What is Betterment?
Betterment is an online money management tool with the goal of helping you make the most of your money. The tool offers a range of services that you can access based on your financial goals. It is essentially your own personal financial advisor. It manages buying and selling your portfolio of funds in the stock market based on the specific criteria you give it.
Betterment is a great tool for anyone, but especially for beginners who want to put their money to work but don’t know where to start. To get started with Betterment, you just need to select your financial goals, risk level, and the time span and amount of money you would like to invest.
As of the Spring of 2021, Betterment offers four major goal or account areas: spending, saving, investing and retirement.
In this review, I’ll cover the area of saving and investing as those are the features we use for our real estate business.
How to Use Betterment
Betterment was designed around the idea of goal-based saving. We primarily use Betterment in our real estate business to help save for down payments for our rental properties. We have bought at least one house a year since 2016 using this method. It’s an easy set-it and forget-it process that has helped us save thousands of dollars a year.
Saving Account – Short Term Goals
The saving feature in Betterment is great for short term cash goals of less than one year. The savings feature is pretty nice because it helps you think through upcoming expenses and begin to plan for them.
For example, let’s say you want to replace the flooring in a rental property. You know that the cost is going to be approximately $2,000. Our first step is to create a new account and name it. Let’s name it “305 Main Street – Flooring Project”. Once the account is created, input the goal of $2,000 and select the date you would like to reach this goal. You can even customize the account by adding a picture. I would use a picture of the rental property or maybe of the flooring I plan to use.
We like the savings feature because it creates a separate account for your short-term spending goals and you can earn a bit of interest. It makes it much easier to save when money is physically transferred and set aside for these larger future purchases. Once we create a goal we set up an auto-deposit so that money transfers automatically each month from our checking account.
Investing Account – Long Term Goals
Betterment’s investment feature is similar to the savings feature except it is for longer-term goals. Longer term goals are defined as money you plan to spend in a year or more. Another difference is that with the investment feature your money is invested. I know, shocker. Betterment will create you an investment portfolio as risky or conservative as you prefer based on your goals and timeline in the market.
Again, we like this feature because it gives you the opportunity to create a separate account for your spending goals. It has all of the same features as the savings goal like defining a fund goal, name, timeline and picture.
We have been using an investment account for years to help us save for our next down payment on rental properties. Each month we auto-deposit $1,000 into the account. So when the right property comes along we are ready to buy. In addition to saving this money, we have also benefitted from it earning dividends from being invested.
Other Betterment Accounts
Just as a side note, we also use Betterment’s retirement accounts. We have set our goal pretty aggressively so that we can retire early and have plenty of savings. We will save that post for another day though. All in all, we have found Betterment to be a very easy tool that helps us put our money to work and save wisely.
If you are ready to start investing with Betterment, you can follow our step-by-step guide for creating your own Betterment account here.
Until next time,
