Saturday, February 28, 2015

Welcome to A New Poster

Hi Everyone! We're going to have a new poster starting here in a few days. Carl is another personal finance enthusiast (obviously) and will be posting on a weekly basis. His posts will tend to be a little more technical and in depth than mine.

Welcome, Carl!

Saturday, February 21, 2015

Is The Cover Letter Dead?

Hello again Cash Turtles! Sorry for the hiatus. I’ve been trying to figure out how to get this blog setup on my own WordPress server… it’s a lot harder than I initially thought.

On with the article! As you may have read on the “About” page I also want to give interview, resume, and career advice on this blog. Having a steady job and making a good salary is a key part of everything we talk about on this site. To that end, I wanted to write an article on the resume cover letter.

Recently, I've found that less and less candidates are sending in cover letters. If I had to guess, only around 20% of candidates send them in to my company. And I have to be honest, we usually only skim them if they're applying for an entry level position. Cover letters are generally more important when you begin to apply to more specific, higher paying jobs. 

That isn't to say that you shouldn't write a cover letter. A great cover letter can only help set you apart from the sea of candidates. It is also important to note that perfecting your resume comes before the cover letter. When reviewing candidates to a position we typically review the resume first to make sure they qualify. If they do, that's when we go back and look at a cover letter. The bottom line is that a cover letter, as long as it is well written and the resume is top notch, can't hurt.

Now we'll move on to some tips for writing a cover letter!

  1. Keep it short and sweet
    • One page max. The cover letter is just to help the folks reviewing your application get an idea about you. Don’t write them a full essay, be concise and to the point. Don’t feel bad if you have to take stuff out; you’ll be able to talk their ear off during the interview.
    • They have tons of these things to read through. Be mindful of when you’re rambling, as it may bore a potential employer.
  2. Don’t be redundant
    • Don’t use your cover letter to repeat things that are in your resume. If you’re taking time to write one, and you expecting employers to take time to read it, you want to make sure it adds as much value as possible. Tell them why you think you’d be a good fit for the job, personal experiences that match qualifications etc.
  3. Focus on skills you have that match skills in the job posting. Highlight these.
    • You can write a few sentences about each skill that you have that matches something in the listing. 
    • Alternatively, you can come up with a sort of table: one column with their desired traits, and a second with your experiences.
    • Bottom line, highlight why you’re a good fit for the job. Try to draw them in and make them interested.
  4. Tie it in with a story about how you've interacted positively with the company before
  5. Name drop, but be careful. If you know an employee and know they'll give you a good review, this can help. 
    • Usually do this in the first paragraph: “I heard about this job from _______"
  6. Be professional
    • This goes without saying... don’t crack jokes in your cover letter.

The place of a cover letter:
To take out paragraphs and blocks of text from resumes
To give employers an idea of why you chose THEIR company
Highlight some skills about how you relate to the company

Bottom line: It can’t hurt you… unless you have a terrible cover letter.

I plan on writing much more on this topic, so there will definitely be more to come. Let me know if you have any comments or questions! 

Tuesday, January 27, 2015

My Financial Plan

Hello Cash Turtles! I figured today I would post about my financial plan so you could all know where I’m coming from. Take it with a grain of salt, and I’m sure I’ll end up changing it quite often. If you have any questions or critiques, leave them in the comments below, or email me.

A Quick Overview: The steps on top take precedence over all of the other steps below them. If any of the higher steps are no longer satisfied (i.e. less money in a savings account), I will drop everything and focus on that. For an explanation of the different account types and why they’re ranked the way they are, see my financial planning article.

Right now I am contributing to a Traditional 401k, Roth IRA, and Traditional IRA. The traditional 401k lowers my tax bracket (I pay less taxes now). For the IRAs, I contribute to the traditional IRA up until I hit the deduction limit, and the remainder goes into my Roth. I will be going over all of this in a future article Traditional vs Roth… huh? If you have questions before then, please reach out to me and I”ll be more than happy to go into detail

