Getting Educated is Just the Start

We’ve all heard that “personal finance isn’t taught in school.” By and large, it’s not. (Although that’s starting to change.) The truth is, however, that if you’re interested in learning key personal finance concepts, there’s no shortage of books and articles from a variety of reputable sources.

But if it’s so easy to get good personal finance content, why do so many people lack the confidence to make good financial decisions? And why do so many make financial mistakes that experts routinely describe how to avoid?

Certainly, there are a litany of reasons. One’s own psychology, to consuming misinformation online, to never getting any information in the first place, can all contribute.

But even for the diligent individual who reads the articles and personal finance books, a lack of timely follow through is not uncommon.

My Mistakes

I know this because I made avoidable financial mistakes when I was younger. And even as I became more financially educated, I sometimes delayed taking important financial steps in a timely fashion.

For example, one year, I got spooked by some macro economic news. I sold a bunch of investments without any real concept of how hard it is to “time the market.” Additionally, as a 20-something, I had decades to ride out market ups and downs and shouldn’t have been so easily spooked. As it turns out, my investments – had I not sold them – would have gone up substantially. But by the time I bought back into the market, everything was more expensive.

In another instance, early in my career I failed to optimize my 401k contribution percentage. In this case, I actually knew what to do. But I procrastinated and stayed underinvested. My money sat in my checking account at a time when interest rates were practically nothing.

In both examples, I almost certainly lost thousands of dollars. 

The Trouble with Personal Finance Books

Here’s the thing: These days, I’m kind of a personal finance geek. I actually love personal finance books and have read more than I care to admit. But if personal finance books were supposed to prevent my younger self from making the mistakes mentioned above, they failed me.

In the first instance, as a 20-something I wasn’t interested in reading a 200+ page books on personal finance (although I will admit to listening to one) and I didn’t learn key investment lessons. In the second instance, I was more educated, but I still lacked a system of accountability to ensure I followed through. 

So, if money books didn’t help, what could have? 

A Money Action Plan

A money action plan is a basic roadmap for life’s financial moments. It could be specific and short term (e.g. what to do with your money when you get a new job), or broad and long-term (e.g. how to move from financial foundations to financial abundance). Whatever the case, a good money action plan should have the following features:

• Digestible in Bite-sized Chunks: Having easily accessible content in a series of short articles is a lot easier to get started with than a hefty personal finance book. 
• Broad but Customizable: Everyone should have a broad understanding of key personal finance concepts and action steps. But not every topic applies to every person. A money action plan should allow for some topics to be added or removed.
• Repeatable Topics: Some financial actions, like building an emergency fund for example, happen over a series of milestones. A money action plan should break those into separate tasks.
• Add Your Personal Notes: When you add your unique notes directly alongside an article, it reminds you of how the content applies to you and makes follow-through easier.
• Ability to Track Progress: Who doesn’t like to see a progress bar getting closer to 100%? Whether you’re working on a short or long-term money action plan, seeing a progress bar can remind you of how far you’ve come and motivate you to continue.

Here’s some not-so-shocking news: The MoneySwell Financial Priorities action plan does all of these things. In fact, we built it to solve our money planning pain points. If you want to try it out, click here to get started!

And don’t worry, for those of you who are still interested in finding some good personal finance books, we’ll have a list of our favorites soon!

Micro-investing is a relatively common way to start saving and investing. In this article, we’ll detail what micro-investing is, its benefits, and its drawbacks. 

What is Micro-investing?</span>

Have you ever paid for a cup of coffee and tossed your change in the tip jar? Micro-investing is kind of like tipping your spare change. Except with micro-investing, you’re tipping yourself, and instead of just saving the tips, you’re investing them.

Micro-investing typically* works by rounding up each debit card transaction to the nearest dollar and using those funds to purchase fractional shares of different investment products, often ETFs. The idea is that it’s an easy and relatively pretty painless way to make consistent, small investments. Over time, the hope is that the value of your shares grows.

* Some micro-investing services don’t use the rounding up strategy. Instead they give you rewards, say “1% of purchases”, and invest those rewards on your behalf. In this article, we focus on the rounding up strategy. But the key takeaways will be the same.

How do you get started with micro-investing?

