It’s perfect for those looking for a more hands-on approach rather than trying to do everything on your own.

Facet Wealth Review

Name: Facet Wealth

Description: is a next-generation company offering professional financial planning services at affordable prices targeted to young professionals.

Overall

4.1

• Pricing
• Customizability
• Ease Of Use
• Dashboard

Summary

If you’re looking for an online financial advisor, Facet Wealth offers a compelling product at a competitive price. Due to the fixed price model, you’ll want to be thoughtful if you are just starting out since the fees will comprise a larger percentage of your investments.

Pros

• Extreme Convenience With Virtual Meetings
• Fixed Monthly Pricing
• CFPs Don’t Earn Commissions
• You’ll Get Peace Of Mind

Cons

• No In-Person Meetings (If You Care)
• Price increases have happened multiple times

• Sign Up Now!

Bottom Line

If you know you’d benefit from having an expert help you make financial decisions, Facet Wealth is a fantastic option. For as low as $150 per month (fees are based on the services you need), you’ll get a dedicated certified financial planner to help you navigate life’s financial decisions like a pro, literally.

I started Finance Plan Today with my brother because we saw an opportunity to give readers the skills and knowledge they needed in order to make better financial decisions.

Those of you who know us personally know that we grew up in poverty. We were raised by a single mom who struggled to make ends meet. My brothers and I worked extremely hard in school to create a brighter future for ourselves.

But one thing I learned is that it doesn’t matter if you went to Harvard, have a Ph.D. in accounting, or are a rocket scientist, it’s still stressful to make financial decisions.

And not everyone has the confidence or time to do it all on their own. If that sounds like you, then seeking professional help might just be the best decision you can make.

For those who love reading our site but still want some extra help, we can’t recommend Facet Wealth enough.

Facet Wealth Overview

Overall Rating	4.1 out of 5.0
Account Minimum	$0
Pricing	Plans start at $100 per month, although the average customer pays closer to $150-$200 per month ($1,800-$2,400 annually).
Payments	All plans are subscription based and are billed automatically on a monthly basis.
Dedicated CFP	When you sign up, you'll have a single dedicated Certified Financial Planner to work with.
Lifestyle and Expense Planning	All plans include lifestyle and expense planning which includes developing a budget to meet your goals.
Investing Expertise	Your CFP will work with you to develop an optimal investment strategy. The days of stressing over investments are over.
Cancellation Fees	None
Other Benefits Included:	Financial education program On-demand access to the Facet Wealth online portal Flexibility to increase range of services on-demand, so Facet Wealth can grow with you.
Schedule Your Free Call

What Is Facet Wealth?

Facet Wealth is a next-generation financial services company aiming to make expert financial advice available at affordable prices. The company’s secret sauce boils down to three components: its proprietary technology platform, transparent pricing, and their focus on service. 

Their proprietary technology platform redefines financial life management and enables the company’s Certified Financial Planners (CFPs) to deliver a game-changing client experience at an affordable price.

All financial advisors at Facet Wealth have the CFP designation which is generally recognized as the highest standard in the personal financial planning industry.

Facet Wealth’s transparent pricing means that you know exactly what to expect at a given price point. And Facet Wealth empowers its in-house financial planning team to only focus on providing the best financial planning services by aiming to eliminate conflicts of interest. In fact, your dedicated CFP is not even involved in determining the price you’ll pay so that their primary focus is simply helping you.

Traditional investment advisors receive commissions from the products their customers use. In addition, financial advisors at traditional firms are required to generate new business and find new customers, which takes their focus away from providing the best service possible to their existing clients.

Facet Wealth eliminates both of those problems.

In fact, their certified financial planners receive a base annual salary and bonus based only on customer satisfaction. No commissions from recommending specific products. Additionally, they are not responsible for recruiting new customers, so nearly 100% of the financial advisors’ time is spent advising clients. The CFPs are not even involved in determining the pricing of your plan, which is pretty awesome as there are no awkward conversations.

How Does Facet Wealth Work?

Facet Wealth is a full-service financial planning firm but differs from a traditional financial planning company in that all meetings take place virtually. If you’ve ever been on a skype or Facetime call, then the meetings will feel familiar to you.

In order to work with Facet Wealth, you simply schedule a complimentary introductory video call to learn more.

During the call, a client relationship manager will answer your questions, describe the process, and assess your needs. During that call, they’ll get a sense of the services you require and determine your price.

Based on that initial video call, they’ll also assign you a dedicated financial planner who will work with you to create a rock-solid financial plan. Part of what Facet Wealth does really well is match you with the CFP on their team who is the best fit for you. Your CFP will be assigned based on their expertise and the scope of services that you need, as well as any preferences you indicate. 

All of your meetings will take place via video call.

Your first call with your dedicated CFP will consist of getting to know each other so that you can start to build a relationship with them. They’ll want to make sure you have all of your questions answered and feel comfortable before the heavy lifting begins.

After this video call, your CFP will send you a list of questions and request a few docs that they’ll need prior to your next meeting.

With regards to the onboarding process, one Facet Wealth user that I interviewed said:

“The onboarding process was very smooth. I liked that I didn’t discuss pricing with my actual CFP and that their focus was simply on helping me. The process never felt rushed and the pacing felt just right. I think my relationship manager and CFP both did a really nice job of making sure my husband and I always felt comfortable and confident with the process. The cherry on top was the beautiful Facet Wealth dashboard I can use to check in on my finances.”

You’ll have more meetings initially then they’ll taper off as you get settled.

From there on out, you’ll meet on a regular cadence with your CFP to get your plan established and do the initial push to get you moving in the right direction before the meetings taper off as you settle into things. The best part is that you can schedule a meeting with your financial planner as often as you need to. That means that if you have a child and need to expand the scope of your services to include planning for future educational expenses for your little one, you can rest assured you can meet with your CFP to handle that.

If you travel a lot for work (or fun!), don’t worry. One user said they had their introductory call with Facet Wealth while traveling in Africa! Just remember that you must be a resident of the U.S. in order to be a Facet Wealth Customer.

