Your home may be the largest single purchase you make during your lifetime. That can make it both incredibly exciting and nerve wracking.

Purchasing a primary residence often falls in the grey area between a pure investment (meant to increase one’s capital) and a consumer good (meant to increase one’s satisfaction). Your home has aspects of both, and we recognize that you may purchase a home for reasons that are not strictly monetary, such as being in a particular school district or proximity to one’s family. Those are perfectly valid inputs to your purchasing decision.

However, as your financial advisor, this guide will focus primarily on the financial aspects of your potential home purchase: We’ll do this by walking through the five tasks that should be done before you purchase your home.

1. Build your emergency fund.

Houses are built on top of foundations to help keep them stable. Just like houses, your finances also need a stable foundation. Part of that includes your emergency fund. We recommend that, before purchasing a home, you should have a fully-funded emergency fund. Your emergency fund should be a minimum of three months’ worth of expenses.

How big your emergency fund should be is a common question. By definition, emergencies are difficult to plan for. We don’t know when they will occur or how much they will cost. But we do know that life doesn’t always go smoothly, and thus that we should plan ahead for unexpected emergencies.

Emergency funds are important for everyone, but especially so if you are a homeowner. When you are a renter, your landlord is likely responsible for the majority of repairs and maintenance of your building. As a homeowner, that responsibility now falls on your shoulders. Yes, owning a home can be a good investment, but it can also be an expensive endeavor. That is exactly why you should not purchase a home before having a fully-funded emergency fund.

And don’t forget that your monthly expenses may increase once you purchase your new home. To determine the appropriate size for your emergency fund, we recommend using what your monthly expenses will be after you own your new home, not just what they are today.

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2. Choose a fixed-rate mortgage.

According to 2020 survey data by the National Association of Realtors®, 86% of home buyers took out a mortgage. This means that most people have to choose which type of mortgage is appropriate for them, and one of the key factors is deciding between an adjustable-rate mortgage (ARM) and a fixed-rate mortgage (FRM). Betterment generally recommends choosing a fixed-rate mortgage.

Here’s why:

As shown below, ARMs usually—but not always—offer a lower initial interest rate than FRMs.

Source: Federal Reserve Bank of St. Louis. Visualization of data by Betterment.

But this lower rate comes with additional risk. With an ARM, your monthly payment can increase over time, and it is difficult to predict what those payments will be. This may make it tough to stick to a budget and plan for your other financial goals.

Fixed-rate mortgages, on the other hand, lock in the interest rate for the lifetime of the loan. This stability makes budgeting and planning for your financial future much easier. Locking in an interest rate for the duration of your mortgage helps you budget and minimizes risk.

Luckily, most home buyers do choose a fixed-rate mortgage. According to 2020 survey data by the National Association of Realtors®, 89% of home buyers who financed their home purchase used a fixed-rate mortgage, and this was very consistent across all age groups. Research by the Urban Institute also shows FRMs have accounted for the vast majority of mortgages over the past 2 decades.

Source: National Association of Realtors®, 2020 Home Buyers and Sellers Generational Trends. Visualization of data by Betterment.

3. Save For The Upfront Costs: Down Payment And Closing

You’ll need more than just your emergency fund to purchase your dream home. You’ll also need a down payment and money for closing costs. Betterment recommends making a down payment of at least 20%, and setting aside about 2% of the home purchase for closing costs.

A 2020 National Association of Realtors® survey shows the median down payment amount for home purchases is 12%. As the chart below shows, younger buyers tend to make smaller down payments than older buyers.

Source: National Association of Realtors®, 2020 Home Buyers and Sellers Generational Trends.  Visualization of data by Betterment.

But is making an average down payment of only 12% a wise decision? It is true that you are often allowed to purchase a home with down payments far below 20%. For example:

FHA loans allow down payments as small as 3.5%.Fannie Mae allows mortgages with down payments as small as 3%.VA loans allow you to purchase a home with no down payment.

However, Betterment typically advises putting down at least 20% when purchasing your home. A down payment of 20% or more can help avoid Private Mortgage Insurance (PMI). Putting at least 20% down is also a good sign you are not overleveraging yourself.

Lastly, a down payment of at least 20% may help lower your interest rate. This is acknowledged by the CFPB and seems to be true when we compare interest rates of mortgages with Loan-to-Values (LTVs) below and above 80%, as shown below.

Source: Federal Reserve Bank of St. Louis. Visualization of data by Betterment.

Depending on your situation, it may even make sense to go above a 20% down payment. Just remember, you shouldn’t put every spare dollar you have into your home, as that will likely mean you don’t have enough liquid assets elsewhere for things such as your emergency fund and other financial goals like retirement.

