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Wednesday, November 29, 2023

A Development Director Making $100K In DC Envisions A Debt-Free Future

How I Money is a series featuring real people who have real questions about money, and real advice from Betterment’s experts. Follow along as our financial planners help folks just like you think through saving, investing, debt, retirement, and more.

Meet Raven*:

A module showing a person's characteristics. "Gender: Woman" "Age: 41" "Location: Washington. D.C" "Profession: Director of Development" "Married: No" "Children: No" "Household income: $100k" "Debt: $10-50k" "Assets: $50-100k" "monthly expenses: $3-5k"

Let’s dive into Raven’s financial goals and concerns:

Talk me through your short-term financial goals. What do you hope to achieve within the next 5 years?


  1. Pay off credit card debt.
  2. Become more financially literate, especially when it comes to investing.
  3. Increase savings.

Let’s talk long-term. What do you hope to accomplish financially 5 years or more from now?

Raven: I’m honestly not sure. I’ve gone through some big life changes and need to adjust my plans accordingly.

Three images, from left to right: A grey wallet with a blue card inside, underneath reads "pay off credit card." A green book with a black bookmark, underneath reads "gain financial literacy." A blue piggy bank with a gold coin by the slot, underneath. reads "increase general savings"

What impact has COVID-19 had on either your short or long-term financial goals?

Raven: I have a good job but there is so much uncertainty in the world. Losing my job is in the back of my mind. Not sure what I should be saving or planning for at this point.

If you could ask a financial expert for advice on one money question, what would it be?

Raven: Do I need a financial manager? Or do I start small with some of these DIY programs?

What the financial experts say:

On the left is a photograph of a white woman in front of a blue background. She's smiling, wearing a black shirt and, and has brown/blond hair. On the right is a caption that reads: "Meet Corbin. Corbin is a certified Financial planner who works directly with Betterment customers to help them achieve their financial goals.

We asked Corbin to comment on Raven’s financial goals. Here are her thoughts.

Raven has a lot of competing financial goals: does she need a financial manager, or can she start with an automated investing and savings product?

Corbin: What a lot of folks don’t realize is that many financial tools are already financial managers. Automated investing providers, like Betterment, offer automated advice and technology that build a unique investment portfolio for each type of investment goal.

When you open an investment goal with us, its customized stock-to-bond allocation recommendation is designed to automatically adjust (in most cases) to help you reach your goal without taking on unnecessary risk.

But since you also mentioned that she’s interested in financial literacy, working with a CFP® professional to answer her in-depth questions could be beneficial to getting her on the right track. A CFP® professional can work with Raven to review her debt, goals, and retirement planning, as well as her current financial situation and investment portfolio.

In either case, an automated financial manager or financial planning professional can help her manage her financial goals.

Prep for your financial future

A text box that reads "Our CFP(R) Professional's Recommendation: Consider a platform like Betterment for automated investing and built-in financial advice."

What should Raven do first: pay off credit card debt or increase her savings?

Corbin: First, it’s always smart to have a cash buffer. We typically recommend having at least three to five weeks’ worth of expenses in your checking account to cover your expenses.

Think about it: If Raven worked to pay off her debt as aggressively as possible but had no extra cash on hand, she’s only one unexpected expense away from potentially being in debt again.

Next, she should think about tackling her high-interest debt.

For example, credit cards tend to have high interest rates of more than 16.5% on average. If Raven’s debt has higher interest rates than her potential returns through investing or saving, then she’s better off paying off her debt first or paying off her debt and saving simultaneously.

Two modules. The first is a text box that reads "Our CFP(R) Professionals's Recommendation: Build an emergency fund while tackling high-interest debt." The second module has a purple and white life ring buoy on the right, and the left reads "What are you saving for? Emergency fund" and "How much do you want to save? 3 to 6 months' worth of expenses"

How can Raven financially prepare for a potential job loss?

Corbin: It’s completely understandable, given the pandemic, that Raven is worried about losing her job. The first thing Raven should do is find out what she’s spending her money on. By creating a list of expenses and minimum payments, she’ll know the minimum she needs to financially get by.

While she’s still employed and financially stable, she could also use this time to build her emergency savings. It’s not the most optimal solution mathematically since she still has high-interest debt, but financial decisions aren’t always made solely based on math.

Finances are emotional and personal, and they should always reflect the circumstances we’re going through. Since Raven is worried about financial security and her ability to pay bills in the future, building her emergency fund is one way to help her feel better about an uncertain future. She shouldn’t ignore high-interest debt, but if making minimum debt payments while building a robust emergency fund for a few months makes her feel more financially prepared, this may be the right path for right now.

A text box that reads "Our CFP(R) Professional's Recommendation: Determine minimum payments and use extra cash to build an emergency fund"

How should Raven be thinking about long-term financial goals?

Corbin: Retirement isn’t always a choice depending on industry and health—given Raven’s age, it’s important that she revisit her retirement plan and find out if she is on track to save enough for what she wants to spend during her golden years, especially if she plans to retire around 64, which is the average retirement age.

If Raven’s employer offers a matching plan on their retirement account, it’s most important that she contributes enough to receive the full match: that’s basically free money!

After that, I’d recommend not falling into the trap of thinking she can only contribute to an employer plan—using multiple accounts like a Traditional or Roth IRA, an HSA, or an investment account can help her meet her retirement goals, and can also help with taxes.

A text box that reads "Our CFP(R) Professional's Recommendation: Contribute to a 401(k) if possible, and consider accounts like IRAs and HSAs

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Your future savings await

Betterment can help make your financial goals real.

When it comes to saving and investing, Betterment aims to help you align your money with your goals. That means not only offering multiple types of accounts for your short and long-term goals, but also helping you identify your goals and invest for them appropriately. Learn more about our guidance and get started saving for your future.

*Responses for the How I Money series were gathered through voluntary participation in an online survey where participants were requested to provide comments, feedback, ideas, reports, suggestions, data or other information to Betterment (collectively “Feedback”). The Feedback gathered in that survey excluded Betterment clients, was anonymized, and was used internally to help us understand how people could benefit from Betterment’s services and to create content to address those needs. Participants permitted Betterment to use any Feedback they provided for these purposes. While this content is written for advice purposes, it may not be applicable to all and is intended to be informational only.

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