Facet Wealth Is Best For You If:

• You have a household income of at least $70,000 or have $50,000 saved between savings, checking, 401(K), IRAs or other financial accounts
• Have less than $1,000,000 to your name
• Are unsure of how to best manage your money
• Have a 401k and aren’t sure if it’s invested properly
• Don’t have the time, energy, or interest to DIY
• Are going through a life transition and want help navigating the process from a financial standpoint
• Are feeling anxious about money and would sleep better at night having a professional keeping an eye on your finances
• You know what you need to do financially but have a hard time translating it to actionable steps
• You have absolutely no clue about anything related to personal finance and just need help
• Travel a lot for work and need to call your CFP from the road

Getting Started With Facet Wealth Is Easy

Getting started with Facet Wealth is easy. You simply schedule a complimentary introductory video call to introduce yourself, explain your goals and financial concerns, and learn about how Facet Wealth can help you.

You can schedule your preliminary call here: Schedule Free Call Now.

Ongoing Planning and Advisory

After your initial call with a Facet Wealth relationship manager, you’ll be partnered with a certified financial planner who you will work with exclusively.

Your first call with your advisor will give your CFP the opportunity to introduce themselves and explain how their planning process will work. I love that they focus on making the process actionable so that you always feel like you are making progress. They’ll also begin to collect any information they need to create a solid financial plan for you. Afterward, you’ll check-in with your advisor as needed to answer questions, evaluate how you are doing, and provide any additional guidance needed.

You can expect to meet via video-call with your CFP regularly for the first several months until your plan is finalized and you feel comfortable with the planning decisions. Thereafter, you’ll have meetings scheduled every 6 months to check-in, but they’ll be available to you should you need anything in the interim.

How Much Does Facet Wealth Cost

Pricing

Facet’s financial planning and consulting fees are negotiable, but generally range from $1,800 to $8,000 per year on a flat fee basis, depending upon the level and scope of the services required. If a client determines to engage Facet to provide discretionary investment management services, such services shall be considered in determining the client’s final financial planning and consulting fee. Other factors considered include, but are not limited to the level and scope of the overall investment advisory services to be rendered and the complexity of the engagement.

A beautiful thing about Facet Wealth is that they’ve moved away from the legacy pricing model in the financial planning industry. However, we must note that they recently increased prices from starting at $40 per month to roughly $150 per month ($1,800 per year). 

Historically, pricing in the financial planning space was based on the number of assets managed. This means that if you worked with a CFP who charged you a fee of 1.25% of AUM (assets under management) and you had a portfolio worth $175,000 you would pay $2,187.50 per year regardless of the number of services you needed.

In fact, if your portfolio grew to $225,000 you would end up paying an extra $625 even though you didn’t use any additional services. Alternatively, some traditional advisors charge a flat fee to create a plan for you, but it usually wouldn’t include ongoing support or guidance.

With Facet Wealth, you pay a flat monthly fee based on your services, regardless of how large or small your portfolio is. Though your level of usage probably does have a positive correlation with the level of service you’ll need.

You’ll have access to your advisor on-demand so that you will always have your financial questions answered as they arise.

Asset Management Is Optional And Included In The Price.

You also don’t need to transfer any assets to Facet Wealth to work with them. They can still create a solid plan for you and give you ongoing support and guidance even if you don’t want them to handle asset management for you. Asset Management doesn’t come with an additional cost so you can always opt into it at any time.

Facet Wealth is able to offer comparatively lower prices than traditional advisors because their proprietary technology and process allow their advisors to more efficiently create thorough financial plans.

The best part is that your CFP is NOT involved in setting prices nor compensated based on the number of services you use. Their focus is always on helping you with your financial needs instead of focusing on up-selling you additional products you might not benefit from.

Is It Worth The Price?

Whether you need or want a CFP to help you navigate your finances is a personal decision, but many people believe the peace of mind alone is well worth it.

For some, the fees are well worth it if you feel completely lost, and having a CFP guide you would give you the confidence to start investing your money and making sure you have the appropriate life insurance policies in place for you and your loved ones.

Their starting price is likely less than you pay on a bunch of other things that are much less important.

How much will Facet Wealth Cost Me?

Historically, the average young professional on Facet Wealth’s platform paid $2,400 per year. However, your plan will depend on the number of services you’ll use. The fee is reviewed annually and adjusted up or down based on the services you’ll need.

As a rough guideline, young professionals just beginning their careers will likely be well served with the services they’d receive at the lower end of the $1,800 to $8,000 per year range.F. This includes setting cash flow goals (determining which student loans to pay off first, setting up a budget, etc.) and making sure you have renters insurance and other basic things sorted out (like contributing to a Roth IRA). Your advisor will also guide you on how to start investing and which investments are appropriate for you.

If you’d like to have your advisor actually handle your investments for you (instead of simply guiding you), a higher tier of service that includes investment management will be ideal.

At the other end of the spectrum, Facet Wealth is equipped to handle small business retirement planning and charitable planning. 

Facet Wealth works with clients of all sizes, but they founded the company to support American families that often fell through the cracks, accounts that are ‘too small’ for traditional investment advisors.

Facet Wealth’s Technology Platform

As a customer, you’ll have all of your financial information listed in your Facet Wealth dashboard. You can see an example of a dashboard below. Highlights include an overview of your financial accounts, family information, action items, and select financial metrics like your credit score.

Facet Wealth refers to your financial plan as your Blueprint. This is the document that your CFP will assemble to help guide you to your financial goals. You can see an example of a Facet Wealth Blueprint below.

Facet Wealth Highlights

• Facet Wealth’s investment philosophy is centered around low-cost ETFs in order to minimize fees and maximize diversification. This is the same approach advocated by investing legends like the late John Bogle.
• Financial planners at Facet Wealth must have the CFP designation, meaning their advisors have in-depth training and expertise to handle the financial complexities of your financial situation.
• All Facet Wealth CFPs are fiduciaries, which means they are required to act in your best interest and place your needs before the company’s.
• You are charged a flat monthly fee regardless of the size of your portfolio, which means there are no surprises or unexpected fees. Your fee is reviewed annually and will be adjusted up or down based on the services you use or don’t use.