Closing Costs

In addition to a down payment, buying a home also has significant transaction costs. These transaction costs are commonly referred to as “closing costs” or “settlement costs.”

Closing costs depend on many factors, such as where you live and the price of the home.

ClosingCorp, a company that specializes in closing costs and services, conducted a study that analyzed 2.9 million home purchases throughout 2020. They found that closing costs for buyers averaged 1.69% of the home’s purchase price, and ranged between states from a low of 0.71% of the home price (Missouri) up to a high of 5.90% of the home price (Delaware). The chart below shows more detail.

Source: ClosingCorp, 2020 Closing Cost Trends. Visualization of data by Betterment.

As a starting point, we recommend saving up about 2% of the home price (about the national average) for closing costs. But of course, if your state tends to be much higher or lower than that, you should plan accordingly.

In total, that means that you should generally save at least 20% of the home price to go towards a down payment, and around 2% for estimated closing costs.

With Betterment, you can open a Major Purchase goal and save for your downpayment and closing costs using either a cash portfolio or investing portfolio, depending on your risk tolerance and when you think you’ll buy your home.

4. Think Long-Term

We mentioned the closing costs for buyers above, but remember: There are also closing costs when you sell your home. These closing costs mean it may take you a while to break even on your purchase, and that selling your home soon after is more likely to result in a financial loss. That’s why Betterment doesn’t recommend buying a home unless you plan to own that home for at least 4 years, and ideally longer.

Unfortunately, closing costs for selling your home tend to be even higher than when you buy a home. Zillow, Bankrate, NerdWallet, The Balance and Opendoor all estimate them at around 8% to 10% of the home price.

Betterment’s research analyzed closing costs for both buying and selling, the opportunity costs of potentially investing that money, and more. It shows that the average expected breakeven time is about 4 years as shown below. Of course, this will depend on many factors, but is helpful as a general guide. Thus, if you do not plan to own your home for at least 4 years, you should think carefully on whether buying a home is a smart move at this point in your life.

Source: Betterment, Is Buying A Home A Good Investment? Visualization of data by Betterment.

Luckily, it appears that most home buyers stay in their homes beyond our 4-year rule of thumb. The chart below is built from 2020 survey data by the National Association of Realtors®. It shows how long individuals of various age groups stayed in their previous homes before selling them.

Across all age groups, the median length of time was 10 years, which is more than double our 4-year rule of thumb. That’s excellent. However, we can see that younger buyers, on average, come in well below the 10-year median, which indicates they are more at risk of not breaking even on their home purchases.

Source: National Association of Realtors®, 2020 Home Buyers and Sellers Generational Trends. Visualization of data by Betterment.

Some things you can do to help ensure you stay in your home long enough to at least break even include:

If you’re buying a home in an area you don’t know very well, consider renting in the neighborhood first to make sure you actually enjoy living there.Think ahead and make sure the home makes sense for you 4 years from now, not just you today. Are you planning on having kids soon? Might your elderly parents move in with you? How stable is your job? All of these are good questions to consider.Don’t rush your home purchase. Take your time and think through this very large decision. The phrase “measure twice, cut once” is very applicable to home purchases.

5. Calculate Your Monthly Affordability

The upfront costs are just one component of home affordability. The other is the ongoing monthly costs. Betterment recommends building a financial plan to determine how much home you can afford while still achieving your other financial goals. But if you don’t have a financial plan, we recommend not exceeding a debt-to-income (DTI) ratio of 36%.

In other words, you take your monthly debt payments (including your housing costs), and divide them by your gross monthly income. Lenders often use this as one factor when it comes to approving you for a mortgage.

Debt Income Ratios

There are lots of rules in terms of what counts as income and what counts as debt. These rules are all outlined in parts of Fannie Mae’s Selling Guide and Freddie Mac’s Seller/Servicer Guide. While the above formula is just an estimate, it is helpful for planning purposes.

In certain cases Fannie Mae and Freddie Mac will allow debt-to-income ratios as high as 45%-50%. But just because you can get approved for that, doesn’t mean it makes financial sense to do so.

Keep in mind that the lender’s concern is your ability to repay the money they lent you. They are far less concerned with whether or not you can also afford to retire or send your kids to college. The debt to income ratio calculation also doesn’t factor in income taxes or home repairs, both of which can be significant.

This is all to say that using DTI ratios to calculate home affordability may be an okay starting point, but they fail to capture many key inputs for calculating how much you personally can afford. We’ll outline our preferred alternative below, but if you do choose to use a DTI ratio, we recommend using a maximum of 36%. That means all of your debts—including your housing payment—should not exceed 36% of your gross income.