  1. Max out 401(k) contributions up to the employer match (if there is one)
    • For example, my employer matches 100% of the first 4% of my pay that I contribute. So if I put in 4% of my salary to a 401k, my employer would double that.
    • Employer contributions to a 401(k) are put into a separate account and aren’t part of the annual limit
  2. Have ~$2,000 in Vanilla brick and mortar Savings (Keep $$$ at ~1 months of expenses, maybe a little higher ($2,000 a month for me))
    • This was my first account, tied to all my loans, CC accounts, checks etc.
    • I might keep less, depending on how comfortable I comfortable am with decreasing it.
    • This step isn’t necessary if you don’t want it to be. If you are in debt, you should probably pay it off rather than save this.
    • I use them for getting change for laundry, the ability to write checks… that’s pretty much the only reason.
  3. Have ~$6,000 in “high yield” savings account (Keep $$$ at ~3-4 months expenses ($2,000 a month for me))
    • See my savings account article <<here>>
    • Semi-liquid. Cash, but harder to get at then TD bank (takes 2-3 business days to transfer).
    • Ideally the interest rate is way better than your brick and mortar bank. Anywhere from .75% to around 1.2%.
    • You don’t want money to decrease in value. 
    • Depending on your comfort level, you can transfer funds from here to:
  4. Put ~$4,000 in Betterment to start
    • See my Betterment article <<here>>
    • Betterment is an automated investment tool. In a nutshell, you contribute money to your account and they automatically invest it in a diversified portfolio of stocks and bonds. You set the ratio of stocks and bonds, they do the rest. The added expense for this convenience is 0.35%.
    • EVENTUALLY, this is a long term goal, have $10,000+ 
    • Depending on how comfortable you get with risk, you can always transfer money from the savings account to Betterment
  5. Max Out HSA Contributions (While contributing to Betterment investment account)
    • You can contribute to an HSA if you have a qualifying high-deductible health insurance plan.
    • Money goes in pre-tax, grows tax free, and can be withdrawn tax free as long as it’s used for a qualified medical expense.
    • Mine needs to have $2,000 in it before I can be invested. Depending, you might want to max IRA before this.
    • See my <<HSA Article>> for more information on HSAs
  6. Max out IRA contributions. Betterment seems to be a better option than Scottrade (assuming no free trades). Vanguard is best.
    • Individual Retirement Arrangement. See article <<here>>
    • Scottrade Roth IRA: Play money account. Account value should be 5% of the total of IRAs and 401ks. MAX!
    • Betterment Roth IRA: For storing money, this was before I had enough money for a Vanguard IRA. Probably gonna roll over.
    • Vanguard Traditional IRA: Vanguard funds!! For hiding from high expense ratios.
    • 2015 limit is $5,500
  7. Max out 401k contributions
    • This is the last tax advantaged account we have left to max out, so we should do so.
    • See my 401(k) article <<here>
  8. Contribute to a taxable investment account
    • As I’ve mentioned time and time again, we should avoid paying taxes unless we have to. 
    • Still, we should still be investing any leftover money we have, and this is the last way for us to do that

Hopefully that helps some of you with your own financial plans! My plan is by no means final, and it probably isn’t even the best one out there. Let me know if you have any questions or comments!

Monday, January 26, 2015

6 Ways to Save More Today!

As promised, here are some easy ways to start saving more money! These are the ways I think will be most helpful to my readers. If you have something that works for you, please leave it in the comments! I’ll be sure to add it. 

1) Digit: Saving. Automated.

My favorite new way of saving is Digit! Digit is an online savings platform that is, simply, amazing. Digit analyzes your spending habits and every week it comes up with a certain number of money it thinks you can afford to save. The amounts it suggests are almost always under $10 per week. I use the money I save with Digit as a type of “mini vacation fund”. The best part? It’s completely free! There are no hidden fees or expenses. Digit is a new company and they can’t accommodate all of the requests they have flooding in right away. This means new users normally have to wait in line. But, if you use my link you can skip the line and get started right away! So what are you waiting for? Give Digit a try now

2) Credit Card Cash Back

My second favorite way to bump up savings is to use your credit card cash back to save. For example, if my Capital One account has $30 in cash back, I’ll take that $30 and put it into Betterment. It’s a fantastic method I found out about a month ago: it means you’re saving 2% of all the money you spend. What can you lose?

3) Retirement is now!