Facet Wealth FAQ

Get Your Free Intro Call Now

Click here to schedule your introductory call with Facet Wealth.

As one customer told me, “I pay less for Facet Wealth than I do for my phone bill, and you have no idea how much less anxiety I have in my life now thanks to my CFP.”

Camilo Maldonado

Camilo is a personal finance expert and the Co-Founder and CEO of Finance Plan Today. I was raised in poverty by a single mother and had to learn everything about personal finance on my own. I have been featured on Forbes, Business Insider, CNBC, and US News. Earlier in my career, I worked as an investment banking analyst on Wall Street at JPMorgan Chase & Co., and I have an M.B.A. from Harvard University and a B.S.E. in finance from the Wharton School of the University of Pennsylvania.

FinancePlanToday.com

The post Facet Wealth Review (2022) 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.

Enter: Blooom, a wealth management tool designed around analyzing your IRA and 401k retirement account for free.

The CEO and Founder of Blooom, Chris Costello, spent years following the traditional finance industry business model catered to the wealthy. Think clients with $1M investment portfolios.

But stacking the cash wasn’t always the lifestyle Chris led. He came from humble beginnings, with the financial habits of his parents barring his family from services that would have helped enhance their financial lives.

It is because of his parents’ plight that he decided to shake up the industry and create Blooom. 

Why should only wealthy people have access to professionals? 

Why must “normal” people resort to ‘DIY’ finances and make costly mistakes?

After all – don’t they need the most guidance? 

Blooom exists because “Very few people age 50 and younger will receive any kind of a pension in retirement, so this makes getting your retirement savings right all that more critical. Like it or not, the 401k, or workplace retirement account, has become the most important piece of American’s retirement savings. Most people will not inherit millions, win the lottery, or sell a business for millions. The vast majority will need to intelligently save their way to a comfortable retirement.”

And intelligently saving money should not be reserved for the ultra-wealthy. 

With around 80 million Americans in the category of needing financial help, not qualifying for it in the traditional model, and not interested or confident enough to get it done themselves, Blooom has stepped in to save the day.

Blooom Review

Name: Blooom

Description: is an automated wealth management service that analyzes your IRA and 401k retirement accounts to make sure you're properly invested.

Overall

3.6

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

Summary

If you’d like to make sure that your retirement accounts are invested properly, Blooom could be the perfect solution for you. In my opinion, the highlight here is the free account analysis that Blooom offers. You can simply connect your IRA and 401k and get helpful tips free of charge. No obligations or commitment is necessary! This is perfect for those of you who are happy with the DIY approach to your money. If you’d like a little more hand-holding, they offer that too.

Pros

• Free Account Analysis
• Easy Account Integration
• Standardized Annual Fee

Cons

• No Phone Support
• Paid Tier of Service Is Costly For Those With Smaller Portfolios (less than $4,500 for DIY plan or $12,ooo for Standard plan)

• Get Free Analysis

Blooom At A Glance

Overview	A service that will analyze your 401k, 403b, 401a, and 457 account for free and make sure it's invested appropriately. FREE analysis with custom recommendations. There's no catch. Just free advice you can use! If you would like for Blooom to manage your retirement investments for you, they will do it for a flat fee of $120.
Features	Free 401k analysis, taking into account your goals and risk tolerance. Blooom will identify whether you are investing in the most optimal investments your 401k offers.
Account Minimum	$0
Pricing	Free 401k analysis (no commitment necessary). $120 annual fee if you want them to manage your retirement accounts for you.
Requirements	Must have an employer-sponsored retirement account. Blooom only manages 401k, 403b, 401a and 457 accounts.
Get A Free Analysis

Bottom Line

Blooom’s mission is to ‘help the un-helped.’ To lend a hand to those who don’t own private islands, or have offshore bank accounts in the Philippines. Blooom is a service directed at those who NEED guidance when it comes to retirement investing. Everyone will get older, everyone needs money to live out their ‘golden years’ in comfort, and everyone should know how a 401k can work for them during their working years, regardless of if they own a yacht or not.

Chris decided to put all of his years in the financial industry in one basket: the basket of helping people just like his parents. People just like you.

Blooom “Saw an opportunity to make an early and quicker impact with people who never wanted to be their own money manager by building a solution to fix the 10s of millions of poorly invested 401ks.

What Is Blooom?

When you think of 401k’s, Roth IRA’s, HSAs, Stocks, Bonds… your eyes might just gloss over. This stuff can be complicated, and the information out there isn’t exactly presented in an easy-to-digest way. 

That’s why Blooom prides itself on not being complicated when it comes to managing your 401k employer account and IRA.

Blooom was founded in March 2013 in Kansas. Since then, they have blossomed into a powerhouse company providing ALL Americans with affordable, simple, and accessible 401k management options.

Their company began in a basement, graduated to a garage, and eventually got to where it is today: Managing $3B of 401k accounts in every state, with 30 employees.

The founders of Blooom managed money and investments for the uber-wealthy for YEARS and decided that their efforts would be best spent helping people that were turned away by Wall Street.

According to their website: “Our method was developed by a Certified Financial Planner to maximize your retirement options. Based on decades of market data, we have created an algorithm to optimize almost any 401a, 401k, 403b, or 457 accounts.”

Blooom is independent, which means they put customers first.

Blooom is not associated with any big banks or financial institutions, so the customer is #1. There’s no sleazy car-salesman pitch to get you to put more into your account, and there’s no moving your account. They really are about what’s best FOR YOU.

Blooom doesn’t assume you know every single acronym or term in the investment world. They don’t present you with confusing information, and they believe you deserve to know what’s in your 401k. That’s it.

Blooom is different because it doesn’t play into the financial industry. They’re rebels… and we like it. Blooom began so that people who have been neglected by the industry could get help. They created technology to help people actually take control of their retirement. They are changing the culture of investing by “putting people first.”

