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smart spendingI can remember it like it was yesterday. I had just graduated college and was in love. She was a beauty. She weighed in at around 2,700 pounds and was just plain sexy. No, I’m not talking about a girl, I am talking about a car – an Acura RSX Type S.

Acura had just redesigned the RSX and I was in love with it. I drove 30 minutes to the nearest Acura dealer and walked into the showroom to see her in black. I sat in the car and fell in love with how the seats wrapped around me and how it smelled. I was going to buy this car.

On my drive home (by the way, I was driving a 1986 Honda Accord at the time which was pushing 200,000 miles) I knew I had to call my insurance agent first thing Monday morning to get a quote. Monday could not get here quick enough!

First thing Monday morning I called my insurance agent and gave the details. She asked a few hours to run everything through and then she would call me back. When she finally called me back, I was sitting on the edge of my seat. If I drank coffee, this is the part of the story where I would have spit it out all over my computer monitor. The cost to insure me:

$1,800 per year

Now, to some this might not seem like a lot. To me, it was huge. Remember, I’m driving a 1986 Accord and paying around $700 per year. Paying $1,800 for insurance comes down to $150 per month. There is no way I am paying that much in insurance coverage for a car!

Alas, my dream of owning her died that day. While it was a sad day, it was one of the smart spending decisions I have made in my life. Maybe it’s because I started out paying a low amount for insurance coverage, but to this day, I refuse to pay anything more than $100 per month on insurance coverage for a car.

Making Smart Spending Decisions

In life, you have to decide what something is worth to you. It’s all about choices. Had I chosen to buy that car and pay that much in insurance, my 401k wouldn’t be where it is today because I wouldn’t have been able to save as month every month.

On the flip side, had I not gotten into credit card debt after college, I would be much further ahead in the financial game of life than I am now. In both cases, I controlled what happened. I choose to not buy the Acura and save my money. I chose to get into credit card debt.

Everything that happens to you financially, for the most part, is of your own choosing. In order to be better with your finances then, you have to make smart spending decisions.

You can’t blow all of your money from each paycheck and then complain that you have no savings. You can’t be a miser and save every single penny and then complain that you never go out or have any fun. You choose to both of those things.

Find Your Balance

Oftentimes, I see people on one end of the spectrum or the other. There is a balance to personal finances. You can work on getting out of debt and still spend money and have fun. In fact, I urge you to go out and have fun. I know from personal experience that completely depriving yourself is only going to lead frustration and even possibly more debt.

Likewise, know that you can save money and still enjoy life. It’s not an all or nothing thing here. What I hope you get from reading my blog and others on the topic of personal finance are ideas. See, what works for me, doesn’t always work for someone else. I hope to provide an idea that you never thought of and maybe it’s the thing you needed to take control of your finances.

For example, I love Power Wallet. At the same time, I know it’s not for everyone, so I offer up some free excel spreadsheets as well. Same applies to investing. I love Betterment. But I know it isn’t for everyone, so I offer model portfolios for those that invest with Vanguard or Schwab.

Final Thoughts

Find what works for you and you’ll find that personal finance becomes a very enjoyable experience. I dare even say that you might look forward to it. OK, I’ll just stick with an enjoyable experience.


Betterment Review

by Jon Dulin · 12 comments

betterment reviewI talk all of the time about making investing easier, not harder for yourself. Who wants to spend their weekends analyzing stocks, trying to find the next home run when you could be playing with your kids or enjoying your favorite hobby? The sad thing is, many investors do make investing harder for themselves and they never reap the rewards of that hard work. What if I told you that you could reap the rewards without putting in the hard work? You’d probably wonder what I was smoking!

Well, I’m not smoking anything. With Betterment, you can earn the returns you want without putting in all of that time researching investments. Remember, when it comes to investing, risk and rewards are related, time invested researching investments and returns are not.

My Betterment Review

What Is Betterment?

Betterment is the most trusted online investment manager and has been around since 2010. Their investment approach is simple: they manage your investments so you don’t have to. And they mean it. They manage everything for you (I’ll talk more about this later).

They do this so that you reach you goals by focusing on the long-term (what successful investors do) and ignore the short-term volatility (what most investors focus on). With Betterment, you are always diversified, balancing risk and reward. And investors are starting to realize this. In 2013 they tripled its assets under management (AUM).

