Acorns Review: Could This Be The Easiest Way to Invest?

Acorns Review

Over the last several years, the financial industry has seen a significant surge in the number of automated investment tools available in the marketplace. While these services have helped simplify the process of saving and investing for many consumers, one relatively new company is taking it a step further by automatically investing your spare change.

That’s the idea behind Acorns, a smartphone app that rounds your purchases up to the nearest dollar and then invests the spare change into the investment portfolio that best suits your long-term goals.

The concept designed by father-son team Walter and Jeff Cruttenden aims to remove the complexities of investing and help millennials tiptoe into the market. But does it really live up to the hype? We break it down for you in this Acorns review.

How Does Acorns Work?

Signing up for an Acorns account is a relatively simple process that begins by downloading the app for Android or iOS and linking your checking account. You are then prompted to create an account where you will answer a few profiling questions in order to determine your goals and risk tolerance.

Based on your responses, Acorns will recommend an appropriate portfolio to invest in or, if you’re so inclined, give you the option to choose one on your own.

Once your account is established, Acorns will monitor the purchases in your checking account and accumulate the spare change into what they call “Round-ups.” Once you have $5 in round-ups it gets invested into your selected portfolio.

Where Does the Money Go?

The Acorns app allows you to make tiny investments into one of six Vanguard funds. Historically, these funds are well-known for being low-cost, worthy investments that are ideal for first-time investors.

Acorns investment philosophy is in line with Modern Portfolio Theory, the methodology behind most online advisors. MPT is a sound theory in the investment world that explains how risk-averse investors can construct their portfolios to maximize expected return based on their level of market risk.

In other words, they construct different portfolios based on your risk tolerance and invest into funds that align with your financial goals. This allows them to optimize returns without compromising the level of risk you are willing to accept.

How About the Fees?

Acorns charges $1 each month for accounts under $5,000. If your account has more than $5,000, then they charge 0.25% per year.

The company also bills itself as the app for the “next generation of investors,” and when it comes to serving that target market, they really put their money where their mouth is: if you’re under the age of 24 or a full-time student the management fees on accounts of any size are waived.

For a full explanation of their fees make sure to visit their website.

Pros of Using the Acorns App

One of the primary benefits of using the Acorns app is that it helps people automatically invest without having to spend a lot of time thinking about it. This is important because although saving and investing is a priority for many people, it’s very easy to get distracted and delay the process.

By utilizing the power of automation, Acorns eliminates that possibility.

Another pro is that you gain access to notable funds. If you’ve ever tried to invest in a Vanguard fund directly through Vanguard, you may have noticed the bar of entry is at least a few grand. Acorns makes accessing these funds much easier for a generation that may not yet have a lump sum of cash to invest.

Understand the Downsides First

If you’re not really making purchases with your checking account then you won’t see your account grow very quickly. This is my current situation.

First, I don’t spend a whole lot of money in my personal life. Second, I use a credit card for everything to consolidate and get travel points.

But it is nice knowing I have this app in place during those instances when I do use my debit card or make a credit card payment.

There’s also been some controversy over their fee structure. Essentially, $1 a month is a nice chunk to pay if you’re investing spare change every month. It would take a while before you see this starting to balance itself out. Some also fear that the spare change model will make people spend more/

While Acorns won’t really make you rich, they are making it easier than ever to invest. Overall, it’s a great option for those who are new to investing and a tool that is definitely worth trying.

 

Amanda AbellaAbout the Author: Amanda Abella is an Amazon bestselling author, speaker and personal finance expert who helps millennials make money their honey through online business. She has built an online brand that touches thousands each month and has been featured in Forbes, The Huffington Post, Seventeen Magazine and more.

The Perks of Hiring a Young Financial Advisor

Younger Advisor

The decision to hire a professional to help navigate the uncertain terrain of your financial future is not a choice to take lightly. Do you go with the industry veteran that has seen the ups and downs of the market and has a slew of letters behind their name to prove it?

Or do you look for someone who can better relate to the current state of your finances — someone your own age, who understands how best to repay your student loan debt and gets your desire to prioritize spending on travel?

Over the past several years, the financial planning industry has seen an increase in the hiring and development of young talent to keep up with the growing needs of people looking for more than just retirement planning. And there are serious benefits that come with hiring a young financial advisor if you’re ready to take this step.

Here’s why finding a younger financial advisor — someone who is in the same generation as you are — can help you reach financial success.

They Can Better Relate to Where You Are in Life

When choosing a financial advisor, one of the primary factors you need to consider is experience.

Not experience in the traditional sense of choosing someone based simply because they have worked in the industry for decades. Experience that comes from a person who has faced similar financial challenges and milestones to what you’re currently facing. Experience that cannot be taught by webinars or continuing education courses.

Finding a financial advisor that is close in age and shares a similar financial perspective to yours provides a unique opportunity to work with someone who ‘gets it’. They are familiar with the ins and outs of student loans. They understand the desire of working toward financial independence over retirement planning. And as a result, their recommendations are designed for you to live a life you love — instead of a life based on societal expectations.

They Aren’t Dismissive of Your Challenges

The traditional financial planning model places a high emphasis on accumulating investable assets and preparing for retirement.

But if you’re younger and facing issues like underemployment, economic uncertainty, or crippling debt, cash-flow planning and budgeting are far more important than running a Social Security analysis or planning for a retirement that is more than thirty years away.