How Does Blooom Work?

To begin the FREE IRA and 401k account analysis, you answer a few simple questions about your current account, Blooom takes your answers and uses them to find the right allocation for appropriate investment strategies for your individual account(s). 

When you securely link your IRA and 401k  accounts to Blooom, their algorithm researches the best diversification for you. According to their website, this makes confusing and messy funds available to you, simple to understand. 

Next, they give you an in-depth overview for free. This account analysis covers where your investment currently is versus where it should be.

This analysis is thorough, personalized, and free. Boom.

Pricing

After the free assessment, Blooom offers 3 tiers of service.

The Essentials tier is $95 per account per year and it only includes a personalized portfolio so that you know how to optimize your investments.

If you would like for them to automatically optimize your accounts, you will need to jump up to the Standard or Unlimited tiers.

The Standard tier is $120 per account per year, while the Unlimited tier is $250 per year for an unlimited number of accounts. That means once you have 3 accounts, it makes sense to jump up to the Unlimited tier. These upgraded tiers also give you advisor access so that you can feel confident that your investments are right for you.

No hidden fees. No penalties. And no account movement. Just simple investment management that you can easily access and understand.

Blooom Is Best For You If:

If personal finance or monitoring your IRA and 401k account just… ‘isn’t your thing.’

We’re all busy, and while some people love to pour over spreadsheets and graphs in their day to day, that may not be you. If checking ‘the market’ and figuring out your options for smart investment returns isn’t your cup of tea, Blooom is for you.

If you like simplicity

Blooom is easy to start, easy to manage, and easy to use. You can monitor your own accounts with suggestions from Blooom, OR you can jump to a paid tier to give Blooom the reigns. If you don’t want to spend hours trying to figure out a complex website or what the hell is going on with your retirement account, Blooom is for you.

If you are not a millionaire or billionaire

You CAN use this service no matter what your net worth is – however, it’s designed to help Americans that may not have access to this service otherwise. If you have a 401k account with your employer and you aren’t bringing in a ‘Wall Street Sized’ paycheck, Blooom is for you.

Getting Started With Blooom Is Easy:

As advertised, Blooom is easy to use and understand. To get an analysis AND professional financial advice from Blooom is completely FREE. 

1. You begin by answering a few questions about yourself: Name, DoB, all that jazz. 
2. Then, you create a Blooom profile by providing your email and a chosen password.
3. After you sign up for an account, you answer a few simple questions about your IRA, 401k, 401a, 403b, 457, or TSP.
4. Your IRA, 401k, 401a, 403b, 457 or TSP is then securely linked to Blooom. They analyze your account, give you feedback, and appropriate next steps.

THAT’S IT

How Much Does Blooom Cost

Blooom’s initial analysis of your IRA, 401k, 401a, 403b, 457, or TSP is FREE and open to anyone – after that, you’ll choose a paid plan.

Their plans start at $45 per year per account and go up to $250 per year per account for their unlimited plan.

This easy-to-understand service is perfect for people who don’t want to be in the weeds of their 401k. By using Blooom, you don’t have to continually worry about the right trades, if your 401k is doing the most it can do, or if you’re getting slapped with hidden fees.

It’s meant to be a seamless 401k and IRA investing experience for anyone who needs it!

Blooom Pricing

Pricing Overview

Blooom has 3 tiers of priced services.

The DIY tier is $45 per year per account. It includes a personalized portfolio, but you’ll make the trades yourself and you won’t have advisor access.

The Standard tier is $120 per year per account. With this tier, they will place trades for you and give you access to an advisor.

The Unlimited tier is $250 per year for an unlimited number of accounts. Since this pricing isn’t per account, it is a no-brainer for those who fancy the Standard plan but have more than 3 accounts. this plan includes everything in the Standard plan except you also receive priority advisor access.

The initial IRA, 401k, 401a, 403b, 457, or TSP analysis is FREE. Anyone can have their account looked at by Blooom. 

Customer Service

If you want to contact Blooom, you have to do it via email. It would be nice if it were possible to call them.

With that said, I emailed their support team to assess their response time, and I got a friendly reply in four minutes. Literally 4 minutes. Not bad.

Blooom Pros and Cons

The Pros Of Using Blooom

• Their free retirement account analysis is extremely helpful and offers valuable insights into your IRA, 401k, or other employer-sponsored retirement accounts.
• Blooom integrates seamlessly with all of the largest retirement account providers, which means it’s a breeze to get set up and get your free account analysis.

The Cons Of Using Blooom

• Blooom doesn’t offer phone support, so you have to email them if you need help. With that said, they are very responsive.
• At this time, Blooom is unable to manage your HSA.
• The free account analysis guides you as to what your target asset allocation should be, but it doesn’t make specific investment recommendations.
• Blooom has changed its pricing structure seemingly every year over the past few years, so that’s something to keep an eye on.

Service Highlights

By far, the #1 best thing Blooom offers is the free account analysis. It means you can simply connect your IRA and 401k and get helpful tips free of charge. No obligations or commitment is necessary! This is perfect for those of you who are happy with the DIY approach to your money.

Might as well get free helpful tips from experts at no cost, right?!

Blooom FAQ

Does Blooom Analyze IRAs too?

Yes! Blooom has expanded its service beyond 401ks to include IRAs.

Is there a cancellation fee?

Blooom accounts can be canceled at any time directly online after your account has been processed. You’ll receive a refund for time not used.

What if I have a 403(b)?

No problem. They offer 403(b) analyses! IRA, 401k, 401a, 403b, 457, or TSP analysis, monitoring, and management are available through Blooom!

Will Blooom manage my Roth 401(k)?

Right now, Blooom only manages traditional 401k accounts. If you have a 401k or other employer-sponsored retirement account managed through Blooom, their advisors are available to assist you with any number of financial questions you may have, including general advice on how to invest your IRA. 

What if I just started investing, and my 401(k) barely has anything in it?