You can start micro-investing by opening an account with an institution that does it. Two popular micro-investing platforms are Stash and Acorns but there are others. Note that you’ll likely pay a monthly fee and $3 to $9 is common.

From there, it’s business as usual from a spending standpoint. You will receive a debit card linked to your checking account that you can use like any other card.

However, when you spend, a portion of your spending is either rounded up to the nearest dollar and invested, or you receive a “stock reward.”

Here are two examples:

• Round Up: Using your debit card, you buy a coffee and muffin for $6.45. This transaction rounds up to $7.00, and the full amount is withdrawn from your checking account. But 55 cents of this transaction is invested.
  

• Stock Rewards: Using your debit card, you buy a coffee and a muffin for $6.45. 1% of that transaction, about 6 cents in this case, is given to you as a reward in the form of a stock purchase. 

What are the benefits of micro-investing?

There are two major benefits of micro-investing.

First, micro-investing is an easy way to invest without spending a lot of money. In years past, initial deposits for mutual funds were commonly $1,000 or even more. More recently, it’s become quite easy to find a variety of funds with low fees and no minimum investment requirement. From this standpoint, whether you’re explicitly micro-investing or purchasing fund shares on your own, a lack of significant cash on hand shouldn’t be a barrier.

The second major benefit of micro-investing is that it can offer an easy way to invest without a lot of investing knowledge. Even for those who understand the value of broad market index funds compared with individual stocks, the truth is you still need to make the selection of which fund to invest in. For new investors this can be intimidating. 

Most mico-investing platforms solve this problem by recommending a portfolio for you based a few basic inputs. These may include your age, time horizon, income, goals, and risk tolerance. From there, the micro-investing platform will do the rest by purchasing shares (or fractions of shares) from a range of portfolios.

What are the drawbacks of micro-investing?

There are two potential drawbacks of micro-investing. 

First, micro-investing may cause you to delay taking action on more significant investing strategies. Did you ever start a project well in advance but still found yourself pulling an all-nighter right before the due date? Sometimes this happens because when we’ve done something, we can create a sense of complacency even though we have much more to do. If this sounds like you, be wary of micro-investing. 

The reason, is that investing generally works best when it has more time to grow and compound. So while starting with micro-investing today is better than nothing, if it causes you to delay more significant investing by many years, you may regret it. See point #2 below.

The second drawback to mico-investing is that it’s not likely to produce very much. Put simply, micro-investing produces “micro results.” You need to save more.

Let’s go through a simple micro-investing example for the “round-up” approach.

• On average, let’s say you have 5 transactions per day
• On average, you will have a 50¢ round-up value (some will be 1¢ and others will be 99¢ but over time it will average to 50¢)
• 50¢ x 5 transactions x 365 days per year = $912.50 in annual savings
• If you continued this strategy for 30 years, you will have invested about $27,374 of your own money. Assuming an annualized 7% rate of return, your investments would be worth close to $93,000.

How does $93k compare to the results of other investing strategies?

While $93k might sound like a lot of money, how does it compare to other approaches?

• Saving 10% of Annual Average U.S. Salary: The average salary in the U.S. is about $62k annually. Many experts recommend saving at least 10% of your salary. This works out to saving about $6,200 annually. At a 7% return for 30 years, you would have about $630,322. That’s nearly 579% more in your nest egg compared to a micro-investing-only approach.
• Maxing out a 401k: The 2025 401k maximum contribution is $23,500. Even if we assume no employer matching contributions, and no increases to your contribution amount (even though the contribution limit is raised over time), with a 7% annualized return for 30 years, your nest egg would be worth about $2,389,118. This works out to about 2,474% more in your nest egg compared to a micro-investing-only approach.

A 2024 survey found that for Americans with retirement accounts, they estimated they would need $1.87 million to retire, adjusted for inflation. When you consider this, $93,000 doesn’t seem like much. 

The “Net Net” on Micro-investing

If micro-investments help you get started and don’t delay you from saving and investing larger sums in other ways, there’s nothing wrong with that. After all, something is better than nothing. But, while “investing your spare change” is a nice tagline, it’s not a strategy for long-term financial success.