Live like you’re already retired. This is a fantastic way to get yourself in the retirement mindset. To some people, retirement may be synonymous with frugal living and cutting back. This doesn’t have to be the case. If you get in the retirement mindset now, you can start saving more and not have a huge shift once you decide to retire. Right now I’m young and spending ~$20,000 a year to support myself comfortably. As long as I don’t let my spending grow out of control I won’t go into financial shock when I retire. 

4) Use a Savings Challenge

Another way to start saving more is to participate in a savings challenge. There are many challenges out there, but what I think is the key is having someone to be accountable with. You can find them in all sorts of places (like reddit). If you need someone I’ll be more than happy to help!

One popular savings challenge that has been gaining popularity recently is (what I call) the Savings Snowball. This starts off easy and gets harder an the year progresses. When you start: Save $1 the first week, $2 the second week, etc. By the end of the year (52 weeks) you will have saved an additional $1,378! Yeah, that sounded like a lot to me too, so I went and did the math and it’s correct! With that money you can make some pretty hefty progress towards any savings goals you have. You can do your own take on this if you’d like, so you aren’t saving so much towards the end of the year.

5) Squirrel Away Your Acorns

Acorns is a great tool for someone who’s struggling with saving on your own. Their app has a very slick interface and I love their concept: It rounds up all of your transactions to the next dollar and invests it. For example: if you were to buy a cup of coffee for $2.34, Acorns would “squirrel away” an additional $0.66 into your Acorns account. The money is invested in an account type similar to Betterment’s. My main issue with Acorns is that they charge a 1% fee when you use their investment service. This adds up fast. Over 40 years they would take roughly half of your earnings as an expense. If you can use any of the methods above i would recommend them first. With that being said, if you think Acorns is a good fit for you you should certainly check it out.

6) Get in the Savings State of Mind

Another (obvious) thing that has helped me save more is that the more you save, the earlier you can stop working. This simple fact helped me get into the saving frame of mind. If I save even 5% more for 20 years, I can stop working a year earlier! This has motivated me to start spending more. This realization has changed my mindset around finances completely: now I’m actually saving for a goal, instead of some arbitrary number.

Similarly, I wrapped my mind around the fact that money = freedom. I am not that enticed to buy the "next new thing” or buying something new if I already have an older, working, version. I always saved at least a little, just without purpose. Now, money represents being able to do what I want. Having $12,000 in savings means that, if I need to, I can leave my job and spend 6 months figuring out what to do next. I don’t think this will happen, but it is comforting to know I could pack up and move to Denver, CO for 5 months without needing to work. That's a lot of freedom.

Well there you go! Hopefully that helped you think about saving more and gave you a few new ideas that you would like to try out. As always, feel free to leave your feedback in the comments below. 

Sunday, January 25, 2015

The Basics of Financial Planning

I’ve posted a lot about different tools to improve your personal finance, but I haven’t discussed the order in which people might save. In this article, I plan to go over the most accepted order to begin saving. I’ve said this before, but you should always do what you feel is best, this is a personal finance blog after all. I will give justifications for each item’s spot in the order. If you have any questions feel free to ask!

Before we get started I wanted to quickly go over the widely accepted rules of thumb for saving. Generally, you should try to save at least 20% of your income, but 30% is preferred.  It is also recommended that you have at least 2.5 months in your emergency fund, but that will be covered in step 3. For more information about saving, see my article How Much Should I be Saving?

I (and many others) recommend the following as a skeleton financial plan:

  1. Max out your 401k/403b employer match (or, always take free money)
    • Short explanation: This should be your first step after you have your emergency fund built up. 401ks or 403bs are employer sponsored tax advantaged retirement accounts and many offer matching programs. I will be referring to them as just 401ks for simplicity. This match is free money that you should absolutely take advantage of. Some employers match a portion of their employees’ contribution to their retirement accounts. Again, take advantage of this; it’s free money. Stop contributions there and move on to your next steps, this is just to take advantage of the free money. See more in my upcoming article about 401ks.
  2. Get out of debt
    • Short explanation: Getting out of debt is a huge step towards financial independence. Being in debt means you are a “financial slave” to the companies you owe money to. You can never be truly financially free until you get rid of all the debt you owe. Debt comes before investing simply because the percent you pay in interest is almost always more than the ~6% you will be averaging in your investment growth. For more information, see my article on methods of getting out of debt.
  3. Build up an Emergency Fund
    • Short explanation: An emergency fund is, as you might think, a big bunch of money that you have saved up to use in case of an emergency. Think of it as you rainy day fund. You should use this very rarely during your life but having it can make the difference between debt and debt free. Your emergency fund is what keeps you from going broke. A general rule is to have at least 3.5 months of expenses saved. For more information about saving and emergency funds, see my How Much Should I be Saving? and What’s the point of an emergency fund? articles for more info.
  4. Max out your HSA (if you’re eligible) 
    • Short explanation: HSAs typically take money from your paycheck before taxes (income and FICA tax free) which is phenomenal. HSAs are only available with certain health plans, check with yours to see if you’re eligible. The money can then be withdrawn tax free if used for a qualified medical expense. Most have an investment option, so your money can grow tax free as well. So they are tax free in, tax free growth, and tax free out. This can’t be beat by any other account. The annual contribution limit in 2015 for HSAs is $3,350 for individuals and $6,350 for families. See more in my upcoming article about HSAs
  5. Max out your IRA
    • Short explanation: An IRA is also known as an Individual Retirement Arrangement (by the IRS) and as an Individual Retirement Account (by everyone else). IRAs are similar to 401ks in that they are tax advantaged retirement accounts. These plans are much more flexible when compared to employer sponsored plans (401k etc). You can invest in almost anything your heart desires (but I would recommend against doing that all the time, if at all) while 401ks are limited to what your employer allows. IRAs also have more lenient rules about withdrawing funds. The annual contribution limit for IRAs in 2015 is $5,500 ($6,500 if you’re 50 or older). See more in my upcoming article about IRAs.
  6. Max out your 401k
    • Short explanation: 401ks aren’t at the top of the list because they are harder to withdraw from than IRAs and don’t have as much diversity in the investment options. Due to their tax advantaged status, they are still a great option for saving money for retirement. The annual contribution limit for 401ks in 2015 is $18,000. You can contribute an additional $6,000 if you are age 50 or older.
  7. Contribute as much as you can to a taxable investment account. See more in my upcoming article about 401ks.
    • Short explanation: This is the last step! Taxable investment accounts should be saved until last because you pay tax almost every step of the way. Taxes, quite obviously, limit your future growth since they take money you could be saving instead. There are no limits on these accounts and are comparatively very few restrictions. See more in my upcoming article about taxable investment accounts.

That’s the mile high view of financial planning. I could write dozens of articles on each of those steps, but I wanted to start with the basics. Do you have any questions or comments? Let me know below!

Saturday, January 24, 2015

Making Sense of Saving

I think everyone agrees that saving is important, and most people wish they could save more than they are. Saving is one of the most crucial steps in personal finance aside from being out of debt. Saving money is the first step to becoming financially independent. In this article I will be giving some rules of thumb for saving, ways to get started, how to not go crazy, and closing with smart places to put your money.

Once you’re finally debt free you’ll suddenly have a lot more disposable income! Please try not to spend it. When I finally paid off all my loans it was very difficult to not spend the extra $500 I had per month. The hard part is taking your income and saving. If you need a little motivation, see my article The Many Benefits of Saving

At this point, you may be asking “How much should I be saving?” There is one major school of thought on this matter, but it’s all up to your personal preference

  • Save a percentage of your income.
    • This is one is one of the most popular methods people use to plan their savings. The recommendation is to save at least 20% of their after-tax income. Saving 30% of your take home pay is preferred. This method makes it easy to plan for the future: saving 25% for 4 years equals 1 year in retirement at your current spending levels. It also scales as you continue getting more pay. One flaw with this is if you don’t increase your savings rate as your pay increases, your spending may increase. This isn’t necessarily a bad thing, but it can increase the length of time you have to work.

After you’ve determined how much of your income you want to save you can start to figure out where you want your money to go. When you first start saving, the first step is to build an emergency fund. This first step is recommended by financial advocates all over the world. Your emergency fund is an account (or accounts) you have that are very accessible and easy to withdraw from. The most common account type is a savings or checking account. The main purpose of an emergency fund is to keep you from going (back) into debt. Most people only have around 3 emergencies in their lives. An emergency can be losing your job, an accident, your house falling down, etc. I will go into more detail in a later article about emergencies and the accounts you can use for an emergency fund.