Blooom helps all 401k participants, no matter the size of your 401k account.

With that said, if your 401k has a relatively small balance, you might end up paying a high percentage of your portfolio in fees to Blooom.

I personally wouldn’t use the DIY plan if I had under $4,500 in assets, the Standard plan if I had under $12,000 in assets, or the Unlimited plan unless I had 3 separate accounts with a combined value of less than $25,000.

At what point does it make sense to use Blooom?

The free Blooom account analysis is perfect for someone with an employer-sponsored retirement account.

The paid account management service Blooom offers is perfect for the person who has a growing 401k and has absolutely no interest in managing it or doesn’t feel comfortable doing it. They’ll essentially take their recommendations and implement them for you. That means that you don’t have to worry about ever managing your 401k again.

Ready For A FREE 401(k) Analysis?

Get your free account analysis now and see how you are doing!

Camilo Maldonado

Camilo is a personal finance expert and the Co-Founder and CEO of Finance Plan Today. I was raised in poverty by a single mother and had to learn everything about personal finance on my own. I have been featured on Forbes, Business Insider, CNBC, and US News. Earlier in my career, I worked as an investment banking analyst on Wall Street at JPMorgan Chase & Co., and I have an M.B.A. from Harvard University and a B.S.E. in finance from the Wharton School of the University of Pennsylvania.

FinancePlanToday.com

The post Blooom Review (Updated): The Virtual 401K and IRA Advisor You Didn’t Realize You Needed 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.

The primary difference between a Roth IRA and a traditional IRA is how they’re taxed. 

With a traditional IRA, you’re getting a tax deduction for making a contribution. Both your contributions and your earnings grow tax-free until they’re withdrawn in retirement; at that point, they’re taxed at your ordinary income rate. 

With a Roth IRA, you’re contributing after-tax money into the account, which means there’s no current-year tax benefit. Instead, your contributions and earnings grow tax-free. And you can also withdraw them tax-free once you hit 59 ½.

But before you decide between the two, you should see if your income is too high for you to even be able to contribute to a Roth IRA. Traditional IRAs have no income limits so high earners may not have a choice.

Most households won’t need to worry about the income limits though because essentially only the top 10% of earners make enough to surpass them.

To learn more, see this article: What Is An IRA?

Roth or Traditional IRA: The Simple Answer

Here’s the simplest question to ask yourself in order to determine which account is right for you:

Will your tax rate be higher this year than during retirement?

If you believe your tax rate will be lower in retirement, it makes sense to go with a traditional IRA this year. The benefit here is that you’re getting a tax deduction this year at a higher rate and then paying a lower rate when you withdraw the funds during retirement. 

But if you expect your tax rate will be higher in retirement, you want to do the opposite. In that case, it’s best to pay taxes this year, and then when you retire, you can withdraw that money tax-free. 

Is it as simple as that, though? It certainly can be. Unfortunately, it’s not that easy. 

Roth IRA Conversions 101

One benefit of contributing to a traditional IRA is that you can always convert it into a Roth IRA. Upon making this conversion, you’re going to owe taxes on the amount you convert at that year’s ordinary income rate. 

For example, let’s say you have a $100,000 balance in a traditional IRA account. Plus, your total income tax rate is 20%. Converting your traditional IRA to a Roth IRA would mean paying $20,000 in taxes this year. 

Why would you want to do this? Well, you’re effectively paying taxes now and then enabling your Roth IRA to grow tax-free. So it goes back to the same line of thinking as we discussed earlier: it’s all about current and future tax rates. 

What’s really important here is that with a traditional IRA you have the option to convert. And therefore, it offers more flexibility for those who are not sure of their situation — or for those who are planning to have a lower income tax rate before they retire.

And this is why, if you’re really unsure of your future tax rate, I believe a traditional IRA is the better option. 

To examine who can benefit from this optionality, as well as then times when a Roth IRA would make the most sense, let’s look at six different case studies. 

Case #1: A Dual-Income Household, Pre-Kids

Let’s say you’re a dual-income household and you plan to have kids in the next few years. Upon having kids, the plan is for one partner to leave the working world and stay at home full-time. Therefore, you expect your total household income (and your tax rates) to go down. 

If that’s the case, you could invest in a traditional IRA prior to one partner leaving the workforce. Then, once your tax rate is lower upon switching to a single income household, you could convert the traditional IRA into a Roth IRA, paying taxes that year. 

It’s these short-term (and often planned for) scenarios — where a household may find itself in a lower overall tax bracket — in which planning for a traditional to Roth IRA conversion can save a lot of money in taxes. 

Case #2: A Business Owner

A business owner can serve as a great example of someone whose income is highly variable, and who could therefore benefit from the flexibility offered by a traditional IRA.

For example, a profitable business owner who plans to sell their business in a few years could contribute to a traditional IRA this year, where they have an income. Then once their tax rate goes down after making the sale, make the conversion to a Roth IRA.

Case #3: Moving To A State With Lower Tax Rates

When people think about future tax rates, what’s most often on their mind is their income. But, where you live today, as well as where you’ll live in the future, can play a large role as well. 

For example, let’s say you’re currently living in a state with a high overall tax rate, like California. If you’re likely to move out of California at some point — perhaps to a state with lower taxes —  you could benefit from contributing to a traditional IRA now and then converting it to a Roth IRA once you move. 

Living in Illinois, which is a relatively high income tax state, I know of a few baby boomers that relocated to Florida for a year or two and made their conversion in order to take advantage of the lower tax rate. What’s important to keep in mind is that you only need to reside in another state for one year. 

The math on this one is pretty interesting, as when you get older and build more wealth, you could essentially pay for a year’s worth of living expenses just with the amount you save on taxes by living in another state. 

Case #4: Taking Time Off Work

If at some point in the future your goal is to take time off work — whether for an unpaid sabbatical, a leave of absence, or to get an advanced degree — you could convert to a traditional IRA to a Roth in those lower-income years. 

For those earning a higher-paying advanced degree — such as an MBA or a PhD — this is especially true, as those years are ideally your last lower-income-earning years for quite some time. 

