and viola! You’re ready to use Wealthfront.

Should You Use Wealthfront

Most people will probably find Wealthfront to be a fantastic fit for their needs. You can use free tools to get high-quality financial advice. And for a low fee, you can have them manage your investments to make your life easier.

For those of you who want to handle every detail of your portfolio on your own, Wealthfront probably isn’t for you. The same goes for anyone looking for an in-person advisor or someone who is still learning how to save money.

But, if you already have $500 saved up, have good savings habits, and want a very hands-off approach to investing, you should check out Wealthfront. Even if you don’t end up having them manage your finances, you can always freely use Path!

Sign up for Wealthfront here to get started now!

FAQs

Lucas Woodley

Lucas is a personal finance expert, an undergraduate student at Harvard University and the founder of the Personal Finance and Consulting Group at Harvard College (an officially recognized student organization). He has spent much of his life working to increase financial literacy in his surrounding communities through independent financial research and curricula design, and he is currently studying economics with a secondary in music.

The post Wealthfront Review appeared first on Finance Plan Today.

Advertised as a much cheaper option than traditional lawyers, Trust and Will makes estate planning more affordable than ever before. But how do they work? Is it safe? And, most importantly, should you use them? Find out the answer to all of these questions and more in our Trust and Will review.

Trust and Will Review

Name: Trust & Will

Description: is a web-based company that helps ease estate planning’s financial and legal challenges. Advertised as a much cheaper option than traditional lawyers, Trust and Will makes estate planning more affordable than ever before.

Overall

4.6

• Pricing
• User Experience
• Ease Of Use
• Customer Service

Summary

Trust and Will is a web-based company that helps ease estate planning’s financial and legal challenges. Advertised as a much cheaper option than traditional lawyers, Trust and Will makes estate planning more affordable than ever before.

Pros

• Low-cost, state-specific legal documentation
• Easy to use questionnaires
• Useful customer support chat
• Only takes a few minutes to fill out a form
• One year of updates to documents completely free of charge

Cons

• Customer service is exclusively online
• Doesn’t offer enough flexibility to fit overly complex situations
• Lack of attorney-client privilege, meaning your information isn’t as securely confidential as it would be with a proper law firm

• Try it out!

What Is Trust And Will?

Trust and Will is an online service that lets you make official legal documents governing your estate for as little as $39. Whether you’re looking to designate a legal guardian, create a will, or establish a trust fund, Trust and Will can help you quickly and cheaply create the necessary legal documents.

Trust and Will also prides itself on making the document-creation process as painless as possible. For example, the average amount of time needed to create a will is only 10 minutes!

It’s also important to note that since laws differ state to state, you’ll need documents valid in your state. Luckily, Trust and Will also automatically takes care of this, using your location to create an estate plan that fits within your state’s laws.

How Does Trust And Will Work?

Trust & Will uses online questionnaires to gather relevant information about your current situation. These questions include whether you have kids under the age of 18, own a home or business, or want to donate gifts upon your death.

After indicating which of these options apply to you, Trust and Will directs you towards a product that’s best suited for your needs.

For example, if you say you have more than $160,000 to your name, Trust and Will sends you to their wills section. This is because most people with that amount of money need to have a plan for what to do with it after they’re gone. 

While the specific product may change depending on your answers, the short questionnaire is still a useful tool for finding a product if you’re unsure what to look for. It’s the same process used by sites like Policygenius to help you shop for insurance.

Once you’ve chosen a product, Trust and Will asks you the necessary questions to create a valid legal document. Let’s talk more about that process for anyone interested in creating a will.

How To Get Started On Trust And Will

Making A Will – Basic Info

Trust and Will suggested I look into creating a will, based on my initial information about my living situation. After signing up for an account with my email address and password, I started the process of creating a will.

First, I had to give some basic information. This included my name, state (to provide customized documents), date of birth, marital status, and children.

After filling out the basic information, Trust and Will asked me to indicate whether I had pets and if I wanted to nominate guardians for any of them. Saying no brought me to the main part of the will⁠—distributing my assets.

