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If you’re looking for a way to plan for your future, set up a better future for your family, and arrive someday at financial confidence, investing is the way to go. Unfortunately, for the beginner, investing can be overwhelming. There are so many different funds. There are so many different loopholes. There are so many different options. Finhabits is one way a beginner investor (or the rest of us) can easily get started investing with a small recurring amount, and ensure their money will grow.
It’s best to get started somewhere, and Finhabits presents a place where investing for beginners can be a teaching and learning experience as your money is multiplying and growing. They act as a fiduciary, a middle man, who gains an understanding of your goals, then takes their expertise to help you diversify your portfolio, and get returns on your money.
I always say, “Some people live life looking for a jackpot, and some people live their lives building one”. The people that live their lives building a jackpot usually end up with one, whereas the people who spend their time looking for one, usually never find it. The chances of winning the lottery, becoming wealthy without good financial habits, or striking a huge work contract are fairly low for most people, but the chances of an average person becoming a millionaire doesn’t have to be low if you take on an intentional approach to your savings and investing. Saving and investing as a long-term strategy can enable you to grow money and use the power of compound interest to take the seed you’ve sown and grow it into a stash that can achieve your financial goals.
If you’ve been around people in the 50s or 60s for anytime, you will hear buzz words like “retirement”. Somewhere around the 50s and 60s, many people are starting to see that physically working to acquire their income stream may not be the best long term strategy. The transition usually takes place between 50 and 60 because at this age, they can see their physical ability declining. Companies like Finhabits pose as potential solutions for people panicking about retirement, people who want to differentiate their habits from their upbringing, or overall hands-off investing for beginners and the rest of us. In this post, I plan to show you the over-the-shoulder view of Finhabits for a new investor.
My Background with Investing
Three years ago, I made a BAD financial decision that I’m still recovering from. I chose to change careers (from the military into full-time entrepreneurship) without a sufficient savings account to carry me thru the income variations. As a result, my family experienced a lot of uncertainty. Now, that we are glimpsing at stability, I read alot about personal finance so I can avoid ever experiencing the income turbulence we experienced before. I share my findings here on my blog because I can see that my family is a part of the majority of people who experience the same life-altering events.
In my January goals post, I told you I wanted to save more money, make more money, get out of debt, and many more things you can see here. Then in my post on 5 Things you should invest in while living paycheck to paycheck, I told you I began setting money aside while I was living paycheck to paycheck, so I could break myself out of the cycle. I suggest you begin doing the same along with investing in the 4 other things I mention here. It’s so stressful to live paycheck to paycheck because you always feel behind, and the uncertainty of not knowing whether your next paycheck will come can be a lot of pressure.
As a result of my January goals, I’ve tried a new side hustle, I’ve been blogging my journey and my “make more money” experiments, and I’ve been researching ways to grow the money I receive. I have a young family: myself, my husband, a one-year old, and a 10-year old. Personally, I have 3 large goals for my family and myself.
- I want to pay for my kids college.
- I want to reach financial confidence where certain about my money-making abilities and I know if I lose everything, I can gain it back quickly
- I want to place my money in places where it can grow, so its not always me working for my money, but my money works for me.
Accordingly, I study different investment firms, the pros and cons, and strategize before I get my money, so when I get it, I can disseminate it in a wise way. Finhabits is a good place for investing for beginners like myself. Beginner investors need to have sound financial advice and to invest easily, and Finhabits seems to offer that.
Finhabits was created to help people who don’t have a lot of room to invest to begin investing. It is investing for beginners!
The founder, Carlos Garcia, grew up with a Latino family. He realized that the racial wealth gap is huge between white Americans and minorities.
According to Forbes, the median household wealth for white Americans was $116,800 whereas the median household wealth (net worth) for African American and Latino families was $1700 in 2013. Garcia decided to do his best to close the racial wealth gap by making investing (a very complicated subject to many minorities) simple, automated, and also offer advice to encourage minorities to increase their knowledge on how to have good financial habits.
My First Impression of Finhabits
As a minority, I appreciate those who attempt to make financial knowledge accessible to us. Financial literacy and closing the racial wealth gap is a pressing cause I stand for, so Finhabits was an intriguing concept that doubled to me as a commendable cause. It’s a win-win!
I quickly decided to check out Finhabits and see how I like it. When I went to the Finhabits website, this is what I saw:
Pretty straightforward. Sign-up begins by the click of a button.
My Reservations About Finhabits
My biggest concerns were:
- How much are the fees?