For millennials especially, living expenses and debt repayment are high atop the list of financial priorities. Couple that with a lack of disposable income for investing and there is very little that is “traditional” about the state of most young adults financial affairs.

A financial planner your own age understands the issues you’re facing and knows that you need a comprehensive plan of action to get your financial life in order before worrying about a retirement that’s decades away.

These planners are less likely to dismiss those challenges as independent variables that only affect a small group. Instead, because they share a similar sentiment, they can better guide you through the planning process and prepare a strategy that addresses your specific needs.

That’s not to say you’ll never talk about saving for the future — but these conversations look far different with someone who helps Baby Boomers plan for retirement and someone who understands your desire to enjoy your life now while also saving what you need to have a secure future.

They Appreciate and Respect Your Goals

For many, the financial freedom to do what you want, such as pursue higher education, travel, or start a family is a higher priority than retirement planning or home ownership.

And while societal expectations may try to imply that there is one tried-and-true path toward attaining wealth, you probably aren’t buying it — and neither are your peers in financial planning.

Life just looks different today than it did 30 years ago. The idea of working at one company for an entire career, just to receive a gold watch and sail off into the sunset, is not even on the radar for most people in their 20s, 30s, and 40s.

The same goes for homeownership. You may prefer the flexibility of renting over the responsibilities of buying. Older advisors on the verge of their own retirements were part of the generation who believed owning your home was the cornerstone of the American Dream, who may preach that “renting is throwing money away.”

Young advisors are usually more open to exploring alternatives and understand that attitudes have changed. We simply don’t look at things the same way anymore, and communicating these mindsets and beliefs to someone very much stuck in an old way of thinking can be a challenge.

Your goals are just that — your goals. And working with an advisor who understands your unique perspective and respects those goals goes a long way in creating a long-lasting relationship of mutual trust and support.

They Add the Right Kind of Value

Hiring a young advisor provides the opportunity to engage with a professional that specializes in working with people just like you. Rather than try to convince you to conform to an antiquated traditional planning model that is not applicable to your financial needs, a young advisor can add value to the areas of your financial life that need the most attention like cash-flow analysis or career management advice.

You deserve comprehensive financial planning, and that doesn’t come from a few modifications to an existing service model designed for an older clientele. It comes from an advisor workforce of your peers that is personally familiar with the financial challenges that you face.

Receiving sound advice is critical to your ability to build wealth over time. So, if you haven’t already, start now and seek out a qualified financial advisor that understands your concerns and challenges, and can help guide you through them both now and for years to come. Your financial future is counting on it!

 

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About the Author: Kelby Green is a freelance writer and ‘Chief Frugality Officer’ behind millennial personal finance blog: The Frugalennial. Connect with Kelby via Twitter @TheFrugalennial

Resource Roundup: Best Places and Tools for Financial Success

 

Tools for Financial Success (1)

Need to pay off debt, save up for a huge expense, try your hand at investing, or just manage your money better? While XY Planning Network does an amazing job with helping equip you with the knowledge and tools needed to make sound financial decisions, we wanted to highlight many other helpful resources to set you up for financial success.

Here are just a few apps, websites and personal development programs and classes and other tools for financial success that are worth checking out:

Websites and Resources

Annual Credit Report

You can check your credit report from all three bureaus for free each year with this website. Once you check your report online, it’s advised that you print it out for your records because you can only utilize this feature for free once a year.

Investopedia

This site releases articles each day to provide knowledge and insight to readers who are interested in investing and managing wealth. There are also tutorials, tools and reports like the latest updates on the market and a Stock Simulator that lets you practice investing with imaginary cash.

Wisebread

This community blog is operated by several contributors who share their own personal tips, strategies and insight on living frugally and saving money. If you’re looking for practical tips and personal stories along with plenty of financial lessons learned, this website will be a fun and insightful read.

Sites for Personal Development

Finance at Khan Academy

This program includes a set of informational videos that cover basic financial topics like interest and debt, housing, inflation, taxes, banking, investing and beyond. The videos do a nice job of covering finance as a whole and many helpful tools for financial success, along with how and why it affects your life in certain ways.

Landmark Forum

This program is available worldwide and provides advanced teachings and seminars on relationships, communication, productivity and leadership just to name a few areas.

Sometimes, improving your finances is not just about money and requires you to change your mindset and some of your behaviors. Landmark provides a unique solution when it comes to improving all aspects of your life so you can be motivated, inspired and driven to reach your other goals.

7 Baby Steps by Dave Ramsey

If you are just starting out on your financial journey, personal finance guru Dave Ramsey created a resource to allow you to make significant progress when it comes to gaining control over your money and building wealth. The process starts with saving up a baby emergency fund of $1,000. Dave Ramsey’s guidelines are an easy concept to grasp and highly effective.

Apps and Other Online Tools for Financial Success

Digit

If you need to save more but have trouble being intentional about it, you can try Digit, a free app that automates your savings. Digit connects to your bank account and analyzes your spending so it can determine how much money to store in a separate FDIC insured savings account.

Some people don’t even realize the small withdrawals the app makes from their account to save — but the app promises to never withdraw more than you can actually afford. And you can always transfer the money back into your checking account if you need to.

ATM Finder

Need an ATM? ATM fees can be up to $3 to $4 if you use a machine out of your bank’s network, and this adds up over time. This app that lets you track down the nearest ATM that you can use while avoiding having to pay a fee.