Making A Will – Determining Beneficiaries

This section was where I got to decide who would receive my assets upon my death and how much each person would get. To fill out this section, simply input the names of each beneficiary and the percentage of your assets you’d like them to receive.

Next, Trust and Will asks if you’d like to decide on a backup beneficially in case all of your other beneficiaries cannot be contacted. This can be a good idea to fill out since there are certain minimum withdrawal laws that apply to money left in Rollover IRAs.

With a backup beneficiary in place, you have an extra layer of protection against losing some of your money to the IRS.

The remainder of this section lets you create all sorts of specifications. This includes anyone you want to exclude from receiving property, deciding Executors (people who help make sure your will’s wishes occur according to plan), charitable donations, and a few other things.

One nice feature of Trust and Will is their “I have a question” button at the end of each section. If you have a question about anything at any point in the process, click that button to get sent to their customer service team.

Alternatively, you can click the question mark in the top right corner to see FAQs related to your current question. For an earlier question about where I live, common questions were “What if I moved recently?” and “What if I spend time in more than one state?”

Both of these features are incredibly useful to help guide you through the process of creating a will.

Handling Your Will’s Arrangements

After filling out the long list of questions about your assets and how to split them up, you reach the very end of Trust and Will’s questionnaire—arrangements. 

The options for this section are quite flexible, ranging from cremation to scientific donation to leaving it up to your executor.

Trust and Will also lets you dictate whether you want a funeral service, mausoleum burial, etc.

Finally, there’s a section for special requests. Trust and Will lists a few possible options for things to include here. Songs played, people invited or not invited, or extremely unique requests for dividing up your assets all qualify as special requests.

After that, you’re done! Congratulations, you just created a will with one-quarter the cost in about one-tenth the time it would’ve taken a traditional attorney. 

What Makes Trust And Will Unique?

Trust and Will’s unique selling point is that they provide more efficient services for lower prices thanks to their online status.

Because Trust and Will is a website rather than an in-person law firm, they don’t need to pay for things like renting a building to operate. This helps cut down on costs, which gets passed on to you as a customer.

Although tools like Policygenius and Earnin have been using automation to cut down on costs for a long time, Trust and Will is unique by merging legal documentation with easy to use questionnaires.

Pros & Cons Of Trust & Will

Trust & Will Pros

• Low-cost, state-specific legal documentation
• Easy to use questionnaires
• Useful customer support chat
• Only takes a few minutes to fill out a form
• One year of updates to documents completely free of charge

Trust & Will Cons

• Customer service is exclusively online
• Doesn’t offer enough flexibility to fit overly complex situations
• Lack of attorney-client privilege, meaning your information isn’t as securely confidential as it would be with a proper law firm

How Much Does Trust And Will Cost?

Trust and Will’s costs depend on which product you’re buying. But, note that all of these costs are below what you’d pay using a traditional attorney.

To purchase will documentation, it costs $89. If you want to add a spouse, it’ll cost an additional $70 ($159 total).

To purchase a trust, it costs $399. If you want to add a spouse, it’ll cost an additional $100 ($499 total).

To purchase legal designation of guardianship, it costs $39. If you want to add a spouse, it’ll cost an additional $30 ($69 total).

The one other cost to note is Trust and Will’s update fees. After your first free year of updating legal documents, you’ll have to pay $12/year if you want to continue getting unlimited updates.

Is Trust & Will Safe?

Trust & Will’s legal team is in charge of creating all legal documents. They’re all trained experts in estate planning. So, you can rest easy knowing that your trust, will, or transfer of guardianship will be taken care of by an experienced attorney.

With this in mind, it’s no surprise that Trust and Will has the highest possible rating, A+, from the Better Business Bureau (BBB). BBB is one of the biggest names when it comes to rating companies’ trustworthiness.

Now that we’ve talked about Trust and Will’s legalities, let’s talk about their financial safety. This is another way in which Trust and Will truly shines. 

For anyone skeptical about the quality of their services, you can take advantage of their 30-day money-back guarantee. So long as your request is within 30 days of your original purchase, you can get a full refund.

The one thing to note is that lack of attorney-client privilege when using Trust and Will. Since they’re not technically a law firm, you won’t be able to get the same protection level for your information.