Case #5: Super Savers

In 2020, the total amount someone under the age of 50 is allowed to contribute to their IRA is $6,000. This contribution limit is the same for both traditional and Roth IRAs. Yet, because with a Roth IRA you’re contributing after-tax dollars, $6,000 inside a Roth IRA has greater value (i.e., $6,000 tax-free has more value than $6,000 pre-tax).

This can make a difference for those who are looking to maximize their contribution to tax-advantaged accounts by any means necessary. As such, it would make sense here to contribute to a Roth IRA, because it has the highest contribution limit when taking this into account. 

Contributing to an IRA is a use-it-or-lose-it scenario. Each year, you can only contribute so much. And if you miss a year, you can’t make up that contribution later on.

Years down the road, this could leave you in a situation where you’re looking to save using a taxable investment account to save for retirement, which means you’ll have to save a lot more money compared to using your IRA. This is very common for those who don’t start saving for retirement until later in life. 

Case #6: Using A Roth IRA As A Worst-Case Emergency Fund

You’ve probably heard of Dave Ramsey’s Baby Steps. In Step #3, Ramsey recommends saving three to six months’ worth of expenses in an emergency fund before starting to invest. 

Now, let’s say you’re following the Baby Steps, and it’s your goal to save the upper limit, which is six months of expenses. 

Here’s how long that will take you depending on your savings ratio:

Those are some pretty high savings rates that demonstrate some strong money skills. And even at those high thresholds, it will still take you quite a long time to start investing. This can have a huge opportunity cost years down the road. In fact, $6,000 compounded at 7% for 40 years equals $89,8467.

One little-known benefit of contributing to a Roth IRA is that contributions can be withdrawn at any time tax-free and penalty-free. Unfortunately, that isn’t the case for traditional IRAs, as you’ll have to pay taxes and a penalty for making an early withdrawal. 

Therefore, an option worth considering is splitting your contributions between an emergency fund and a Roth IRA, until your emergency fund reaches six months. This way, you don’t forgo the opportunity to contribute to an IRA, your investments compound, and if (in a true worst-case scenario) you have to withdraw from your IRA, you’ll be exactly where you’d be if you were trying to save only in an emergency fund. 

The big caveat here is that you probably will want to invest your emergency fund very conservatively, so you avoid the very worst-case scenario of needing to use your emergency fund right after a huge drop in the market. 

Final Thoughts

Your situation and your goals are different. The best thing is to use these case studies to analyze your own situation, making the best choice you can make based on what you know today. 

So, while we did get a little complex with the above case studies, don’t let it overwhelm you from starting an IRA in the first place. Either type of IRA is better than not investing for retirement at all, and there are pros and cons to both options!

It’s also impossible to predict your circumstances 30 years into the future, so don’t dwell on the decision for too long, since it’s important to start investing as early as you can!

Where To Open An IRA

If you’re finally ready to open an IRA below is a list of companies that you can use to quickly open an IRA in just a few minutes!

• Acorns
• WeBull
• M1Finance
• Wealthfront
• Betterment
• Fidelity
• Vanguard
• Charles Schwab

R.J. Weiss

R.J. Weiss is the founder and editor of The Ways To Wealth, a Certified Financial Planner, husband and father of three. He’s spent the last 10+ years writing about personal finance and has been featured in Forbes, Bloomberg, MSN Money, and other publications.

The post Traditional IRA vs. Roth IRA 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.

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.

The post Betterment Review appeared first on Finance Plan Today.

To be 100% honest with you, I didn’t know what a 401K was when I started working. I also didn’t start funding my roth IRA until two years after I started earning money because I didn’t realize what I was missing out on. And this was after spending 4 years at the best finance program in the world.

In reality, personal finance often seems like a DIY project. You read the directions online, maybe watch a few videos, read some articles and then venture out on your own and hope you don’t make mistakes. The difference between a DIY home project and your money is that the stakes are a lot higher when it comes to your finances. And making a mistake can set you back several years.

The Basics Of Personal Finance Are Easy To Understand

The honest truth is that the basic concepts of personal finance are extremely simple.

1. Spend less than you make.
2. Take advantage of retirement accounts.
3. Save as much as you can and maximize your income.

Heck, simply making a budget and sticking to it is half the battle.

A lot of personal finance sites like my own show everything you need to do in detail. Yet, I still get daily emails from readers asking for help. They feel stuck under a mountain of debt, unmotivated by a low salary, or overwhelmed by all of the information out there.

Even Though The Basics Are Simple, The Amount Of Information Out There Makes Things VERY Confusing.

When you Google the phrase ‘how to budget’, over 1.7 billion search results are returned. It’s hard to even wrap my mind around that number. No wonder you feel lost.

I regularly receive emails from readers who feel stuck, unmotivated or lost. My response to them is usually the same. I reiterate the basic steps outlined above and explain how they need a budget and to try to increase their income. But for a lot of people, understanding the steps isn’t enough.

A lack of confidence or understanding of the topic is enough for some people to want to avoid it altogether. Not everyone loves personal finance. They might know it’s important but they don’t enjoy it. They don’t enjoy learning about it, reading about it, or even thinking about it. Or maybe they already have so much going on and just don’t have time for financial planning.

Don’t Neglect Your Finances Out Of Fear.

But the funny thing is that when you have health problems, you visit the doctor, or the dentist when your tooth is bothering you, but when you’re hurting for money you internalize the despair and feeling of helplessness. Even if you want to seek help, a lot of people out there will tell you paying a financial advisor is a waste of money.

The steps to effective financial planning are relatively simple. So why pay to have someone help you manage your money? Using that line of thinking, why would you ever pay for eggs at a diner or restaurant? The steps to making eggs are pretty simple. Heat a pan, add some oil or butter, crack an egg and voila. If you want it to have a more robust flavor just add more butter, salt and pepper. No need to pay someone else to do that for you.