The two most popular ways of saving are save based on expenses and save a flat amount.

  • Have one month of expenses saved.
    • This is a method popularized by Dave Ramsey, but is used by many people. The recommendation here is to use how much you spend each month as a base. From there, you save a certain number of months worth of expenses. The recommended rules here are to have between 3.5 and 6.5 months of expenses. For me, I have calculated that I spend ~$2,000 a month at most. This means that I should have between $7,000 (3.5 x $2,000) and $13,000 (6.5 x $2,000) saved up in my savings account before I move on.
  • Save a flat amount.
    • This method has been popularized by (as far as I can tell) Andrew from Listen Money Matters. This method is targeted towards people who aren’t using their bank account for their emergency fund. He recommends using an alternative <automated investing service>, like Betterment. I will go into more detail about this in my article on financial planning. He recommends saving 1.5 months of expenses in your savings account, and then having $25,000 in your taxable investment account. This works great with accounts like Betterment because the money is growing at the same rate as a retirement account would. So even if you don’t end up using all of the money due to emergencies (and hopefully you won’t) you can retire on it.

I personally use the monthly model of saving for my emergency fund. This money is split between my bank account (1.5 months) and the remainder is building up in Betterment

Once you have your emergency fund build up, what’s next? To keep this post manageable I’m only going discuss emergency funds. Already have your emergency fund built up and are looking for the next steps? Check out my financial planning article!

On to the next phase of savings:
How to not go crazy

When it comes to saving money there is a spectrum of personality types. On one end are people who want to save every single penny possible and miss out experiences, opportunities, and interactions. On the other end are people who don’t care about save little more than token amounts of money.

Either type of person can end up being driven crazy by trying to save. The OCD savers may end up feeling like they aren’t experiencing life to the fullest, are missing out on friendships, and any number of other things. On the other side of the fence, the actionless savers may feel like they want to save but can’t bare to miss out on the experiences. They may also not feel as financially secure as they like. 

Regardless of what type of saver you are, I think this simple method will help keep you sane: Pick the top three things that you will not compromise on and rarely (or never) drastically cut back in those areas. Obviously, your budgets should still be within reason. Blowing half your income eating out at restaurants is insane, no matter how high up on your list it is. You will always have to make sacrifices, but these three areas should the the last. For example, I may need to cut my overall expenses by 20%, but only 2% will come from my budget for groceries.
For me, they are:
  1. Eating out at new restaurants
  2. Groceries
  3. Trips/Vacations

I usually end up being somewhat frugal with #2 and #3 anyway, but I try to keep my budget for eating out at restaurants as high as possible. Leave your top categories in the comments below!

Smart Places to Put Your Money
No, "underneath your mattress" is not one of them. I’ve gone over this in the article, but I wanted to separate it out for ease of reading.  I think the three accounts you should use are: checking, savings, and automated investing

Checking - The most liquid account you could possibly have. You can take money in with a debit card, and ideally have it linked to your credit cards to make paying a breeze. I want to have half a month worth of expenses in here at any time.

Savings - Some people question whether or not a savings account is necessary. I say that it has a place in my financial plan, but you may decide differently. Savings accounts offer slightly higher interest (i.e. 1% instead of .1%). The 1% is fairly insignificant and doesn’t outpace inflation, but it it secure. You never have to worry about your account decreasing in value. I plan to have 3 months of expenses in my savings account.

Automated Investing - This is a relatively new technology and hasn’t been incorporated into all savings plans as of yet. I think they can have a very important part in almost any portfolio. When using an account for this, it is essential to balance risk. Having all of your savings in an account that can lose value is not a smart idea. This is why I will be keeping 6 months of savings (or $12,000) in my Betterment account.  This way, I have 3.5 months to find out what to do before having to tap into this account.

Well that’s it! While the methods may be different they seem to agree on one thing: You should be mindful of your saving and spending. Also remember that it’s a marathon, not a sprint. Slow and steady wins the race. Stay tuned for my How to start saving more money today article.

What here appeals to you? What are the three areas of your life that you value? I was certainly at both ends of the spectrum in my life, and would be interested in hearing from you!

Monday, January 19, 2015

What's the Deal With Betterment?