Mint

If you would like to see where your money is going each month so you can manage your finances better, Mint is another free app that allows you to check your spending each month.

Mint safely connects to all your account and tracks all your spending in a simplified manner so you can see everything at once. You can also set reminders and create goals with the app.

Good Budget

This paid budgeting software allows you to improve your budgeting skills by digitalizing the age old ‘envelope budgeting system’. Good Budget allows you to create digital envelope’ for each budget category, then it tracks how much you’re spending from each envelope so you can stick to your predetermined budget better.

Credit Karma

Credit Karma, a website that allows you to check and track your credit score and report from two of the three major credit bureaus, also has an app so you can manage your credit on the go.

Books to Read

Gratitude Works by Robert A. Emmons

Gratitude can often be a huge factor in determining your financial success. If you aren’t grateful for what you have, you may end up wanting more and more which can eventually lead to debt.

This book not only discusses the basics of gratitude, but it helps shift your mindset from wondering how gratitude works, to specifically how you can get more of it.

How to Fix Your Credit: 101 Credit Tips by Dominique Brown

Dominique Brown is a Licensed Financial Advisor, coach, REALTOR®, and best-selling author who shares powerful tips for legally improving your credit score and repairing bad credit.

This book shares tips on everything from the meaning behind your credit score and how it can impact your financial future, along with how to avoid credit repair scams.

A Random Walk Down Wall Street by Burton G. Malkiel

This book has several editions in order to provide updated details and information about investing. This book has been praised by Forbes, The Wall Street Journal, and Chicago Tribune as one of the first books you should read when starting a portfolio.

The Richest Man in Babylon by George Samuel Clason

This classic book first published in 1926 takes a unique approach to financial education by offering common sense financial advice through ancient parables. Clason reveals the Babylonians’ secrets for creating, growing, and preserving wealth.

 

Chonce MaddoxAbout the Author: Chonce is a freelance writer who’s passionate about helping others get out of debt and work toward financial stability. You can connect with her on her blog, MyDebtEpiphany.com.

How Much House Can I Afford?

How Much House Can I Afford

You have a steady job, a good credit score, and you’re on track with your retirement savings. You don’t have consumer debt, you’ve knocked out your student loans (or have them on a manageable payment plan), and you have a little cash savings, too.

With these financial bases covered, you may feel that you’re in a good position to afford your first home.

But according to the a recent survey conducted by Realtor.org, buying a home is still an expensive proposition for first-time buyers despite lower mortgage interest rates and a rising household median income.

Before diving into the home ownership pool, consider the following points to help you make a financial decision that you can live with — and understand how much house you can afford.

Lifestyle: Today and Beyond

It’s important to not only look at your current lifestyle but the one you envision for yourself in a few years as well. If you’re currently single or engaged but are planning to get married and/or have children in the near future, then you may want to buy a home that can accommodate those plans.

This can save you money as you’d avoid the transactional costs tied with selling in order to buy a bigger home down the line. It can also help you prepare for increased costs of living. For example, you may be able to afford a $2000 per month mortgage payment now. But when you have kids and need to pay $1800 per month for daycare, will your budget be able to handle it?

And bigger is not always better regardless of whether or not you’re looking to expand your family. You may not want to maintain a larger property and prefer the convenience of condo living.

Take a moment to consider what your personal life goals are and decide on a property that will support your lifestyle for years to come. Homes aren’t easy to unload, so give yourself — and your budget — room for flexibility.

Location, Location, Location

You may have heard the adage “location is everything” and in real estate, it’s largely true. After you’ve determined what style and size of home you’ll need, the next step is to partner with a reputable realtor.

Finding a realtor who is knowledgeable not only about real estate in general but has experience with the neighborhoods you are looking at is crucial. They will be able to locate desirable homes in neighborhoods where the resale values are consistently strong.

Take the time to meet with several real estate professionals and obtain references. Buying a home is a major financial purchase so the preliminary research is worth the effort.

Can You Really Afford It?

Determining whether you can afford the home you want is truly the crux of the home buying process. You should first review your current expenses in relation to your household income.

Go over the following questions — or seek the assistance of a financial advisor.

Your responses will help clarify if you are ready for homeownership:

  • Are your debts significant enough that they could impact your ability to obtain a mortgage?
  • Would a mortgage plus related housing expenses exceed 30% of your net household income?
  • Do you have enough savings in addition to your down payment to contend with emergency expenses?
  • Is buying a home in your best interest and a financial decision that you are comfortable with?

Saving 20% percent of the home purchase amount in order to avoid PMI (private mortgage insurance) is ideally what you should aim for. If you have your heart set on a home that is $350,000, then you’d need to save $70,000 for a 20% downpayment on a conventional mortgage.

If you’re short on a 20% down payment then you can choose to wait until you reach your savings goal, put a smaller down payment, consider a less expensive home or explore alternative options such as government funded loan programs.

Don’t Forget the Extras

Avoid being blindsided by the additional expenses related to a home purchase. You’ll have to pay property taxes, homeowner’s insurance, new furnishings, and closing costs such as title and mortgage lender fees — just to name a few.

Another consideration that many new homeowners don’t factor is ongoing home maintenance. It’s suggested that you save 1-3% of the property value annually towards maintenance costs. Appliances will eventually need replacing, structural issues may surface and you’ll want to ensure that curb appeal remains high for resale purposes.