How Betterment Works

To start investing with Betterment, you simply choose your investing goal, risk tolerance and timeline. Betterment makes all of this easy. You can choose pre-selected goals like saving for a house, college or retirement, or you can just invest without picking a specific goal.

Based on what you select, Betterment offers you a pre-selected asset allocation. For most, this allocation will work fine. But, you have the power to tweak the allocation. Do you want 90% stocks and 10% bonds or more of mix of both? You aren’t left to slaughter here either. They will guide you along the way, letting you know if you are on track to meet your goal or not.

From there, you set up an automatic transfer from your bank account to Betterment and Betterment will invest your money and periodically rebalance your portfolio for you.

Betterment invests your money in one of their index portfolios consisting of ETF’s (see below). Depending on your risk tolerance and your goals, your portfolio will be created with a mix of the stock basket and the bond basket.

betterment investments

These investments are the same investments that anyone could pick from, regardless if they invest with Betterment or not. Betterment does not make money by putting your money into these investments.

Costs and Fees

The fees that Betterment charges are in a tiered system, as seen below:

$0 – $10,000: Management Fee of 0.35%
$10,001 – $100,000: Management Fee of 0.25%
$100,001 or more – Management Fee of 0.15%

Betterment fees

When you are first starting out, Betterment takes a fee of 0.35% to manage your money and that decreases as your account size increases. There are no other fees that they charge. (Note that if you forgo the $100 monthly deposit and have less than $10,000 invested, you will be charged $3 monthly. While this sounds harsh, the goal is to get you to save and invest for your future. By simply saving $100 each month, you are more likely to reach your long-term goals).

Understand that you still pay the management fees of the underlying ETF’s that you invest in. This hold true if you invest in ETFs with any broker. In other words, the ETF fee is one you cannot avoid.

Now, we all know that I’m not a fan of fees. But in the case of Betterment, the fee isn’t an issue. Here is why. The average investor earns 2% annually on their investments. That’s it. A measly 2%. On average, Betterment investors earn 1.25% MORE than the average investor, and this takes into account that miniscule management fee they charge you.

The reason why this is, is simple: the average, non-Betterment investor allows emotion to enter the picture and cloud their judgment. When the market rises they buy and when the market drops, they sell. This is exact opposite of what should be done.

With Betterment, you are buying regardless if the market is up or down. When it is up, you buy fewer shares with your automatic investment. When the market drops, you buy more shares with your automatic investment. You are taking advantage of the stock market when stocks are on sale: you buy more shares at a lower cost and fewer shares at a higher cost.

But that’s not all. With Betterment, you stay invested for the long-term. Your emotions don’t sway you into doing the wrong thing. For me, I honestly forget that I have a Betterment account sometimes because they do everything for me (more on this below). I get an email telling me that my automatic deposit was just invested or that I earned dividends and they are being reinvested. In other words, they don’t allow for my emotions to derail my goals by doing everything for me.

Pro’s And Con’s To Betterment

As with anything in life, there are both pro’s and con’s. Below are what I feel are the pro’s and con’s to Betterment.


  • No Researching Investments: They have the ETFs they use for investing. All I have to do is pick a goal and set up a monthly transfer and I am done.
  • Solid Principles: Betterment is built on the idea of index investing. It’s been proven time and time again that you can’t consistently beat the market. Betterment knows this and doesn’t engage in it. They also understand that fees and taxes are what really determine performance.
  • Fees: They have to charge a fee for what they offer you, but that fee is more than reasonable.
  • Automatic Rebalancing: Over time, depending on how the stock market performs, your asset allocation can get out of whack. Your 60% stock/40% bond portfolio can turn into a 70% stock/30% bonds portfolio. This is a bad thing. If you become too heavily weighted in stocks, you will be taking on more risk than you would like. On the other side, if your bond holdings become too great, you risk not earning the return you need, thus never reaching your goals. With Betterment, they will keep your portfolio allocation right where it needs to be.
  • Tax Benefits: Tied to the automatic rebalancing above, Betterment makes sure they rebalance in the most tax efficient way possible. This means come tax time, the chance of you owing a large amount of taxes is small.
  • Free Advice: Betterment has a terrific blog and they offer basic investing advice to their investors free of charge.
  • Fractional Investing: With many brokers, you can only invest in ETFs in whole shares. This means that if you have $100 to invest and the share price is $75, you can buy 1 share. Your remaining $25 will sit in cash, earning you virtually nothing. With Betterment, you can invest in fractional shares, meaning that all of your money is working for you, all of the time.
  • Website Layout: I haven’t really talked about the website, but it is great. You know when you go to some websites and you have to look around for 5-10 minutes trying to figure out where things are or how to do things? Betterment isn’t like that at all. Its layout is clean and easy to navigate. In fact, I would argue it’s probably one of the easiest sites to navigate.
  • Always Adapting: Even though Betterment doesn’t believe in active investing, they are always making enhancements and improvements to the site, service and portfolios. These enhancements result in better efficiency for both Betterment and the user as well as stronger portfolios.
  • Great For Beginners: I know that for many newcomers to investing, investing can be overwhelming. With its simple approach, a beginner will feel at ease from the start and that will translate into long-term investing success.
  • Tools: The site has a lot of tools that you can play around with to help you see where you will be in the future and what you can do to help make your goal more of a reality. This includes playing with the amount you save each month, adding a one time deposit like a tax refund, changing your time horizon or your investment allocation.