I've been asked a few times "What exactly is Betterment?" In this article, I plan to go over what you can expect when you open a Betterment account. Betterment offers Traditional IRAs, Roth IRAs, Trust Funds, and taxable retirement accounts. I'll go over setting up a bank account, allocations, funding, and more!

Put simply, Betterment is a website where you can deposit money and have it invested for you on your behalf. You control how risky you want your investments to be, but other than that it's completely hands off. For a more in-depth discussion of the technologies behind Betterment and similar tools, see my article "All About Automated Investing"

The first thing you'll see when you open up Betterment is your account overview. Here, you can see how much you've invested, how much you've earned, fees, and the average return. This view is an average of your Betterment "Goals". Each goal can have a separate stock/bond allocation. For example, you can have one goal for an IRA, and another for an emergency fund.

As you can see, my account is underperforming right now. That's fine. My money has only been in the account for a little under a month, and the market returns 7% on average (more or less). Since I don't plan on using my Betterment money for years to come I'm not worried about this at all.

Which brings me to my next point! Betterment provides awesome graphs to visualize the magic of compounding interest. Below is a picture of one of my goals and the associated graph. Once you open an account you can adjust this feature as many times as you want. If you're curious you can setup an account in just a few minutes. If you use the link at the bottom of the article you'll get 30 days free!

This is the screen you see once you click on one of your goals. On the top you can adjust your target amount, auto deposit, one time deposits, timeline, and allocations. This is a very powerful page and will probably be the one you spend the most time on when you're in betterment. As the graph shows, if I contribute $25 a month for 20 years, I will have $15,166 in my account if the market does average. That's the power of compound interest.

To compare to a savings account with the same deposit rate that earns 1% a year will only have $6,770 at the end of 20 years. This is almost the same as if the market preformed poorly for 20 years. Betterment says that there is only a 2.5% chance of that performance. It is just as likely that your Betterment account will have $35,745 after 20 years. This seems more than worth it to me. To get the full experience you can open an account and play with the numbers for free. Betterment only charges fees if you deposit money.

If you like more detail or just want to see where your money's going, Betterment's got you covered.

On the "Current Holdings" page, Betterment breaks down where all of your money is invested. It even gives you the ticker symbol so you can lookup performance for an individual fund.

This page also shows you the percent your portfolio has "drifted" from the allocation you set. Betterment automatically rebalances your portfolio if you get above 5% drift. Drift happens when certain stocks outperform/underperform the rest of the portfolio. This throws off your predetermined allocation and can change returns.

One of the great things about Betterment is that they will take your deposits and automatically offset the drift, reducing the likelihood of you paying taxes. You'll never have to think about it again.

Lastly, we come to fees. All of this doesn't come for free, although it is heading in that direction. Don't let them scare you, these fees are much cheaper than what you would be charged elsewhere. With no cost per trade, Betterment removes the typical $7 or so transaction fee that almost every other institution charges for buying or selling. The added expense ratio is super low too, as funds average 0.50%. For those that don't know, an expense ratio is the percentage a fund manager or advisor will take, and there is almost no way around this.

Currently, Betterment charges a maintenance fee of 0.35% for accounts under $10,000, 0.25% for accounts under $100,000 and $0.15 for accounts over $100,000. More detail on their fees can be found on their pricing page. Accounts under $10,000 must deposit at least $100 per month or they will be charged $3 monthly, instead of 0.35%. This isn't all that much, and if you can't afford it this may not be your best option. You could pay down debtbuild an emergency fund, or invest in other brokerages. I will be writing articles on all of these topics in the near future.

So what are you waiting for? It takes minutes to setup and once you do, your money is working for you! You can open an account without penalty, click around see if you like it before funding. There's no commitment if you're just opening an account without depositing money, which is amazing. That's what I did.

Betterment is one of the first automated investors to hit the scene. They are also, in my opinion, the one with the best web interface. Their site has great graphs and descriptions of everything you'd have questions about. Plus if you sign up using my link, you get 30 days free! (If you decide to invest with them) Sign up for Betterment now!

If you already setup an account and are having trouble, see my article "All About Automated Investing" or contact me! I will be happy to help.

Did I miss anything? Do you still have questions? Let me know in the comments below!

