In Part One of “The Internet and Your Money,” I discussed how marketers turn the Internet into an overspending trap, but there is another way that the Internet can cost you money and make it difficult to save: analysis paralysis. Sometimes there are just so many options, it is difficult to choose and move forward because we are afraid we will make the wrong choice.
I remember back when I went to open my very first IRA. I had always been mostly self-employed and never had the kind of job that offered a 401(k), so I made it to my thirties without any retirement savings at all. When I started to research how to do it online, I was totally overwhelmed. There were just so many different choices! Charles Schwab, Merrill Lynch, AmeriTrade — I didn’t know where to open the account or what kind of investments to select once I did. For awhile, I fell into a state of analysis paralysis, I would google some choices now and then, but then decide to decide later, and “open IRA account” sat on my to-do list for nearly a year before I finally did it.
If you find yourself in a similar situation, it is time for the “80 percent solution.” Doing something, even if it’s only 80 percent right, is better than doing nothing just because you think you won’t get it 100 percent right. Just get started and course correct along the way! I didn’t know which IRA option was the very best one, but not picking was actually costing me money — both in lost tax savings and in growth and dividends — so finally I did something easy. I opened an account at a local Edward Jones branch and bought some actively managed AAA-rated funds for my retirement account, and I also opened a brokerage account to buy a handful of individual stocks that I liked. Were these the absolute best decisions for my income level and life situation at the time? No, not exactly — but at least I got started. If I had waited another couple of years, my inaction would have cost me far more than the high fees on my funds did. And when I learned more, I moved my money. But at least I had some money saved up to move!
My advice for anyone looking to start their long-term savings is to do something easy and low cost that feels comfortable to you. Check out robo-advisors, many of which have awesome apps to go along with them. Robo-advisors are online wealth management services that provide automated, algorithm-based portfolio management advice without using human financial planners. Here is a review of the top 10 robo-advisors. Included in this list are two of my favorites: Vanguard, which is where I moved my own retirement accounts years ago and have left them ever since, and Betterment, where I invest as well.
Vanguard pioneered the passively managed index fund, which everyone from Warren Buffett and Tony Robbins to Suze Orman and Ramit Sethi now tout as the best possible option for the average person over time. I also like that Vanguard is run as a nonprofit, which means that there are no outside fund owners to pay, so the fees that are charged go to cover costs instead. There are no incentives to sell clients certain expensive funds to earn a kickback from a third party.
Betterment is super cool and has a great iPhone app. You can set up recurring deposits for as little as $10 a week, or month. One of my favorite things about Betterment, and another similar robo-advisor called Acorns, is that there is no minimum to open an account and get started. When I first signed up several years ago, for awhile I went in daily just to check out the allocation dial and see what new activity had occurred. If you use Acorns, the app rounds up the change on purchases you make and invests that change bit by bit, like acorns growing into a mighty oak tree. Personally, I love a good analogy, and I love seeing little seeds of savings grow!
Just in case you haven’t heard, DailyWorth founder Amanda Steinberg has been hard at work creating a new wealth management company, WorthFM. WorthFM is going to offer similar investing services to other robo-advisors, but it will be a platform built by women with women’s particular investing issues, barriers, and goals in mind. I have every intention of being an early adopter for this new enterprise.
Whether you find that one of these methods works well for your situation or another suits you best, the important thing is to choose one and get going. The longer it takes you to start saving, the more money it costs you in the long run. Your first decision doesn’t have to be a permanent one; your savings solution may grow and change as your living situation does. So stop waiting and start building your wealth this year!
Jennifer Turrell is a member of the DailyWorth Connect program. Read more about the program here.