How Is Trust And Will’s Customer Service?

Trust and Will’s customer service is, for the most part, excellent. Their online chat feature is responsive and provides useful information. 

Also, Trust and Will’s support staff can help walk you through any problem you might encounter if the FAQ section can’t help.

However, that’s not to say Trust and Will’s customer service is without any flaws.

What I Wish Was Different About Their Service

Honestly, I only have a few very minor complaints about Trust and Will. And, Trust and Will could fix all of them with a customer support phone number.

Being able to speak on the phone with a live person might allow users to create documents that fit a more complex situation. The little things that are often part of these circumstances can be tough to explain and work around over text.

But, if Trust and Will had a dedicated customer support system via phone, these issues might be resolved.

How Does Trust & Will Fare Against Competitors?

Compared to in-person estate planners, Trust and Will has a number of advantages. In addition to the lower costs and quicker turnaround time, Trust and Will’s forms can be filled out from the comfort of your home.

But, this luxury does not come without drawbacks. Since everything is online and mostly automated, Trust and Will doesn’t hold up quite as well for those who have complicated assets to divvy up.

This isn’t necessarily a criticism of Trust and Will, though. Tools like SmartAsset are built around trying to address the same issue of convenience vs flexibility. However, it’s still worth mentioning.

Should You Use Trust And Will?

If you have a particularly complex financial situation, such as owning your own business and having lots of rental property, or your family life is legally complicated (multiple marriages with children, etc.), you may need the extra flexibility afforded by an in-person estate planner.

Unless you happen to fall into either of those two categories, however, chances are Trust and Will will be a great fit for your needs. If you’re in need of their services, Trust and Will is one of the best places to get affordable legal documents for wills, trusts, and guardianship.

Lucas Woodley

Lucas is a personal finance expert, an undergraduate student at Harvard University and the founder of the Personal Finance and Consulting Group at Harvard College (an officially recognized student organization). He has spent much of his life working to increase financial literacy in his surrounding communities through independent financial research and curricula design, and he is currently studying economics with a secondary in music.

The post Trust and Will Review appeared first on Finance Plan Today.

How much you should save depends on where you put your savings and your goals for retirement. With that in mind, let’s break down the what, how, and why behind how much you should save.

How Much Should You Save Each Month?

This number varies depending on where you look. But, most sources say you should save at least 15% and ideally 20% of your monthly income. 

If you started saving late or are looking to retire early, you should probably aim for the upper end of that range. Or, you could always choose to save more than 20 percent if you can afford to do so.

However, it’s important to choose a savings amount that won’t sacrifice having a sustainable budget. A 15% savings rate that lasts for several years will always be more beneficial to you than a 30% savings rate that lasts two months.

One possible method to use for saving is the 50/30/20 budgeting method. This involves breaking down your expenses into three categories: “needs,” “wants,” and “savings & debt repayment.” Then, put 50% of your monthly income towards needs, covering fixed expenses such as rent, groceries, and utilities. 

30% goes towards your wants, which are variable expenses that can be anything from dining out to saving up for vacations to going clothes shopping.

The last 20% is for savings and debt repayment, including any investments you may have, increasing your emergency savings, paying off credit cards or student loans, etc. 

The upside to this strategy is that each budget category is more flexible and doesn’t necessitate as much planning each month.

However, one negative of this strategy is that it can be harder for some people to stick to since it doesn’t offer a strict, designated plan for every dollar of income. Also, sometimes 20% isn’t enough to make meaningful progress on getting out of debt.

But there are a ton of ways to make a budget that works. Choose the one that works best for you.

Where Should You Put The Money You Save?

There’s no one-size-fits-all best place to put your money, but here are a few good options:

Using A High-Yield Savings Account

A high-yield savings account is a savings account that offers a high-interest rate. It’s that simple. 

Online-only banks typically offer high-yield savings accounts like CIT Bank. These online-only banks use the money they save from not having to have local physical branches to offer interest rates that may be as high as 200+ times greater than what a typical traditional bank can offer.

These interest rates can be as high as around 2.2% APY, so it’s definitely worth shopping around to find the best rates.