I have not been paid by Betterment to write this article, I'm just a satisfied customer.

Sunday, January 18, 2015

All About Automated Investing (aka Now We Can All Have A Great Investment Portfolio Without Paying A Premium)

One hot topic that's been circling the internet over the last few months has been automated investment tools, also known as robo-advisors (among other things). In this article I will explain what these tools do, go over the pros and cons, and show you how to get started using the best tools in this space. See my links at the bottom of the article to setup accounts at top companies in this space with benefits like 30 days free and skipping to the front of the line.

The intention of these tools is to take all the pain out of investing yourself. Many people like going this route because they offer lower fees and less hassle when compared to traditional brokers and investment advisors.

Lower Fees

Universally, the online automated investment advisors offer surprisingly low expense ratios. They are hard to beat if you were to invest elsewhere or have a real person as your advisor. For the service they provide (see "less hassle" below) I feel they are well worth the small expense. This is a personal decision, however, and I urge you to decide for yourself.

There are also no transaction fees. At popular online brokerages (eTrade, Scottrade, Fidelity) this cost ranges from $7 to $14 every time you buy or sell: it doesn't matter if you're buying one share or twenty. If you invest only $100 you're already starting off at a 7% loss. At best. This is when automated investment companies really shine. If you can only afford to invest $100 or so a month automated investing becomes a fantastic option. The only thing I would recommend to someone saving for retirement over this is Vanguard. I will be writing up a post on them in the future.

Less Hassle

Since everything's online the majority of these companies have great websites. Betterment has arguably the best website of the bunch, here's a peak:

The websites have loads of features and information available at any time. The ability to check up on the account whenever you want is fantastic. But I'll warn you, it can get addicting.

Once you take literally seconds to setup automatic deposits, you will never have to set it again. I can't tell you how much less stressful my finances are now that I've automated it all.

Another great feature is automatic rebalancing and dividend reinvestment. Funds don't all grow at the same rate (surprise!) when this happens, the investment weights get skewed towards the funds preforming super well or super poorly. The companies will automatically shuffle your money around to make sure you stay as close as possible to your original allocation. Whenever you receive a dividend, it will be automatically put back into your account. There is almost nothing you have to do to maintain your account after the initial setup.

If you've decided to open an account with one of the automatic investment companies out there, congratulations! If you're still on the fence, this next section will hopefully help you decide.

Here are the steps to opening an account and setting it up so you never have to look at it again.
  1. Open an account with one of these companies (See bottom of the article for discounts)
  2. Fund your new account
  3. Choose your risk level
  4. Sit back and watch it grow

Step 1: Open An Account

When you open an account with one of these companies you will give them your basic information and link a bank account to their site. The account opening process takes 10-15 minutes at the most. Not a lot for something that can save you time worrying about investments and make you money in the background.

You can select from a variety of plans. The type of account options available at some (but not all) of the companies are: Traditional IRA, Roth IRA, Taxable Investment Account (this is the regular vehicle), and Trusts.

Step 2: Fund Your New Account

This allows you to deposit money to get your account funded so you can start earning interest! Once your account's initial setup is complete you will have to do is determine your ratio of stocks and bonds. This is the hardest part and it takes 10 or 15 minutes... so that should say something. Deposit as much as you are willing, and setup automated deposits to make contributions a breeze.

Step 3: Choose Your Risk Level

After you have setup and funded your account, you will have to take your last step: choosing your acceptable level of risk. This is mostly determined by ratio of stocks to bonds you hold in your account. Very simply, stocks are riskier while bonds are safer. For more information about the differences between the two, see my upcoming article "What's the Difference Between Stocks and Bonds?"

Very simply put, the advice for the average investor is that they should have anywhere between their age in bonds to their age minus 20 in bonds. For example, an 30 year old investor would have a portfolio that has between 30% bonds (their age) to 10% (30 - 20) bonds, with the remainder in stocks. The exact percentage is determined by numerous factors such as job security, risk tolerance, all available assets, and others.

For more information, see my upcoming article "What is the right stock and bond allocation for me?"

My retirement accounts hold around 90% stocks and 10% bonds, which is the allocation recommended again and again for people under 30. My emergency fund, on the other hand, is 61% stocks and 39% bonds. I want it to be less risky because I may need to use the cash. It all depends on what you're using the account for and how much risk you're willing to take on.