Above everything, don’t rush into buying a home before doing your homework. You can determine how much home you can afford by asking questions and working with a professional who can help you see the full picture — including factors that you may not even know to take into account.

The time you’ll invest will lead you to an enjoyable homeownership experience that your financial situation will thank you for, today and for years to come.

 

About the Author: Kassandra Dasent is a freelance writer, business consultant and advocates K Dasent Headshotfinancial wellness as a certified financial educational instructor. Her work has been featured in several online publications including Yahoo Finance, MSN.com and US News & World Report. Connect with Kassandra via Twitter @KassandraDasent

Stop Overspending! Inexpensive Alternatives to Common Costs

Stop Overspending

It’s not fun to set a budget for yourself when you go into it expecting to cut out things that are important to you. Looking good, feeling good, and having fun can take up a big portion of each paycheck.

But these things don’t have to be all-or-nothing. You can still have what you want if you’re willing to be just a little bit creative. You can stop overspending and still enjoy some discretionary buys.

Here are a few suggestions to get you started.

Gym Membership

Exercise is certainly important, but if you’re carrying a gym membership that you hardly use and definitely don’t enjoy, it’s time to try something else out. Start jogging in your favorite park, pick up a workout DVD to do at home, or ask your yogi friend to show you how to do some yoga sequences.

You can also go online to websites like FitnessBlender.com or even YouTube to find all kinds of free workouts, from cardio and HIIT to yoga and strength training.

And you don’t even have to drop your gym membership in its entirety if it provides value for you. Just consider switching to a different, cheaper gym or look for a new membership tier at your current workout spot.

Bonus: Interested in the latest fitness tracker but don’t want to shell out that much money? Here’s a roundup of alternatives to the FitBit.

Expensive Nights Out

There’s nothing wrong with going out for a night of fun, but doing it every week or even multiple times a week can really chip away at your financial situation. A great alternative? Go out for happy hour and then head home, kick off your work shoes, and cook your own fabulous meal. Or consider taking a mixology class and hosting your friends for drinks!

If the idea of cooking is really intimidating, once again, turn to the Internet for help. There are countless resources available that will help you get started in the kitchen. Try running a Google search for some specific meals, like “how to cook vegan dinners” or “paleo recipes.”

Plus, if you cook at home, you can enjoy the leftovers for lunch the next day and save even more money by eliminating another meal you might usually buy on the go.

Books, Newspapers, and Magazine Subscriptions

If you love books but the cost of buying new reads all the time is killing your budget, the library is your friend. A library card won’t cost you anything, and these days most libraries have an ebook catalog you can access through your tablet, smartphone, Kindle, or other e-reader.

When it comes to magazines, if you aren’t reading them, cancel them now or just don’t renew them when you get the renewal notice. Or, switch to online subscriptions, which are often less expensive.

A lot of content that’s in newspapers and magazine is also available online for free.

Insurance Policies

Many of us think insurance is a “set it and forget it” thing — it’s definitely mandatory and for good reason. But that doesn’t mean once you choose a policy, you can’t periodically check for better rates or options for your needs.

Review your insurance coverage each year and make sure you’re not paying for anything you don’t actually need. You may also be paying too much for coverage, so evaluate how much protection you need and what your tolerance for risk is.

Salon Services

Getting a haircut every 6 weeks really adds up, especially if you’re adding color services or other treatments. Same goes for manicures, pedicures, and other salon services.

Many cities have beauty schools (think Aveda Institute) that offer student services for free or at a steep discount. Most schools will have an experienced stylist check each student’s work during and after the cut to make sure nothing’s going wrong — and these are students with a level of experience, not total newbies who have never handled scissors before.

You can also go the DIY route and do your own mani-pedis. Cutting your own hair may be harder, but a family member could realistically help. Financial bloggers and self-proclaimed “frugal weirdos” The Frugalwoods Family does this to save on haircuts!

Dry Cleaning

While most clothing that says “dry clean only” on the label really shouldn’t go through a regular washing machine cycle, there are ways you can cut down on your dry cleaning expenses. The obvious first line of defense is to try to avoid buying clothes you can’t wash yourself.

For everything else, look into at-home dry cleaning kits or go online for washing instructions. Many natural fibers (like silk and wool) can be washed at home by hand even if the label says to dry clean them.

Do a little digging online and research what’s on your clothing labels. And of course, you can always stretch out the time between cleanings. Most of us tend to overlaunder our clothes, which not only costs more but also wears our clothing out faster.

Transportation

It seems like a no-brainer to have your own car, but having a car is expensive and there are usually much less expensive alternatives. Rather than leasing or buying a new car every couple of years, keep the one you have until it bites the dust. (Imagine going years without a car payment!)

Look at public transportation options, rideshares, or carpooling options. Biking to work is also becoming much more common.

Keep Hacking It!

No matter what part of your budget you need to trim, there’s an online community of “hacking” for that. Groceries, travel, insurance, technology…. you can find all kinds of information about saving big on any expense.

Try running a Google search for what you’re most interested in saving on, and check out the blogs, videos, and social media accounts that come up in the results.

All it takes is a little bit of time and a touch of creativity to get a healthier budget without missing out on the things that are important to you!

 

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About the Author: Ashley Gainer is a writer and coach who makes great content for entrepreneurs and small businesses and teaches other writers how to do the same. You can find her online at ashleygainer.com or on Twitter @ageditorial.