In our opinion, the best way to determine how much home you can afford is to build a financial plan. That way, you can identify your various financial goals, and calculate how much you need to be saving on a regular basis to achieve those goals. With the confidence that your other goals are on-track, any excess cash flow can be used towards monthly housing costs. Think of this as starting with your financial goals, and then backing into home affordability, instead of the other way around.

Wrapping Things Up

If owning a home is important to you, you can use the five steps in this guide to help you make a wiser purchasing decision.

Have an emergency fund of at least three months’ worth of expenses to help with unexpected maintenance and emergencies.Choose a fixed-rate mortgage to help keep your budget stable.Save for a minimum 20% down payment to avoid PMI, and plan for paying ~2% in closing costs.Don’t buy a home unless you plan to own it for at least 4 years. Otherwise, you are not likely to break even after you factor in the various costs of homeownership.Build a financial plan to determine your monthly affordability, but as a starting point, don’t exceed a debt-to-income ratio of 36%.

If you’d like help saving towards a down payment or building a financial plan, sign up for Betterment today.

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You’ve probably heard of a 401(k) plan blackout period – but do you know exactly what it is and how to explain it to your employees? Read on for answers to the most frequently asked questions about blackout periods.

What is a blackout period?

A blackout period is a time when participants are not able to access their 401(k) accounts because a major plan change is being made. During this time, they are not allowed to direct their investments, change their contribution rate or amount, make transfers, or take loans or distributions. However, plan assets remain invested during the blackout period. In addition, participants can continue to make contributions and loan repayments, which will continue to be invested according to the latest elections on file. Participants will be able to see these inflows and any earnings in their accounts once the blackout period has ended.

When is a blackout period necessary?

Typically, a blackout period is necessary when:

401(k) plan assets and records are being moved from one retirement plan provider to another New employees are added to a company’s plan during a merger or acquisitionAvailable investment options are being modified

Blackout periods are a normal and necessary part of 401(k) administration during such events to ensure that records and assets are accurately accounted for and reconciled. In these circumstances, participant accounts must be valued (and potentially liquidated) so that funds can be reinvested in new options. In the event of a plan provider change, the former provider must formally pass the data and assets to the new plan provider. Therefore, accounts must be frozen on a temporary basis before the transition.

How long does a blackout period last?

A blackout period usually lasts about 10 business days. However, it may need to be extended due to unforeseen circumstances, which are rare; but there is no legal maximum limit for a blackout period. Regardless, you must give advance notice to your employees that a blackout is on the horizon.

What kind of notice do I have to give my employees about a blackout period?

Is your blackout going to last for more than three days? If so, you’re required by federal law to send a written notice of the blackout period to all of your plan participants and beneficiaries. The notice must be sent at least 30 days – but no more than 60 days – prior to the start of the blackout.

Typically, your plan provider will provide you with language so that you can send an appropriate blackout notice to your plan participants. If you are moving your plan from another provider to Betterment, we will coordinate with your previous recordkeeper to establish a timeline for the transfer, including the timing and expected duration of the blackout period. Betterment will draft a blackout notice on your behalf to provide to your employees, which will include the following:

Reason for the blackoutIdentification of any investments subject to the blackout periodDescription of the rights otherwise available to participants and beneficiaries under the plan that will be temporarily suspended, limited, or restrictedThe expected beginning and ending date of the blackoutA statement that participants should evaluate the appropriateness of their current investment decisions in light of their inability to direct or diversify assets during the blackout periodIf at least 30 days-notice cannot be given, an explanation of why advance notice could not be providedThe name, address, and telephone number of the plan administrator or other individual who can answer questions about the blackout

Who should receive the blackout notice?

All employees with a balance should receive the blackout notice, regardless of their employment status. In addition, we suggest sending the notice to eligible active employees, even if they currently don’t have a balance, since they may wish to start contributing and should be made aware of the upcoming blackout period.

What should I say if my employees are concerned about an upcoming blackout period?

Reassure your employees that a blackout period is normal and that it’s a necessary event that happens when significant plan changes are made. Also, encourage them to look at their accounts and make any changes they see fit prior to the start of the blackout period.

Thinking about changing plan providers?

If you’re thinking about changing plan providers, but are concerned about the ramifications of a blackout period, worry no more. Switching plan providers is easier than you think, and Betterment is committed to making the transition as seamless as possible for you and your participants.

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The umbrella term “observability” covers all manner of subjects, from basic telemetry to logging, to making claims about longer-term performance in the shape of service level objectives (SLOs) and occasionally service level agreements (SLAs). Here I’d like to discuss some philosophical approaches to defining SLOs, explain how they help with prioritization, and outline the tooling currently available to Betterment Engineers to make this process a little easier.