Or just maybe, you still order eggs or a sandwich because someone else is less likely to make a mistake preparing the eggs for you. Or because you have a finite amount of time and don’t want to spend it frying an egg at that moment. Maybe cooking just isn’t fun for you.

I am not here to vouch for the financial planning world, but rather reflect on the oft-expressed philosophy that there’s no place to pay for financial advice unless you’re mega-rich. In truth, the industry is being transformed by upstarts who charge modest fees and eschew commissions in order to better align incentives between advisor and client. Companies like Facet Wealth come to mind.

We Always Recommend Facet Wealth To Those Who Need Help

We recommend Facet Wealth to our personal friends and family who ask us for advice finding a financial advisor. Actually. And guess what? They couldn’t be happier to finally be able to sleep at night knowing they aren’t making financial mistakes doing it on their own.

Traditional financial advisors charge a percentage of assets managed which leads them to only seek and serve high net worth clients. Facet Wealth leverages technology in order to serve low net worth clients. Does this mean that everyone should be hiring a financial advisor-as-a-service firm? Not exactly.

If you are earning minimum wage and have a lot of student loans to pay off, you’ll need to save every penny you can in order to make ends meet. But if your household income is $70,000+ or you have over $50,000 saved, it could make sense to take a closer look if you don’t feel confident investing and managing your money.

Regardless of how you ultimately navigate your financial journey, it’s important to remind yourself that very few people feel 100% confident in managing their money, and that includes those with finance degrees.

If you’re ready to feel less financial stress, schedule a free intro call with Facet Wealth now.

Another solid option for online financial planning services with lower than average fees is Vanguard Personal Advisor Services. They do have a $50,000 minimum requirement, and you can learn more below.

You Can Also Seek A Local Financial Advisor

Companies like SmartAsset make it simple to find a local financial advisor if you’d rather work with someone in person. They simply have you fill out a survey to learn about you, collect some contact information, and then send you a list of local advisors.

You can read our full SmartAsset review to learn more about finding a financial advisor near you.

Camilo Maldonado

Camilo is a personal finance expert and the Co-Founder and CEO of Finance Plan Today. I was raised in poverty by a single mother and had to learn everything about personal finance on my own. I have been featured on Forbes, Business Insider, CNBC, and US News. Earlier in my career, I worked as an investment banking analyst on Wall Street at JPMorgan Chase & Co., and I have an M.B.A. from Harvard University and a B.S.E. in finance from the Wharton School of the University of Pennsylvania.

FinancePlanToday.com

The post When Does It Make Sense To Have A Financial Advisor? appeared first on Finance Plan Today.

But what is a robo-advisor? How do they work? What is the best robo-advisor? And, most importantly, should you use one? Find out the answers to all of these questions and more below.

Our Picks For The Best Robo-Advisors

If you are new to investing, or simply would rather outsource your investment decisions so that you don’t need to worry about it, robo-advisors might be exactly what you’ve been looking for.

Best Robo-Advisors Comparison

When it comes to comparing robo-advisors, many offer similar services. The difference among them often comes down to where each robo-advisor specializes.

Knowing this difference is critical. If you’re using the best robo-advisor for high net-worth individuals, but you only have $1,000 to your name, you’re probably missing out on a much better deal.

The best robo advisors have several account types (brokerage accounts, IRAs, etc.)

Here’s a broad overview of each robo-advisor from our list of the best:

Wealthfront

One of the pioneers of robo-advising, Wealthfront has been around since 2008!

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. In exchange, you get some of the same modern strategies used by Personal Capital’s team (low-fee ETFs and tax-loss harvesting).

Plus, Wealthfront is exceptional at creating well-diversified portfolios.

But, Wealthfront’s specialty is in 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, check out Wealthfront and Path. 

Betterment

Betterment is one of the best robo-advisors out there. Like Wealthfront, It’s been around for a long time, so it has a well-established formula for success.

Betterment combines a simple-to-use UI and approach with lots of features. Add on some of the lowest fees around, and you’ve got a great way to automate investing.

One of my favorite features of Betterment is the ability to set up multiple portfolios. You can dedicate each one to a different goal, allowing you the flexibility to simply set up all your goals in advance and then let Betterment take care of the rest.

One important note about Betterment is their annual management fee increases from 0.25% to 0.40% if you have over $100,000 in your account. However, you get an added benefit: with a higher account value, you get unlimited access to CFPs through Betterment.

This access can be incredibly valuable for planning out your financial goals and strategies to achieve them. It also makes Betterment what I like to call a “hybrid” between traditional financial planners and robo-advisors.

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

M1 Finance

If there were one robo-advisor I had to pick to compete against Betterment as an all-around option, it’d be M1 Finance.

Though M1 Finance is newer than Betterment, it’s quickly amassed a large following and critical acclaim. This is, in part, because M1 Finance does something few other robo-advisors do: they’re free.

M1 Finance has a 0% management fee, making them completely free. Since the name of the game with robo-advisors is to minimize the cost of investing, this gives M1 Finance a huge advantage.

Beyond their uniquely low cost, M1 Finance lets you choose your own investments or use a professionally-created portfolio. They do this using a feature known as “The Pie.”

The Pie takes care of portfolio rebalancing, all while making a visually appealing and easy to understand portfolio breakdown.

In terms of available investments, M1 Finance is also excellent. By letting you invest in stocks, ETFs, and fractional shares, you can use M1 Finance to personalize your portfolio, even if you don’t have a ton of money.

Overall, M1 Finance is a phenomenal service that maximizes your portfolio’s gains in both the short term and long term. And all with no commission fees, portfolio management costs, and the ability to buy fractional shares.

Read the full M1 Finance review to learn more.

Ellevest

Ellevest is a robo-advisor geared towards women. By taking into account the different financial trajectories of most women vs. men, Ellevest provides financial advice that better fits each gender.

To be clear, many men happily use the service and it’s open to anyone.

But, Ellevest offers more than just robo-advising. You can also purchase meetings with CFPs on either an annual basis or a per-session one. These CFP meetings make Ellevest somewhat of a hybrid, just like Betterment.