Note that these rates fluctuate with current economic conditions, so better conditions will mean higher rates and vice versa.

As another plus, high-yield savings accounts are no riskier than traditional banks. This is great if you’re looking for an especially safe place to park your savings and let them grow.

The two cons with high-yield savings accounts are the lack of in-person assistance and a monthly withdrawal limit. If you withdraw from a high-yield savings account more than six times per month, you could face fees and penalties.

High-yield savings accounts will overall be best for someone who doesn’t plan on making several withdrawals but still wants a lot of safety and flexibility. If you’re looking for a place to store your savings, you should seriously consider a high-yield savings account.

Using A CD To Save

Now, let’s talk about certificates of deposit (CDs).

CDs are different from savings accounts in that the institution holds your deposit until maturity, at which point you can withdraw your money with its accrued interest.

While CDs tend to pay more than high-yield savings accounts, you cannot easily access the money you’ve placed into the CD until the end of its lifetime.

Upon signing the contract for a certificate of deposit and depositing a certain sum of money, called the principal, the interest rate (APY) is locked for the time in which you leave the money with the bank, called the term length.

The term length varies a lot, but it usually is either three months to five years long. If you try to withdraw your money anytime during the lifetime of the CD before the end of its term length, you will likely face early withdrawal penalties.

In terms of safety, CDs are just as safe as bank accounts.

Both are FDIC-insured up to $250,000, meaning that if the bank you made the CD with suddenly fails, the government will make sure you get all of your money back, up to $250,000.

So, should you save with a CD? While you are unable to touch your money for some time, generally speaking, CDs offer higher returns on your money than savings accounts and high-yield savings accounts.

It ultimately becomes a balance between how accessible your savings are and how much you can earn in interest.

If your financial situation is currently very unstable and you might need your savings in the next few months, CDs probably aren’t for you. 

But, if you don’t think you’ll immediately need your savings and are financially stable, CDs are a great way to save.

Using 401(k)s and IRAs To Save

Using tax-advantaged accounts like 401(k)s and IRAs can make a tremendous difference in how much money you end up with when you retire. 

To keep it simple, tax-advantaged (or tax-favored) basically means that the government will allow you to pay fewer taxes if you invest using this plan compared to making the same investments outside of a tax-favored account.

The way this works for 401(k)s is your contributions are tax-deductible. This means that money is not taxed when you put in your 401k.

You will end up paying tax when you finally take the money out, but it’ll be less than if you initially paid income tax, invested it, and then paid capital gains tax.

The most significant aspect of 401(k)s to be aware of is the potential for an employer match. Some employers will match the amount that you put in, which increases the amount of money going into the account each time!

This is usually done at a one-half to one percentage point ratio, up to a certain cap. 

In plain English, this means if your employer caps their contributions at 3%, you could contribute 6% of your own money and get the full 3% match. 

The same taxation process applies to Traditional IRAs, which are also made with pre-tax dollars. Roth IRAs, on the other hand, use after-tax dollars. But, in exchange, Roth IRAs can be withdrawn tax-free after age 59 ½.

Additionally, you can withdraw your contributions (ONLY the total you contributed, NOT any of the investment gains) at any time, tax and penalty-free!

This is a game-changer because your money isn’t necessarily trapped until you retire. Ideally, you won’t touch it until retirement, but it’s nice to know you can access it, penalty-free, in case of an emergency.

A Few Caveats

Unfortunately, there is a limit on how much you can contribute to your IRA each year. Currently, that cap is $6,000. So, it’s important to start soon and spread that saving over several years to avoid having this become a huge pain.

Also, you can’t contribute to an IRA if your individual AGI is over $139,000 or you and your spouse’s joint AGI is over $206,000.

There’s also a limit on how much you can contribute to a 401k. Currently, that amount is $19,500. 

Why Are You Saving?

Fundamentally, you’re saving to support yourself financially without working and still do the things you want to do. This is the idea behind financial independence.

But, to achieve this, you need to save up a lot of money. Since you have to consider your regular living expenses and potential emergencies, health bills, etc., you’ll want a healthy cushion of funds.

How Much Should You Save For Retirement?

