Last Thursday the Entrepreneurship Club and Wharton Women in Business (WWIB) welcomed Alexa Von Tobel to Wharton to discuss her experience founding LearnVest and her recently published book Financially Fearless. Alexa argues that financial literacy is a basic human right and her work through LearnVest is targeted at taking financial planning from a luxury product to a mainstream product. When writing her book, Alexa initially wanted to name it The F Word (unfortunately this was not well received by mass market retailers) because most of us find discussing our finances to be as taboo, if not more taboo, than discussing sex or politics.
The average American makes 6-10 money decisions a day. Yet over 76% of the country feels that they lack control over their finances and 61% of Americans are living paycheck to paycheck. Despite these numbers, financial planning is a tool for the wealthy and typically runs thousands of dollars a year. Our discomfort with figuring out our finances has created a litany of excuses, “Oh I have a guy who knows money” or “I don’t have enough money for this to matter.”
Building a business
Alexa was at HBS when she entered LearnVest into the Business Plan Competition and won. She realized that despite years working on Wall Street, she still felt like financial planning was an unknown to her. She dropped out of HBS in 2009 and moved to NYC to pursue her dream. Over the past four years LearnVest has raised $41M from top investors including Accel and American Express. The focus on delivering high quality financial education is clear; not only do they refrain from selling any affiliate products but also their Head of Product is a CFP (Certified Financial Planner). Recently she has recruited heavy hitters such as the CFO of Weight Watchers and the head of Analytics at Netflix to join the growing team. Their focus on quality seems to have paid off as they have a 92% referral rate and only 2.5% of their paid users unsubscribe.
Seven steps to financial control
Through a few years of research during LearnVest’s early years, the team has put together a seven-step plan to take control of your finances.
- Organize – Most Americans have over 15 accounts (you may even find some you didn’t remember opening). Alexa recommends using a free tool like LearnVest to create microhabits such as checking your money every day but just for one minute. She also recommends checking your credit reports (also free) once every four months since monitoring is the best way to deal with fraud or identity theft.
- Focus – Think about spending in after-tax dollars. A good budget should follow the 50/30/20 rule – 50% on essentials like rent and utilities, 30% on lifestyle, and 20% on the future
- Plan – Are you saving enough for your future? We’ve all learned about the benefits of compounding interest but it can be hard to remember to save for retirement in our 20’s.
- Protect – Alexa stresses the importance of protecting your assets, for example, renter’s insurance is a must!
- Build – LearnVest has a team of dedicated CFPs who help you figure out your big-ticket goals, such as home buying, and help find a way to save up.
- Maximize – This is probably the part most Wharton folks are good at – its time to build an investment portfolio!
- Achieve – This is a LearnVest specific step where a dedicated CFP helps you build habits to achieve your goals!
For us second years it’s probably time to start thinking about paying off those ventures and weekend trips to Europe. Check out the product at LearnVest.com (there are some free products as well as paid offerings)!