Quitting Your Job

Your Financial Checklist Before Quitting Your Job to Freelance

Quitting Your Job

Have you ever dreamed about quitting your job and freelancing full time? It’s a goal for many people who are doing work on the side of their day jobs and are ready to make the leap and do something they love.

But before you make any jump into self-employment, there are some financial considerations to take into account. Freelancing sounds fun, but your income will suddenly be variable and it’s up to you to make the money you need to get by. That’s a lot of pressure, and it’s much different than having an employer with benefits and steady income.

So how do you know you — and your finances — are prepared for quitting your job and freelancing full-time? Use this checklist to guide you!

Create a Big Emergency Fund

Having enough cash in an emergency savings fund is important no matter what. But you’ll want to boost your reserves before quitting your job because self-employment income can be much more volatile than when you’re an employee.

That same flexibility that full time freelancing provides you with your time also means your income might be flexible from month to month. Some months, that will be great; you’ll make more than you anticipate.

But what will you do in a month where you make less than expected, and in that same month your car breaks down, you take a trip to the ER, and your hot water heater gives out? This may sound extreme, but we all know life happens.

A big emergency fund will protect you, and the more volatile your income the bigger your reserves should be.

Create a Bare Bones Budget

Do you know how much money you need to meet your basic required expenses each month? A “bare bones” budget can help you understand this number. This is what you need to survive, and knowing this amount can also help you on the flipside: it gives you a mark to target for your minimum viable income.

Expenses like groceries, rent or your mortgage payment, utility bills, and minimum debt payments should all be included in your budget while extra expenses like entertainment spending or your vacation savings fund don’t need to be included.

Develop a Sustainable Income

Your emergency fund covers you in case the cash stops flowing for a bit. A bare bones budget can help you manage extremely low levels of spending to help you through lean months — so getting into your emergency fund becomes a last resort.

Let’s talk more about the income side of the equation.

Before quitting your job, you need to develop a sustainable income. This doesn’t mean you need to make exactly the same amount every single month before you can freelance or work as a self-employed individual. But you should understand what average numbers are, and you’ve been freelancing long enough to see a trend in your earnings.

Know How to Manage Self-Employment Earnings

You need to do a little bit more than just deposit your checks as a full time freelancer to make sure all your bases are covered. Make sure you account for taxes, since you’re responsible for your own withholding.

Estimating about 30% and setting aside that amount of your gross income for taxes should give you a good starting point. Remember to talk to a financial advisor or tax professional to get the specific numbers for your situation, since there are so many variables in figuring out specifics around what you owe Uncle Sam.

You’ll also want to account for things like what you want to save for retirement, since there’s no employer to give you a 401(k) and a match. Remember your business expenses, too.

In short, your net income could look a lot different than your gross. Subtract taxes, retirement savings, and expenses from your gross, and that gives you your net. Be sure to budget off the net number, and be able to manage your personal costs once your business expenses are accounted for.

Obtain the Proper Insurance

When you’re self-employed, the task of obtaining the proper insurance is solely up to you. If your employer currently provides you with medical, life, dental, or any other type of insurance, you’ll have to secure new insurance policies to begin when you quit.

Research and compare your options with dental and life insurance to see what will best fit your needs and budget. For medical insurance, if you lose or quit your job for any reason, you will most likely qualify for a special enrollment period that allows you to enroll in a health plan even if it’s outside of the annual open enrollment period. You may even be able to continue with your current plan but pay a slightly higher premium.

Being Prepared Before Quitting Your Job Goes a Long Way!

Right now — before you quit your job to try your hand at freelancing for a living — is the perfect time to get prepared since you know what your goals are and have a timeline set. While choosing self-employment can certainly seem like a leap of faith, you can help build a foundation to land on by working down this financial checklist.

 

Chonce MaddoxAbout the Author: Chonce is a freelance writer who’s passionate about helping others get out of debt and work toward financial stability. You can connect with her on her blog, MyDebtEpiphany.com.

Digit Review: How to Painlessly Save Money With Digit

Digit Review

Not too long ago, Digit came on to the financial scene as a service to help you painlessly save money. In the company’s 5 month pilot period, it saved it’s users over $600,000. And in a time when statistics regularly show the poor savings rate in the U.S., this is a pretty big deal.

Investors are liking Digit as well. They got $2.5 million in seed funding from Google Ventures, Baseline ventures and a few other firms.

So what’s all the fuss about? What exactly is Digit? How does it work? And can it really help you boost your savings? Get the answers in this Digit review.

What Is Digit?

Digit is a web service that simplifies the process of saving money by taking small withdrawals from your checking and automatically moving them into a savings account. Essentially, it evaluates your spending habits, finds extra money that you can save and then deposits those small amounts into savings. The idea is that these withdrawals are generally so small that you won’t even miss the money.

For example, through analyzing your income and spending patterns, Digit may notice that it can take out a few dollars from your checking account and put it into savings because you won’t actually need that money to pay for any upcoming expenses. Over time, these small amounts can really add up, and it’s all done automatically without the user having to think about it.

How Does Digit Work?

The first step is to set up your Digit account by signing up online and linking your desired checking account to the service. As of March 2016 you can also download their smartphone app and set up an account that way.

From that point forward, Digit will run an algorithm every few days that analyzes spending and savings trends in your checking account. From there, they determine an amount of money they can take out of the account and put into savings.