bettermnet potential


  • Investment Options: There are only a few ETFs upon which your portfolio is built upon. For many, this lack of investment options is a turn-off, which is why I list it as a con. But in reality, this is secretly a pro of the service. See, you don’t need 20,000 investments to build a diversified portfolio. In fact, I would bet that if you looked at all of the holdings in your portfolio right now, you would see a lot of overlap. What I mean by this is that if you own 2 large cap mutual funds or ETFs, chances are, you are holding virtually the same companies, just a different percentage of them in each investment. You don’t need 20,000 investments to be diversified. As I have shown in my model portfolio post, you can get by on just 3 holdings. Don’t fall for the “more is better” trick with investing.
  • Cost of Service: Betterment costs money to use. You can easily learn the basics of investing (I preach them throughout my blog) and do it all yourself. But the fee they charge is small in comparison to what most advisors charge.

Why I Recommend Betterment

To me, it all comes down to what I am getting for my money. I’ve learned that you can’t just look at what something costs you, you have to look at the benefit it provides. For example, you might need surgery on your eye to ensure you won’t go blind. The surgery costs $10,000. Do you just look at the price and scoff, thinking it’s a waste of money? No, you look at the benefit – not going blind – and decide to pay.

The same idea holds true with Betterment. They charge a fee to invest. OK, that stinks. I’ll be the first to admit it. But, look at what you get:

  • Free Trades
  • Free Reinvesting of Dividends
  • Free Rebalancing

These typically cost money with other brokers. But this isn’t that only benefit with Betterment. It’s the fact that everything is automated for you. You never have to think about making it a point to invest for the future. You set up the transfer once and you forget about it.

Automating like this works. If you automate saving money from each paycheck already, you know what I am talking about. But if you don’t, you still experience automation. Do you have any service that automatically renews? That is automation right there. I bet you never think about that. Have your credit card on file with iTunes? That is automation right there. All you have to do is tap the screen and boom, you have a song.

This is why even though Betterment charges a fee, the fee is more than worth it in the long-run. You will stay invested and will be less likely to react based on emotions. Again, this is what defeats the overwhelming majority of investors out there. They allow their emotions to interfere.


If you want to reach your financial goals, I urge you to take a look at Betterment. In fact, it won’t even cost you anything to try. If you open an account with less than $5,000 they will give you 1 month free – no management fee. If you open your account with more, you will go longer without paying a management fee.

$1 – $4,999: Receive 1 month free
$5,000 – $24,999: Receive 3 months free
$25,000 – $99,999: Receive 4 months free
$100,000 and above: Receive 6 months free

Therefore, there is no reason not to try it out. Betterment saves you time by automating the entire process and it saves you money in the long-run by keeping you invested and your investments optimized. Give it a try for free for 30 days and relish in the fact that you are making one of the smartest financial moves of your life.

If you want to open a Betterment account and take the first step towards reaching your goals, click here or the picture below.

Full Disclosure: I am not getting paid for this review. I have had a Betterment account for over a year and absolutely love it. If you do click on the link or the picture below and open an account, I will get a commission. (Thank you in advance to those that go this route.) This post was originally published in 2013 but was updated to reflect updated features of Betterment.