So, let’s say you decide today that you want to retire in thirty years. How much money should you save for retirement, assuming you want to maintain a similar living situation to your current one?

First, a quick rule of thumb for how much you should save for retirement is that you’ll need 25x your annual retirement expenses.

This means that if you spend $30,000 a year on housing, food, car payments, health care, child support, etc., you’ll want at least $750,000.

The 25x rule says that if you save 25x your annual expenses in retirement and have a 4% annual withdrawal, this should last you at least 30 years (barring any economic catastrophes in the early years of your retirement). 

For example, if you are going to spend $60K per year during your retirement, your retirement savings goal should be $1.5 million. This is because $60K x 25 = $1.5 million.

If you plan to have a longer retirement, then you should save more. If you plan to have a shorter retirement, you can save less.

We have a free and easy to use retirement calculator that you can use to calculate an estimate for your own financial situation.

One note is that the 25x rule isn’t perfect. There is never absolute predictability when it comes to the future. But, as a way to give you an idea of exactly how much you should save, it’s a useful starting point.

How Can I Save That Much Money?

Such a large number can feel very overwhelming to people. One of the most powerful ways to work towards this goal and grow your money is to learn how to invest.

There are a ton of different tools available and ways to invest, everything from robo-advisors like M1 Finance and Betterment to online real estate brokers like Fundrise, to sites with over-the-phone financial planners like Facet Wealth and Personal Capital.

There’s no short answer to the best way to invest. But, here’s our guide on how to start investing so that you can make an informed decision about what method of investing is right for you.

How Should You Define Successful Saving?

This question comes up a lot from people who are new to saving. Sometimes, saving 20%, or even 15% isn’t possible at the moment.

So, beyond a specific percentage, how should you define successful saving? The short answer is growth.

Let’s say 20% is currently too much for you right now. In that case, start with an amount that’s more realistic for you. It doesn’t matter if that’s 2% or 15%, what matters is that you pick a place to start and commit to moving towards that 20% mark over time.

Now, what happens when you start saving 20%? Are you done with saving and making adjustments forever? No.

A higher savings rate can never really hurt. Worst case scenario, you simply have a bit more security knowing that your emergency fund can handle whatever disasters life throws at you.

If you happen to be at a 20% savings rate and find an opportunity to increase it further, this might translate into an earlier retirement. When you start thinking about savings in terms of added years of leisure, it becomes a lot more valuable.

Now, you might be thinking, “Well, if I still try to aim higher once I get to 20%, why is that specific number so important in the first place?”

We choose the 20% goal because it’s the recommended amount you should save to support yourself in old age. If you’re consistently below that, the consequences are much harsher than if you go slightly over.

Not having enough money to support yourself forces you to continue working. Very few people want to continue working 9-5 at 80 years old. That’s why saving the recommended 20% is so important.

To easily track how much you are saving, you can use an app like Mint to track everything.

You can do it!

FAQs

Lucas Woodley

Lucas is a personal finance expert, an undergraduate student at Harvard University and the founder of the Personal Finance and Consulting Group at Harvard College (an officially recognized student organization). He has spent much of his life working to increase financial literacy in his surrounding communities through independent financial research and curricula design, and he is currently studying economics with a secondary in music.

The post How Much Should I Save? appeared first on Finance Plan Today.

But what is Betterment, and how does it work? Is Betterment safe? And, most importantly, should you use it? Find out the answers to all of these questions and more in this Betterment review.

Betterment Review Score

Name: Betterment

Description: is one of the best robo-advisors currently available. With low fees and a ton of features, Betterment is a fantastic choice for anyone looking to invest without all the hassle.

Overall

4.6

• Pricing
• User Experience
• Ease Of Use
• Customer Service

Summary

Betterment is one of the best robo-advisors currently available. With low fees and a ton of features, Betterment is a fantastic choice for anyone looking to invest without all the hassle.

Pros

• Flexibility in asset allocation
• No account minimum
• Low management fees
• CFPs available
• Can invest in value stocks
• Well-diversified portfolios
• Automatic portfolio rebalancing
• Tax-loss harvesting

Cons

• Financial advisors have a higher annual fee and $100,000 account minimum
• Hands-on investors will likely feel crippled
• No real estate investments (REITs)

• Sign Up

What Is Betterment?