To learn about the financial steps you should be taking for long-term financial success, the MoneySwell Financial Priorities Action Plan can help. It’s your personalized financial checklist no matter where you are in your financial journey. It can help you understand how to balance debt payments alongside investing for your future and so much more. 

And if you’re interested in understanding how much you might need for your retirement, use the free MoneySwell Retirement Planner (and sign up for an account if you want to track your progress over time). 

Your life will change. Your retirement plan should too.

If you’ve used a retirement calculator in the past, there’s a good chance your experience went something like this:

You enter a few basic fields of data. It’s easy. Then, you’re asked more complicated questions. You scratch your head. “Are they asking for how much I make now, or how much I’ll make in the future? Should that be in today’s dollars or future dollars? What are ‘today’s dollars’ anyway?” You make a half-hearted attempt at reading the fine print and quickly put in your best guess. Finally, the calculator spits out some numbers. Your first reaction is, “What the…can this be right?” This is shortly followed by, “I’m never going to meet my goals.” You walk away with a mixture of discouragement and confusion.

This is a bad experience. It’s a one time exercise that provides you with some numbers. While these numbers may be mathematically correct, they provide very little context to help you take meaningful action. And if you don’t take meaningful action, you’re unlikely to achieve your goals. 

Here’s the thing: Retirement planning isn’t a one time exercise. Planning for retirement takes years or several decades. And over that timeframe your life will change, probably drastically. This doesn’t mean you shouldn’t plan. But it does mean you need a plan that provides actionable information today, and that adapts with your changing life over time. The MoneySwell Retirement Planner does exactly that.

Set Annual Goals and Move Your Own Goalposts

The Retirement Planner answers two of the most important questions in retirement planning: 

• In today’s dollars, how much might I need to retire? (Another way this can be read is, “If I were to retire today, given my current income and spending habits, how much would I need?”)
• Am I currently saving enough to meet my goals within my desired timeframe?

When you set your three savings benchmarks for the year, the Future Outlook table tells you, “If you save at one of these levels this year, and every year in the future, you could have this much money at these ages.” Then, the Nest Egg Needs shading overlaps this table. The shading indicates when you will hit your Lowest, Medium, and Highest Nest Egg Needs targets.

If you’ve just gone through the exercise and discovered that at your current savings level you are not on track, don’t be discouraged. Very few people will be on track at every stage of their lives. Sometimes, you may not be on track due to your ability to save. Other times, you may be off track primarily because your nest egg needs numbers (your goalposts) have grown. However, by setting annual goals and tracking your progress, you can make adjustments as needed and feel confident you are moving in the right direction.

Examples

Let’s make sense of this by walking through an example at four stages of life. We’ll follow ‘Beatrice’ from her early twenties into her peak saving years to show you how she uses the tool to help her achieve her goals.

Remember: Depending on your circumstances, or where you are in your financial journey, the numbers below may not align with your experience. But the numbers aren’t what matters. The goal is to help you understand how to think about this tool so you can maximize its value for you.

Phase 1: Early Adulthood

Life Scenario

Beatrice landed her first salaried position this year. After taxes, her annual net income is about $36,000. She’s still in the process of paying off student loans. Combined with her other expenses and putting some money toward an emergency fund, she thinks she’ll be able to save between $1,000 and $3,000 toward retirement this year.

Future Projection

Beatrice scrolls in the Future Outlook table and sees her results. She realizes that if she were to only save at her minimum savings amount from this year forward, she wouldn’t hit her lowest nest egg goal until she was about 84 years old. This is initially discouraging but she knows she’ll probably be able to save more in future years. Then, when she looks at her pace with her target savings goal, she sees that she could hit her minimum goal by the time she’s 72. This still isn’t ideal (she’d like to retire before then) but it’s closer. Finally, she reviews her stretch savings goal. At this rate, she could hit her lowest nest egg goal by 68.

Phase 2: Early Middle Age

Life Scenario

Over the last decade of her life, Beatrice has been able to significantly increase her annual income. After taxes, her annual net income is about $66,500. She thinks she’ll be able to save between $7,500 and $14,000 (~8.3% – 15.6% of her gross income) toward retirement this year.

Future Projection

As Beatrice scrolls through the Future Outlook table, she’s pleased to see that she’s made solid progress toward her goals. At this year’s minimum savings amount, she might hit her lowest nest egg goal by age 66. At her target savings amount, she might hit that same goal by age 64, and at her stretch amount, she might hit that goal by age 60.