This is by no means final, and a huge part of personal finance is that your investment ratios are your choice. If you aren't comfortable taking on more risk (stocks), you can always hold more bonds. One of the wonderful things about accounts like Betterment is that you can change your allocation whenever you want. It is better to get started with a conservative profile than to not start at all. Be careful though: When you change your allocations the company sells your shares and buys new ones to meet the new allocation, which can incur taxes.

Step 4: Sit Back and Watch it Grow

At this point, you have already:
  • Opened an account with one of the online automated investment companies
  • Funded your account
  • Potentially setup automatic deposits
  • Set your stock/bond allocations
You might be asking yourself, "What do I have left to do?" Well, nothing! That's the best part about this technology. After you setup everything you can sit back, relax, and let your money work for you. You can relax knowing that money is automatically invested in a well diversified portfolio of stocks and bonds. They will also automatically reinvest your dividends and automatically rebalance your funds if they move too far away from your predetermined allocation.

If you want, you can use the company's smartphone app or website to keep track of your investments. But don't do it! It's addicting, and small drops in the market will drive you crazy. Remember to stay the course. Leave the money you put in your account in there unless you really need it. For more info, see my upcoming article "Why you shouldn't be afraid of the stock market"

Another one of the great benefits of these automated investing tools is the low fees. As an example, Betterment (one of the more established companies in this space) has expense ratios ranging from .35% to .15%. Most advisors charge at least twice that. It should be noted that the expense ratios are on top of the underlying fund's investment ratios. WiseBanyan, a relatively new company on the scene, has no additional fees! The website isn't as slick as Betterment's, but the lack of fees is a huge benefit that shouldn't be overlooked.

More on the impact of expense ratios can be found in my upcoming article on expense ratios.

So what are you waiting for? It takes minutes to setup and once you do, your money is working for you! You can open accounts with each company without penalty, click around and see which you like best. There's no commitment if you're just opening an account without funding, which is amazing. That's what I did.

Betterment is one of the first automated investors to hit the scene. They are also, in my opinion, the one with the best web interface. Their site has great graphs and descriptions of everything you'd have questions about. Plus if you sign up using my link, you get 30 days free! (If you decide to invest with them) Sign up for Betterment now!

For a more detail about what you can expect when you open an account with Betterment, see my article "What's the Deal With Betterment?"

As I mentioned earlier, WiseBanyan is one of the newer automated investment services out there. Because of this their website isn't up to the same level as Betterment's. But don't let the the user interface fool you! As I mentioned above, WiseBanyan is the only service I know that charges no additional fees to manage your money. For this reason, and this reason alone, I think WiseBanyan could rocket up to the top of this category.

WiseBanyan registrations are usually on a "first come, first served" basis. Due to the overwhelming interest in their relatively new site, there are currently thousands of people waiting in line for an account. But, if you use my link you can skip the line!

Sign up for an account with WiseBanyan today, skip the line, and pay no fee! Sign up here

I will be doing an in-depth review of these two sites over the course of the coming weeks!

Did I miss anything? Is there something you'd like me to go into more detail on? Let me know in the comments below!

I am not being paid by either Betterment or WiseBanyan to write this review. I'm just a satisfied customer.

Thursday, January 15, 2015

Welcome to Cash Turtle!

Hello, and welcome to Cash Turtle!
"Slow and steady wins the race"

Cash Turtle is a blog about saving money, investing smartly, and getting rich slowly. The name Cash Turtle pairs the monetary aspect of this blog with the idea that if you want to get rich, the most reliable way is to do it slowly. I'm sure we all remember the old story of the Tortoise and the Hare, and I feel that story applies to the world of personal finance very well.

I began my journey being financially responsible by listening to Dave Ramsey's book "Total Money Makeover". This snowballed into listening to podcasts and reading finance articles until the wee articles of the morning. I have a page of helpful resources where you can find links to everything that I think will help you on your path to financial independence.

What you'll find here:
  • Smart investing tactics
  • Ways to, hopefully, retire early
  • Long term investments
  • Ways to lower the amount of taxes you pay
  • Various investment vehicles
Thank you for visiting, and be sure to leave me any feedback, or topics you would like to discuss!