Betterment is one of the most established robo-advisors that’s still around today. It was founded back in 2008 and has grown to its current status as one of the leading investment platforms available.

With over $20+ billion of assets under its management, Betterment is one of the largest robo-advisors in the world, trailing only established giants like Schwab and Vanguard. This sustained growth has been fueled largely by Betterment’s commitment to using the best technology and strategies available.

How Does Betterment Work?

Betterment uses its questionnaire to assess critical factors that help determine how you should invest. Chief among these is your risk tolerance, which is the amount of risk you’re willing to take on with an investment. Higher risk tends to lead to greater potential rewards, but most people prefer minimal risk.

After gathering this information, Betterment can choose a portfolio that best suits your preferences.

Although these can vary in terms of which specific assets your portfolio has, you can rest assured knowing that Betterment does an excellent job managing diversification. This means that regardless of how much risk you choose to take, you’ll be protected against extra unnecessary risk.

Using their computer algorithm, Betterment also takes care of a lot of the nitty-gritty details that come with managing an investment. Things like portfolio rebalancing and tax-loss harvesting are all done for you.

All of these services are paid based on a small percentage of your portfolio’s total worth. This is pretty standard practice across robo-advisors, but there are also free options like M1 Finance if you don’t mind missing out on a few of Betterment’s features.

What Makes Betterment Unique?

One of Betterment’s most unique features is its offering of value stocks as investable assets. These are stocks in companies that, due to advanced metrics, aren’t as highly valued by active traders.

By investing in these types of companies, there’s a lot of potential to earn more money than you could through more traditional investments. This is one of the few investment strategies that offer possible long-term success, so it’s great to see Betterment taking advantage of it.

Another part of Betterment that makes it unique is that it’s a “hybrid” of sorts between online and in-person investment platforms. While computer algorithms automate the standard account, Betterment’s premium service lets you regularly interact with a financial advisor.

This flexibility allows Betterment to appeal to a broader range of possible investors. On the one hand, you have cheap, automatic investing to satisfy the hands-off investor. On the other hand, there are professional financial planners to help those whose situations are more complex.

Regardless of which camp you fall into, you can probably find what you’re looking for with Betterment.

The last significant, unique aspect of Betterment is the amount of flexibility you get when choosing investments.

Unlike an M1 Finance or Acorns, Betterment lets you change how much of your portfolio you want to be invested in different types of assets. If you want more international investments, you can adjust. If you’d rather invest in short-term US Treasury bonds, go for it!

However, it’s important to note that Betterment does not let you choose which ETFs are actually in the asset class. Though some people may find this frustrating, it’s a useful way to ensure your portfolio stays diversified.

Pros & Cons Of Betterment

Betterment Pros

• Flexibility in asset allocation
• No account minimum
• Low management fees
• CFPs available
• Can invest in value stocks
• Well-diversified portfolios
• Automatic portfolio rebalancing
• Tax-loss harvesting

Betterment Cons

• Financial advisors have a higher annual fee and $100,000 account minimum
• Hands-on investors will likely feel crippled
• No real estate investments (REITs)

How Much Does Betterment Cost?

Betterment’s standard offering costs 0.25% of your account balance annually. 

So if, for example, your portfolio has $10,000 worth of assets in it, you would pay $25 for the year. Although these types of fees can certainly add up over time, Betterment has one of the lowest ones available.

Betterment Premium

If you want to take advantage of Betterment’s premium plan, which gives unlimited access via phone to CFPs, it’ll cost 0.40% annually. If you want regular access to a professional, Betterment’s rates are actually very reasonable.

This can be useful if you need advice on other investments not managed by Betterment. This includes 401(k)s and assets like real estate. If you have investments spread across a wide variety of services, consider Betterment Premium.

But, you’ll need at least $100,000 in your account if you want to use Betterment Premium.

Is Betterment Safe?

The short answer is yes; Betterment is safe. They encrypt all account data and use two-factor authentication. This means you’re unlikely to have your account details stolen. And, even if you do, two-factor authentication can help protect your account’s assets.