Phase 3: Middle Age

Life Scenario

Life got expensive over the last decade! Between having a child and upgrading her housing, Beatrice now spends a larger percentage of her net income, which is about $86,000. So while she’s earning more, she hasn’t been able to increase the percentage of her gross income that she saves compared to a decade ago. She thinks she’ll be able to save between $10,000 and $18,000 (~8.3% – 15.0% of her gross income) toward retirement this year.

Future Projection

As Beatrice scrolls through the Future Outlook table, she notices her timeframes have changed. Unfortunately, they’re a little higher than they were before. At this year’s minimum savings amount, she might hit her lowest nest egg goal by age 67. At her target savings amount, she might hit that same goal by age 65, and at her stretch amount, she might hit that goal by age 64.

Phase 4: Peak Saving Years

Life Scenario

In the last decade, Beatrice has been promoted multiple times at work and increased her income. Just as importantly, she’s done a good job of not letting her expenses increase too much. Her net income is about $102,200 now. She thinks she’ll be able to save between $16,000 and $25,000 (~11.0% – 17.2% of her gross income) toward retirement this year.

Future Projection

As Beatrice scrolls through the Future Outlook table, she notices she’s made progress on her timelines, but not as much as she would like. At this year’s minimum savings amount, she might hit her lowest nest egg goal by age 66. If she saves at her target savings amount, she might hit that goal also at age 66 (but earlier in the year). Finally, at her stretch savings goal, she may hit her lowest nest egg goal by age 65.

However, now that Beatrice is closer to retirement, she’s willing to factor in other retirement income, like Social Security. She goes to ssa.gov to find her estimated Social Security income and discovers she can expect about $2,100 per month.

Now that the MoneySwell Retirement planner knows she will have other sources of income beyond her Nest Egg, it calculates that her Nest Egg doesn’t need to be as high. It now projects she may only need between about $1.6M and $2.1M.

Based on these new needs numbers, she sees that at her current savings goals, she may hit her lowest nest egg need goal between 62 and 63 and her highest nest egg need goal between 66 and 67.

Summary

The examples above are overly simplified. The steady 7% annual rate of return will not be so steady in reality. (But the hope is that you can average something close to this return over the decades.) Additionally, your income may go up significantly faster or slower than Beatrice’s did. (Or you may decide to take a pay cut for a more satisfying job.)

While income that grows slower (or drops) will affect your ability to save, it also means your nest egg needs will likely be lower. This is because projections for what a person will spend in retirement are based in part on income before retirement. (You can learn more about how your nest egg needs are calculated here.)

As we’ve said before, the best time to start saving for retirement was yesterday. But the next best time is today. The MoneySwell Retirement Planner can be a helpful tool to ensure you’re doing what you reasonably can to stay on track.

<< Retirement Account Setup Checklist

A Small Step Can Go a Long Way

At the Growth stage, automatically funding your long-term savings may feel like a step too far.

Your limited dollars may be competing with priorities like paying off medium-interest debt (student loans anyone?), increasing the balance in your emergency fund, saving for a down payment on a home and more. It may be tempting to think, “I’ll fund my long-term savings and retirement but I don’t want to be locked into an automatic payment.” We understand this thinking. But we recommend you set up automatic funding anyway, even if for only a small dollar amount.

By taking the time to set up even a very small dollar amount of automatic funding, you will overcome two significant impediments to long-term saving and investing:

1. Not knowing what to invest in 
2. Not knowing how to set it all up

By completing this task now, you’ll ensure that you don’t delay for months or even years before making progress. And once your automatic investing is set up, when you’re ready to increase the contribution amount, it will be as simple as updating a single number.

How To Do It

Depending on your situation, you can set up automatic funding directly from your paycheck (for example through a paycheck withdrawal to your employer-sponsored 401k) and/or self-funding from a liquid cash account to a long-term investment account. We cover both options below.

Funding & Purchasing Directly from a Paycheck

1. 1. Find Your Account: If your employer offers a retirement plan (e.g. a 401k, 403b or similar), you’ve likely already set up your account when you were hired. If you’re not sure, reach out to your HR department and they can tell you where your account is. You may need to register your account if you haven’t already.
   2. Find Contributions: There will be a place on the brokerage account’s website for contributions. Find it.
      