- Aside from standing for a great cause, what separates Finhabits from the average bank?
- What separates Finhabits from investment firms like Vanguard (that I love)?
- How easily can I access my money if I need to?
So, I’ll start by showing you my experience as I scrolled around for my answers.
How much are the fees?
Finhabits charges $1/month for accounts with less than $2,500. Then, they charge 0.50% for accounts greater than $2,500. The $1.00, while it sounds low, $1.00 would be more than 0.50% until the balance exceeds 0.50% when you do the math. Even with the fees, Finhabits could still be a good option for growing the savings practice and investing for beginners.
Finhabits vs. Vanguard
Finhabits takes your financial goals, whether savings an Emergency fund, savings for a wedding, saving for a new car, or whatever your goal may be, and they diversify your portfolio to help you grow your money. Finhabits is not the holding company. They are simply the advocate for you and your financial goals.
Since Finhabits is investing for beginners, it’s good they have fiduciaries who can advise. Rather than making the choices of which funds you should place your money, Finhabits will use their expertise in the field to help you make the tough choices and get returns on your investment.
There is no need to compare Finhabits with Vanguard because they use Vanguard and Blackrock funds to grow your money. Essentially, Vanguard and Finhabits operate as partners. You get the growth potential of Vanguard funds while having the advice and expertise of a fiduciary who chooses appropriate investment funds for you.
With Vanguard, you do your own research, you can ask questions, but ultimately, you make your own choices about how your money is distributed, in which fund, when to transfer, and so on. Vanguard is for the DIY investor.
With Finhabits, the finance experts align their decisions to transfer, choose funds, and so on to meet your financial goals. Vanguard caters to the DIY investor who likes to have control and make their choices for themselves, whereas, Finhabits is quality investing for beginners who may be overwhelmed by the plethora of choices in the investment world, and would benefit from the partnership of finance experts as they learn investing for themselves.
- Easy to automate
- No minimum balance
- No transfer fees
- Automatic rebalancing
- Your portfolio is managed for you
- Your goals are kept in mind and targeted by a professional
- You have access to a fiduciary financial advisor
- You can open an IRA or a Roth IRA, and experience the tax-deferred growth benefits
- Rather than not saving at all, you can begin setting money aside for financial goals
- Easy set up
- Easy to deposit money
- The fees can be high in comparison to other investment firms if your balance is low
- You do not control the fund allocation
- May be too hands-off for the DIY investor
Investing the Easy Way
For as low as $5/week, Finhabits enables you to begin setting money aside for a cause like paying for your kids’ college, financial independence, retirement, or others. I can spend $5.00 on a sandwich, so setting aside $5.00/week for a financial goal is very reasonable.
Since Finhabits strongly targets minorities, their target audience, is typically not accustom to saving as a habit, and they may be living paycheck to paycheck. Finhabits gives them the ability to invest begin investing small amounts, and create new financial habits. To sign up, you simply go here, then select your goal:
For IRA’s or Roth IRA’s (Tax-Deferred Retirement Accounts)
If you choose retirement, they will ask you questions about your age and your expected risk tolerance. Their future value calculator is cool also because it shows you how much you should invest to get a certain gain.
After populating your age, risk tolerance, and weekly savings amount, you will have to enter your email and password to create your account.
For Other Investing
For other investing such as saving for a new car, saving for a new house, or otherwise, you would choose “Invest my money” as a goal.
I would not recommend Finhabits as an option for children’s school funds. 529s are the best option for college savings (that I’ve seen). With a 529, you can grow your money tax-deferred. Finhabits does not seem to offer 529s, but they are a good option for other savings goals. When you go to “invest my money”, this is what you would see:
You choose how much money you want to save and how much you can save weekly, then they calculate for you how long it will take you to achieve your goal at the rate you forecasted. They also tell you how much you can expect to gain from compound interest (in the turquoise).
I would not recommend Finhabits for the investor who likes to trade between various funds regularly; however, if you’re looking for an alternative to the low interest rate bank accounts, Finhabits is a great alternative to normal investing for beginners. If you are a minority or an ally, and you want to close the racial wealth gap for your family, Finhabits doubles as a great cause. If you are interested in saving your 3-6 month emergency fund, saving for a new car, or even saving for retirement, setting up the $5 dollar per week automation could be a very useful step to investing for beginners. Finhabits enables you to start with a small amount and build up to bigger amounts. I recommend stopping by the Finhabits website now and getting started investing today (even if it’s a small amount at a time).