When you start with Digit, you may see small amounts like a few cents here or a few bucks there being pulled from your checking account into a savings account. Once the app better understands your specific habits, it will hone in on numbers that work for you — and you can always change settings to tell the program to save more for you.

When I first started using the service in the summer of 2015 Digit would only deposit around $2 into a their savings account every few days. As time has passed and as I’ve made more money, some of the automatic deposits into savings have been as high as $50.

And as far overdraft, their algorithm is designed to avoid that (but if it does, Digit promises to cover the cost). I’ve personally never had the service overdraft my account. In fact, I’ve noticed that Digit tends to automatically take out smaller withdrawals or spreads them further apart if my checking account goes below a certain number.

Another thing you need to know about how Digit works is that after the initial setup you can do everything via text. For instance, if you want to save more money you simply text “save” to their designated number. You are then prompted with the next steps via text.

It’s the same process with withdrawals, retrieving your Digit account balance, reviewing your checking account balance, viewing your upcoming bills and pausing your automatic savings.

You can see all of the appropriate prompts from your online account — and you can use the online dashboard to manage Digit, too, in case just texting doesn’t feel comprehensive enough.

The Best Thing About Digit

What makes Digit different from just your regular automatic savings is that if figures out the amount it can save for you. It’s all based on your lifestyle, so it easily fits into your current financial plan and doesn’t require you to come up with a fixed amount every month.

Digit also really works. From December 2015 to February 2016 Digit saved me almost $500 that would have just sat in my checking account otherwise. (Granted, this was after I changed the settings so that it would be more aggressive.)

Another great thing about Digit is how it uses technology to make the process easy. Once you’ve linked your checking account, everything else can be done via text.

Each day Digit will send you a text with your current checking account balance. And each month, Digit will text you with a summary of how much it has saved you in during that given period.

What Are the Downsides of Digit?

Digit has an unusual interest rate payment structure which they call Savings Bonuses. Instead of accruing interest each month, you get 5 cents for every $100 you keep in the account for at least three months. If you have $100 in the account for at least 90 days you’ll get 5 cents, $200 in the account for more than 90 days will get you 10 cents, and so on.

These bonuses are paid out every three months and are contingent upon how much money you have in the account and for how long. Given that the interest rates on savings accounts and CDs are miserable anyway, Digit’s Savings Bonus structure isn’t that big of a con in the long run but it’s something to be aware of and understand.

Digit’s Referral Bonus structure may also help make up for it. You can receive $5 for each person you refer once they’ve made their first savings transfer into their Digit account. At this point, I’ve already made over $35 in referral bonuses. The more I share it, the more more money I make in bonuses.

Final Thoughts

While it won’t make you rich, Digit is a great tool to help you stash away any extra cash that may have gone unnoticed otherwise. Users have been able to start emergency funds, pay down debt, invest lump sums or pay for things like trips. Overall, it’s a great service to add to your financial toolkit.

 

Amanda AbellaAbout the Author: Amanda Abella is an Amazon bestselling author, speaker and personal finance expert who helps millennials make money their honey through online business. She has built an online brand that touches thousands each month and has been featured in Forbes, The Huffington Post, Seventeen Magazine and more.

The Financial Argument for Renting Over Buying

The Financial Argument for Renting over Buying

Deciding whether you want to buy a home or continue to rent can be a huge decision that relies heavily on your finances and your preferences. While owning a home has almost always been associated with the American Dream, some people are finding that renting is the cheaper, better option for their situation.

There are quite a few reasons why renting may seem more appealing — and there’s a strong financial argument for renting over buying.

Here’s what you can consider when trying to decide for your own living situation.

Renting Provides More Freedom

If you want to buy a home, staying put for 5 to 7 years is the general rule of thumb to break even once you sell. This accounts for things like your monthly mortgage payment, your initial closing costs, and the cost associated with the selling process.

Homes appreciate slowly — if at all — so it takes time to recoup what you put into it.

But many homeowners may lose money in the long run, even if they meet that minimum standard of 5 years in the home before selling. If you’d like to have the option to pick up and move if you don’t like the area, find a new job, or pursue other opportunities, you may want to choose renting an apartment or house instead of buying.

While you can’t necessarily pick up and move any time you want when renting because you likely have a lease, it’s easier to get out of that kind of agreement than put a property up for sale, market it, negotiate with buyers, and close the deal.

Renting and obtaining a short lease is a much more flexible option that will allow you to feel less tied down if your circumstances ever change and you need to move or travel long-term.

Buying Isn’t Always Cheaper

Most people’s reason for buying a house is because it’s ultimately cheaper. If your monthly mortgage adds up to be less than market rent in your area, this is a reasonable motivation to want to buy a house.

Plus, there’s always the urge to avoid “throwing money away.” When you buy, you still have the monthly payment — but that goes toward equity in your home. You get that money back one day, right?

Maybe. That assumes the market goes up over the time you own your home and that the market is great when you eventually sell.

And depending on where you live, renting could actually be cheaper. Much cheaper, if you consider options like living with roommates.

The best thing to do to settle this side of the argument? Run the numbers for your specific situation. This rent versus buy calculator for the New York Times is really helpful.

Save Money on Upkeep

Home repairs and maintenance are some of the most fluctuating and unexpected expenses homeowners have to deal with. An estimated $2,000 repair or remodel can easily turn out to be double or triple that amount.