      If you’re able, we recommend contributing 10 – 15% of your pretax income.

   3. Make or Adjust Contribution Percentages: Your contribution from a paycheck is almost always set up as a percentage, not a dollar amount. Additionally, even if you never set this up, it’s possible you already have a small regular contribution being made from each paycheck since many employers do this automatically on behalf of their employees – often 3%. If you can, increase this contribution percentage by at least a percent or two. A percentage to shoot for is 15% but do whatever you can.
   4. Other Steps: Depending on your account type or the institution it’s with, you may have to make specific investment choices. If you don’t see options for investment choices here, they are probably managed on the “Investments” or similarly named section on the site. It’s worth confirming what the investments are but in all likelihood some investment choice and regular purchases with your contributions is already set up – you shouldn’t need to do that on your own for most employer-sponsored plans. But of course, you can make adjustments to those investments as your plan allows.

Self-funding & Purchasing

Use this option if you either don’t have an employer-sponsored plan, or, for any other reason you want to set up your own account (e.g. funding your own Roth IRA is a common example).

1. 1. Determine Funding Account: This is the account you’ll use to fund your long-term savings. This is typically a savings or checking account, likely the same one you deposit your regular income to.
   2. Set a Transfer Between Accounts: From either your funding account’s website or your investing account’s website, find the section of the site for “Transfers.” If both your funding account and your long-term savings/retirement account are at the same institution, you can directly set up the transfer. If the accounts are at different institutions, you’ll need to set up an “external account” first. (Note: Sometimes the validation process of setting up an external account can take a day or two. If that’s the case, make a note here about where you’ve left off, and complete the next steps in this task below once that’s done.)
   3. Set Amount: Determine the amount you’ll want to transfer. If possible, try to save 10-15% of your pre-tax income. If that’s not possible, contribute whatever amount you can. Note that for those who are self-employed, lump sum contributions are more common, often on a quarterly basis. (This has to do with taxes paid quarterly and other factors that may affect how much can be contributed.) In this case, one strategy might be to set aside 10-15% in your business account (before transferring to a personal account) for a future lump-sum transfer to your retirement account.
   4. Set Frequency: This can usually be set for as frequently as once a week with varying options up to once a year. We recommend at least one payment a month. If you’re paid more frequently than that, set up a transfer for as often as you get paid.
   5. Set Start Date: You can set this for today or whatever day you want. Just remember that depending on your frequency setting, the day of the week you set your first transfer will determine the day of the week for future transfers. So choose a day of the week that works for you (e.g. perhaps a Friday if that’s the day you’re typically paid).

Make Investment Purchase

Now that you’ve set up your funding, you need to set up your investment purchase.

1. Set Automatic Investing: Somewhere on your investment account’s website there should be an option for “automatic investing” or something similar. Find this section.
2. Choose Your Investment Fund: This is where you actually choose your investment. To find more detail on how to choose an investment go here. But in all likelihood you’ll be selecting from a “no-load” and “no transaction fee” mutual fund or exchange traded fund (ETF). This is important because it will ensure that when you make your regular purchases, you’re not getting charged for each trade you make – something that would be particularly silly if you’re only investing a small amount to begin with. (Although in recent years many investment banks have eliminated many trading-related fees altogether.)
3. Choose Your Investment Amount: This should be the same amount as your regular funding transfers.(Note that some funds require an initial investment amount. For example you may need to contribute $1,000 for your first investment but regular additions can be whatever amount you choose. If you don’t have enough money to cover the initial investment, we recommend finding a fund that doesn’t require an initial investment or that has one that is low enough for you to quickly meet the threshold. Don’t let this initial investment derail your plans for automatically funding your long-term savings!)
   
4. Set Your Investment Purchase Frequency: Once you set your start date and frequency, you’re now set to automatically make your investment purchase!
5. Make Note for Future Changes: In the notes section (logged in users only), make a note indicating what you’ve set up, and where on your brokerage account’s website you did this. This will make it easier in the future to come back and adjust the contribution amount when you’re ready to make an increase.