But unlike Betterment, Ellevest’s robo-advising works on a subscription basis. You pay a monthly fee of $1 – $9 per month, with different service levels depending on the subscription tier.

Depending on the tier, you can invest in IRAs, get discounts on CFP meetings, and create several investment goals with different accounts for each. Regardless of your tier, however, Ellevest has a ton of useful educational resources to help you learn how to manage your money. 

These factors make Ellevest great for someone less experienced with managing money or anyone who wants a gender-specific investment strategy.

Acorns

Acorns is a fantastic robo-advisor for someone who is new to managing finances. Thanks to their signature “Round Up” feature, Acorns makes it easy for you to build effective saving and investing habits.

By rounding up everyday purchases to the nearest dollar and investing the change, Acorns provides a simple and easy introduction on how to invest. Since the money never reaches your checking account, it’s harder to spend it or take it out of savings accidentally.

Just like Ellevset, Acorns uses a flat monthly subscription fee rather than a percentage. The $12 per year tier lets you use the round-up feature and Acorns’ cashback program called “Found Money.”

By partnering with 350+ other companies, Acorns allows you to get extra money into your account whenever you make a purchase at a partnering store. This is essentially cashback, as you’ll be able to invest that money or withdraw it into your bank account.

The $36 per year tier also lets you keep your money in an IRA account, which will make it more attractive to long-term investors.

Ultimately, though Acorns is a simple and easy to use app, it doesn’t have enough unique features to beat out more specialized robo-advisors. But, as a way to help establish solid saving and investing routines, it’s great!

Read the full Acorns review to learn more!

Personal Capital

If you are simply looking for an easy way to track your net worth and track your progress toward financial goals, then a free Personal Capital account is the perfect tool.

The free account gives you access to Personal Capital’s retirement planner. 

Using a few details like your current age, yearly savings, and expected retirement spending, the retirement planner simulates thousands of scenarios and gives you a breakdown of how much you’ll have by the time you retire and how long it will last. 

Taking into account other sources of income like Social Security, Personal Capital’s tool does a wonderful job explaining how and where your money will go in retirement. It even gives you an estimate of how likely your portfolio is to last a certain number of years.

This tool is incredibly comprehensive. I’d recommend it to anyone who is new to saving. If you’re wondering why building a budget is useful, using a retirement planner can help motivate you to stick to your budget and save over time.

While they have a handful of great free resources for planning retirement and managing finances, they also offer advising and financial planning services to those with at least $100,000.

Boasting a team of experts, including Harry Markowitz (the father of modern portfolio theory), Personal Capital certainly has some heavy hitters helping you manage your wealth.

They charge a management fee between 0.89% and 0.49%, and it decreases as your account balance increases.

In exchange for this higher management fee, you’ll benefit from modern management strategies that involve adjusting portfolio weights and using low-fee ETF strategies.

If you’re looking for a few free tools or have a high net worth and want help from some of the best in the business, check out Personal Capital.

Read the full Personal Capital review to learn more.

What Is A Robo-Advisor?

Robo-advisors are, simply put, automatic investment services (read: a thing that manages your money). By taking advantage of algorithms to create and manage portfolios, robo-advisors can cut a lot of the cost out of investing.

These are the extreme end of passive investing. That’s right, robo-advisors are even more low maintenance than index funds!

It’s useful to think of robo-advisors as financial advisor apps. They cut out the need for an online broker, which means you don’t have to go through a middleman to buy and sell investments. Robo advisors are generally best for the investor who wants a minimal amount of involvement with his portfolio.

The ease of use and low-cost nature of most robo-advisors make them attractive for would-be passive investors. Plus, they’re getting more advanced. This means they’re getting even better at designing and managing portfolios.

How Do Robo-Advisors Work?

Robo advisors operate similarly to traditional financial advisors, in that they allocate your money into specific investments for you. That means you pay a small fee in exchange for not having to manage your investments. The key difference, however, is in the size of the fee and the allowed flexibility.

Robo-advisors use questionnaires on risk tolerance, future goals, and user preferences (e.g., socially-responsible investing) to make your portfolio. With this information, you can get a personalized portfolio that accounts for your needs.

After the robo-advisor makes a portfolio, it’ll manage it for you in exchange for a small fee. These fees vary slightly depending on which robo-advisor you use, but it’s usually around 0.3%.

It’s important to note that this fee is a lot lower than what you’ll find with a traditional advisor. But, robo-advisors usually offer less flexibility, so you have a trade-off there.

So, if you’re an investor who prefers the additional flexibility offered by a financial advisor, or if you’d rather work with someone face-to-face or via phone, consider hybrid advisors like Personal Capital.

Robo-Advisor Pros And Cons

Though there may be exceptions from individual robo-advisors, most of them have the following in common:

Robo-Advisor Pros

• Easy to use for hands-off investing
• Low fees
• Low or no account minimums
• Automatic portfolio rebalancing & diversification
• More accessible than traditional advisors
• Can customize portfolios to suit your needs and goals
• Many can take advantage of tax-loss harvesting

Robo-Advisor Cons

• Less flexible than traditional financial advisors
• Often cost more than target-date funds 
• No in-person contact 

Should You Use A Robo-Advisor?

Ultimately, robo-advisors are a great way to invest for the hands-off investor. If you’re looking for a “set it and forget it” type of investing tool, robo-advisors may be exactly what you want.

Most robo-advisors offer some type of pre-built portfolio, and these are almost always well-diversified. So, you can rest assured that your investment’s risk is well-managed.

Also, the low fees and portfolio rebalancing make robo-advisors especially attractive for the passive long-term investor.

But, if you want regular in-person appointments or the extra flexibility of working with another human being, consider a traditional financial advisor or hybrid.

Two solid options for finding a financial advisor are Facet Wealth and Smart Asset.

Or, if you want to invest for retirement passively, target-date funds are another great low-cost, automated option.

Robo-Advisor 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 What Is A Robo-Advisor & Which One Is Best? appeared first on Finance Plan Today.