As a renter, you don’t have to worry about repairs for your home at all since the landlord will usually take care of everything from installations and upgrades, to painting and landscaping. Letting someone else handle these sometimes erratic and extremely high costs can give your monthly budget a big break.

Yes, There’s More Than Just Money in Renting Over Buying

Some people believe that buying a home is much cheaper than renting while others will argue that renting is cheaper because it excludes a lot of added living expenses that homeowners have to deal with.

Ultimately, there is no right or wrong answer because everyone’s situation is different. You can start by running your own numbers and understanding the specifics that apply to your situation — not someone else’s, and certainly not hypotheticals.

It just helps to understand some of the arguments for renting over buying (and vice versa!) so you know you’re thinking about the situation from all angles.

And yes, there is more to this argument than the numbers. What you care about and your preferences are important here.

How much space do you need? (Be honest!) Are you okay with having neighbors close by or do you want some space? Do you have a lot of debt, or a small emergency fund — or both? How are rent rates in your area compared to the price of homes? Where do you want to be in 5 years?

All of these factors — and more — will play a large role in your ultimate decision.

It’s best to remember that you don’t have to rent or buy forever. Both are options, and in both situations you can change your mind over time. There can be a financial argument for renting over buying, and there’s no rush to make a big purchase.

Rent as long as you need to consider the decision. As with all things in personal finance, at the end of the day the choice is largely a personal one.

 

Chonce MaddoxAbout the Author: Chonce is a freelance writer who’s passionate about helping others get out of debt and work toward financial stability. You can connect with her on her blog, MyDebtEpiphany.com.

Goodbudget Review: How to Do a Cash Budget, Without the Cash

GOODBUDGET REVIEW

There are tremendous benefits to putting yourself on a cash budget when you’re dedicated to taking control of your cash flow, savings, and debt repayment. The trick to being on a cash budget, though, is that — well, it requires you to carry around a bunch of cash.

Not anymore! The Goodbudget app (formerly EEBA, the Easy Envelope Budget Aid) makes it possible to sync your accounts and track your spending using the envelope system, while allowing you to leave those envelopes at home.

When you’re on a cash budget, the boundaries are easy: there’s a dedicated amount of money to be spent in any one category in any one month, and when the money is gone, it’s gone.

No more hoping you can afford something, no more trying to remember your expenses in your head, no more wondering if you’re going to be on track at the end of the month. It’s all right there in your hand.

But is Goodbudget really as great as it sounds? Does it keep your financial information safe? Should you use it if you’re considering the envelope budget?

Our Goodbudget Review

We tapped a self-described cash budget enthusiast XYPNer to try Goodbudget and report her results so you can know what to expect. She used the old-fashioned envelope budget when she was single, and now that she’s married she’s looking for a way to make a cash budget work for two spenders with no clearly defined spending roles. Here’s what she found.

Getting Started with Goodbudget

Signing up for Goodbudget is straightforward. The only thing to decide before you sign up is whether you want the free or the paid version.

The free version gives you 10 “regular” envelopes, 10 “more” envelopes, 1 financial account, 2 devices, a year of history, and community support.

For $5/month or $45/year, you can have unlimited “regular” and “more” envelopes, unlimited accounts, 5 devices, 5 years of history, and email support. The only time you’ll enter any private financial information on Goodbudget is when you purchase a paid plan.

Once you click on that Get Started button, you’re taken to a page that asks for an email address, password, and plan selection. There’s also a phone number you can call or an email address where you can send any questions you have, as well as a side-by-side comparison of the two plans.

After I register, I’m taken to the dashboard. On the left, there’s a column with two tabs: envelopes, and accounts. On the right, there’s a section that lists all my transactions. From there, I can search transactions, import transactions from a file I’d get from my bank account, or export everything in a CSV. I also see an option to generate helpful reports on spending, balances, income, etc.

Getting My Budget Set Up

I click on the Envelopes tab and click on Add/Edit. I’ve already planned what my envelopes will be, so setting them up is easy. I can even decide which envelopes will roll over their remaining cash to next month and which ones will return their leftovers to the pot.

In addition to the regular monthly envelopes, there are Goal/Annual Envelopes, which allow me to save up a certain amount each month toward an annual expense, like holiday gifts or car insurance, as well as one-time big expenses like a car or a wedding.

I also need to set up my accounts. There’s a section for checking/savings/cash accounts and a section for credit cards. They’re called credit cards, but really you can use them to track the balances of any debts you have.

It’s also possible to turn off the accounts and use Goodbudget just to track your spending and income without tracking which account(s) the money funnels through.

Adding Income and Transaction Information

Goodbudget lets you track both income and spending, and you input both of these in the Add Transaction section. You can also transfer money from one envelope to another or from the pot of unallocated funds to an envelope, and that’s done in the transaction feature.

You can schedule any kind of transaction in advance, and you can also set up recurring transactions — for example, your paycheck or your health insurance premiums. There’s an option to get an email notification anytime a scheduled or recurring transaction occurs.

As you spend or receive money through the month, you can enter each transaction manually on the website or in the mobile app. There’s a neat feature in Goodbudget that allows the app to remember your location when you enter a transaction and suggest the same information next time you enter a transaction in that spot.