In terms of your investments, Betterment offers SIPC insurance. With SIPC insurance, your investments are protected up to $500,000 or $250,000 cash. So, in the unlikely event Betterment declares bankruptcy, you won’t be left with an empty bag.

How Does Betterment Make Money?

Betterment makes its money through annual fees. If you have a standard account, this is your 0.25% fee. If you’re using Betterment Premium, your 0.40% is going towards Betterment’s bottom line.

How Is Betterment’s Customer Service?

The bulk of Betterment’s customer service takes place online. This means you’ll mostly be using email and the FAQs on Betterment’s site to get help. 

But, if you do find yourself in need of some more personal assistance, Betterment also has an over-the-phone support system that’s available from 9 am – 6 pm ET, Monday through Friday. 

You’ll have to use email outside of these times, which is available through the same hours plus 11 am – 6 pm ET on the weekend.

What I Wish Was Different About Betterment

I don’t have many complaints about Betterment. They offer low prices, excellent service, and a lot of features. That said, the inability to invest in real estate via REITs is unfortunate.

Real estate can be a great way to diversify your portfolio beyond what’s available through stocks, bonds, and ETFs. By investing in a REIT, you’re basically investing in a company that buys properties, which means the company’s value is tied to the underlying rental properties.

Think of this strategy similarly to investing in stocks. In both cases, you’re becoming a shareholder (person who owns shares or stocks in a company) and thus get to enjoy part of that company’s profits.

Since real estate value often follows different trends than the stock market, it serves as a way to get further protection against risk. Although Betterment’s lack of REITs isn’t the end of the world, it would still be great to see them added.

According to the company, their reasoning does seem to offer a good explanation for it: “We include exposure to real estate, but as a sector within equities. Adding additional real estate exposure by including a REIT asset class would overweight the portfolio strategy’s exposure to real estate relative to the overall market.”

How Does Betterment Fare Against Competitors?

Betterment is one of the best robo-advisors currently available. In terms of low-cost, passive investment platforms, Betterment’s truest competitor is Wealthfront. Although other robo-advisors can beat out Betterment in specific areas, almost none have the same all-around capabilities.

See how Wealthfront stacks up against Betterment: Wealthfront vs Betterment review

But, that’s not to say there isn’t some great competition out there. M1 Finance has no annual fees whatsoever. Robinhood also offers fractional shares and no account minimums but lets you pick individual stocks. And, Webull has a ton of technical tools for someone who wants to be a more active investor.

Betterment will do well against the competition in terms of making investing easy and handling the most difficult parts. As an all-around investing platform, it’s fantastic. Just know that it’s not the only great option out there.

How To Get Started On Betterment

You can sign up here!

Betterment is well known for having one of the easiest start-up processes of any robo-advisor. They even state at the start of their sign up process that it should take at most three minutes!

To create an account, first fill out some basic details like your email address, address, and income. Then, you can pick your financial goals. These can be anything from education to retirement.

Once you have selected your goals, Betterment lets you play around with different asset allocations and shows you how risky various investments are. Once you’ve determined what balance you want, it’s time to connect any bank accounts and get started!

It’s an incredibly simple process, and from start to finish, it only took me two minutes to complete.

Should You Use Betterment

There’s a reason Betterment is so highly rated by financial experts. They offer a cheap service with a surprising amount of features. If you’re looking for a way to passively invest, whether for retirement, a child’s education, or a home, Betterment can help you meet your financial goals quicker and easier.

For anyone who wants to invest but lacks the lofty account balances other services have, Betterment is a great introduction. With no account minimums and automatic portfolio rebalancing, Betterment can remove the stress from learning to invest.

If you want to start investing without the risks of picking individual stocks or managing your own portfolio, check out Betterment.

FAQs

Lucas Woodley

Lucas is a personal finance expert, an undergraduate student at Harvard University and the founder of the Personal Finance and Consulting Group at Harvard College (an officially recognized student organization). He has spent much of his life working to increase financial literacy in his surrounding communities through independent financial research and curricula design, and he is currently studying economics with a secondary in music.

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