Simone's Blog: Money Magnet

As the Director of Affiliate Relations at HomeFree-USA, I’ve always been fascinated with how people handle their money. Like everyone else, I’ve had my financial ups and downs. In fact, it took me 32 months to pay off $32,000 in credit card bills and build up a six-month emergency fund. While that was a very difficult period, I am grateful – and wiser -- for the experience.

Through my personal experiences and working at HomeFree-USA, I’ve gained a ton of insight that I feel compelled to share. You’ll find those lessons here. Feel free to take the thoughts and ideas that resonate with you most and put aside the rest for later. I look forward to sharing my journey.

What Exactly is a Robo-Advisor?

Up until this decade, having a financial adviser was designed for wealthy people. One of the reasons for the saying “The Rich Get Richer” is because financial advisors were typically paid based on the amount of money they invested for their clients. 

Up until this decade, having a financial adviser was designed for wealthy people. One of the reasons for the saying “The Rich Get Richer” is because financial advisors were typically paid based on the amount of money they invested for their clients. Wealthy families, obviously having more disposable income, received the type of professional advice that would allow them to earn far more than a normal savings account from their bank, while only taking on a little more risk or work. The rest of America was simply locked out of this huge stepping stone.

Until now.

Technology has allowed all of us access to information and opportunities like never before. Through FinTech (Financial Technology), companies have been able to cut the cost of investing advice by digitizing every aspect. So now, even if you have no more than $50 left over at the end of the month, you too will be able to invest and turn that into $65 like wealthy people have been doing all along.

Enter the Robo-Advisor.

These are companies that, through a series of questions, assess how risky you want to be with your investments, when you expect to need your money back, what you’re saving for, and possibly if there are any things you feel strongly opposed to investing in. The two best parts: it can cost less than half of a human advisor, and you don’t need to know much more than you do right now.

According to Nerd Wallet, these are the top robo-adviser firms of 2018:

WealthSimple - with no account minimums, a focus on Socially Responsible Investing (i.e. companies who share your values), and some human assistance, this is a great starting point.

Wealthfront - this company requires a minimum account balance of $500 but it also charges a little less than Wealthsimple. However, once you save more than $5,000 they will waive your investing fees.

Betterment - I have an account with them and have been happy. They’re the largest and most established of the robo-advising firms. I like that they center my investing strategy on my personal goals and timeline.

Ellevest - Started by a woman, Ellevest focuses on female clients because it recognizes that women typically earn less than their male counterparts and are often intimidated by investing. It requires no minimum balance and eases concerns by offering access to Certified Financial Planners (CFPs).

Is it enough to save and invest in a 401k?

Hopefully you’ll soon get to the point where you’ve saved enough for an emergency fund (3-6 months of expenses) and are contributing 15% towards retirement. Once that happen, financial goals that won’t happen for 5 or more years should become your priority, which is where investing comes in. This is also when you’ll start earning more on your money, so the sooner the better.

And so it is.