Transactions can be imported in bulk from Quicken (QFX), MS Money (OFX) or CSV files, and your financial institutions will provide at least one of these file types for you to export. Once you’ve uploaded the file, Goodbudget will match up the imported transactions with any transactions you’ve already inputted.

You can then assign any new transactions to their envelopes by dragging each one to the corresponding envelope.

I found the website easy to use, and the help documents are easy to access and excellent. Once I was able to get everything set up, I downloaded the app onto my smartphone. When I logged in the first time, everything was ready to go.

Making any major changes or doing anything in bulk would be much easier to do on the web, but the main feature — transactions — is easy to do on either interface.

Deleting Device Access and/or Your Account

Managing access to your Goodbudget account is straightforward. If you want to keep track of the devices connected to your account, click on My Household and then on Manage Devices. You’ll see a list of all the devices used to connect to your account. From there, you can revoke access if you want.

To delete your account, click on My Household, click on Close Household, and hit the red confirmation button. It’s that simple.

Pros and Cons of Goodbudget for Cash Budgeting

Overall, I’m really happy with what Goodbudget delivers. I’m able to set up a cash budgeting system that two people can use. We’re able to keep using our credit cards, which we like, and we don’t have to carry around envelopes of cash. This will make staying on track with our budget a lot easier.

The web-based interface is robust and easy to use, and connecting multiple devices is seamless. This is the part I’m most excited about, since two people are spending from this one budget.

That said, there’s one main thing about Goodbudget that might make it less than ideal for some people. There’s no way to connect to your accounts with financial institutions; any transaction information has to be entered or imported. Bulk importing makes the task much easier, but it’s still an inconvenience if you want something that does everything for you.

Ultimately, I found Goodbudget to be a great tool for setting up and living by a cash budget without having to deal with trips to the bank and keeping track of envelopes of cash. I’m really happy to have found it.

 

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About the Author: Ashley Gainer is a writer and coach who makes great content for entrepreneurs and small businesses and teaches other writers how to do the same. You can find her online at ashleygainer.com or on Twitter @ageditorial.

Budgeting for Student Loan Payments Once You’ve Left the Nest for Good

Budgeting for Student Loan Payments

The average college student graduates with some form of student loan debt. As statistics show, most students carry around a student loan balance of $30,000 that they need to repay.

During and right after your grace period are the perfect times to evaluate your loans and your financial situation to determine how you’ll make student loan payments each month.

You can choose from a variety of payment plans and options before you get started as well. When you owe a lot of debt, some people may tell you to drastically cut your expenses so you can focus on your debt or move back in with family so you won’t have to worry about the financial burden of paying for housing.

While moving back in with your parents is a great option to jumpstart your student loan repayment process as it could save you thousands of dollars, not everyone has that option as some graduates are older or have simply left the nest for good.

Here are a few ways to budget for student loan payments when you are committed to living on your own.

Budget the Easy Way By Paying Yourself First

This is one of the easiest ways to make sure you pay on your student loan debt on-time and regularly each month. Instead of fearing that you won’t have enough money left at the end of the month to contribute to your loan payment, try to pay yourself first instead.

When you get paid, make at least the minimum payment on your student loans, then transfer a set amount to a savings account. After that, take care of all your other bills. You can use what’s left on discretionary spending last.

You may have to cut some unnecessary expenses or adopt some frugal hobbies with this method, but it will give you peace-of-mind when it comes to developing a realistic budget and paying off debt.

Lower Your Housing Expenses

If you rent an apartment and can’t or prefer not to move back in with your parents in order to put money toward your student loans, you can still cut your living expenses. The trick is knowing how to keep your living expenses moderate and simple.

A spacious condo downtown will clearly cost you more than a smaller basic apartment on the outskirts of town or in a small suburb. Living in luxury is not a must — and it’s a goal you can work toward over time as your income goes up and you pay down your debt. For now, repaying your loans should be a financial priority.

There are a lot of hidden costs involved with renting an apartment or house and owning a property, too. Be aware of these when choosing a living space, and look to eliminate what you can.

Some landlords provide extra amenities for tenants like a pool, computer lab, fitness center, concierge service, and so on. While these amenities might be nice, the extra cost you have to pay for them will be reflected in your rent amount.

You can lower your housing expenses by choosing to rent in an area that has a lower cost of living and leasing housing that doesn’t have extra maintenance and storage fees or benefits attached.

And don’t forget — you can make living on your own a little easier by finding a roommate (or roommates) to split expenses with. You may not be flying solo, but it’s a good compromise to have your own roof instead of staying under your parents’ and be able to repay your loans.

Consider a Side Gig

If adding student loan payments into the mix gives you a budget deficit, try finding extra ways to earn money on the side to increase your income. Depending on how much your student loan payments are, you may only need to bring in a couple hundred dollars per month.

You can do this by babysitting, walking dogs, cleaning houses, running errands, consulting businesses or individuals, or freelancing your skills. Don’t forget the fact that you will have to pay taxes on the extra income you earn so talk to a financial advisor or accountant who can offer insight on that aspect.

Commit to Making Payments

Budgeting for student loan payments when you have other financial responsibilities like your housing, bills, or even a family can require a lot of focus and determination along with a clear plan. The key is to prioritize the debt and commit to making payments each and every month so you can eliminate it.

 

Chonce MaddoxAbout the Author: Chonce is a freelance writer who’s passionate about helping others get out of debt and work toward financial stability. You can connect with her on her blog, MyDebtEpiphany.com.