What is an SLO?

At a high level, a service level objective is a way of measuring the performance of, correctness of, validity of, or efficacy of some component of a service over time by comparing the functionality of specific service level indicators (metrics of some kind) against a target goal. For example,

99.9% of requests complete with a 2xx, 3xx or 4xx HTTP code within 2000ms over a 30 day period

The service level indicator (SLI) in this example is a request completing with a status code of 2xx, 3xx or 4xx and with a response time of at most 2000ms. The SLO is the target percentage, 99.9%. We reach our SLO goal if, during a 30 day period, 99.9% of all requests completed with one of those status codes and within that range of latency. If our service didn’t succeed at that goal, the violation overflow — called an “error budget” — shows us by how much we fell short. With a goal of 99.9%, we have 40 minutes and 19 seconds of downtime available to us every 28 days. Check out more error budget math here.

1 Google SRE Workbook https://sre.google/sre-book/availability-table/

If we fail to meet our goals, it’s worthwhile to step back and understand why. Was the error budget consumed by real failures? Did we notice a number of false positives? Maybe we need to reevaluate the metrics we’re collecting, or perhaps we’re okay with setting a lower target goal because there are other targets that will be more important to our customers.

It’s all about the customer

This is where the philosophy of defining and keeping track of SLOs comes into play. It starts with our users – Betterment users – and trying to provide them with a certain quality of service. Any error budget we set should account for our fiduciary responsibilities, and should guarantee that we do not cause an irresponsible impact to our customers. We also assume that there is a baseline degree of software quality baked-in, so error budgets should help us prioritize positive impact opportunities that go beyond these baselines.

Sometimes there are a few layers of indirection between a service and a Betterment customer, and it takes a bit of creativity to understand what aspects of the service directly affects them. For example, an engineer on a backend or data-engineering team provides services that a user-facing component consumes indirectly. Or perhaps the users for a service are Betterment engineers, and it’s really unclear how that work affects the people who use our company’s products. It isn’t that much of a stretch to claim that an engineer’s level of happiness does have some effect on the level of service they’re capable of providing a Betterment customer!

Let’s say we’ve defined some SLOs and notice they are falling behind over time. We might take a look at the metrics we’re using (the SLIs), the failures that chipped away at our target goal, and, if necessary, re-evaluate the relevancy of what we’re measuring. Do error rates for this particular endpoint directly reflect an experience of a user in some way – be it a customer, a customer-facing API, or a Betterment engineer? Have we violated our error budget every month for the past three months? Has there been an increase in Customer Service requests to resolve problems related to this specific aspect of our service? Perhaps it is time to dedicate a sprint or two to understanding what’s causing degradation of service. Or perhaps we notice that what we’re measuring is becoming increasingly irrelevant to a customer experience, and we can get rid of the SLO entirely!

Benefits of measuring the right things, and staying on target

The goal of an SLO based approach to engineering is to provide data points with which to have a reasonable conversation about priorities (a point that Alex Hidalgo drives home in his book Implementing Service Level Objectives). In the case of services not performing well over time, the conversation might be “focus on improving reliability for service XYZ.” But what happens if our users are super happy, our SLOs are exceptionally well-defined and well-achieved, and we’re ahead of our roadmap? Do we try to get that extra 9 in our target – or do we use the time to take some creative risks with the product (feature-flagged, of course)? Sometimes it’s not in our best interest to be too focused on performance, and we can instead “use up our error budget” by rolling out some new A/B test, or upgrading a library we’ve been putting off for a while, or testing out a new language in a user-facing component that we might not otherwise have had the chance to explore.

The tools to get us there

Let’s dive into some tooling that the SRE team at Betterment has built to help Betterment engineers easily start to measure things.

Collecting the SLIs and Creating the SLOs

The SRE team has a web-app and CLI called `coach` that we use to manage continuous integration (CI) and continuous delivery (CD), among other things. We’ve talked about Coach in the past here and here. At a high level, the Coach CLI generates a lot of yaml files that are used in all sorts of places to help manage operational complexity and cloud resources for consumer-facing web-apps. In the case of service level indicators (basically metrics collection), the Coach CLI provides commands that generate yaml files to be stored in GitHub alongside application code. At deploy time, the Coach web-app consumes these files and idempotently create Datadog monitors, which can be used as SLIs (service level indicators) to inform SLOs, or as standalone alerts that need immediate triage every time they’re triggered.

In addition to Coach explicitly providing a config-driven interface for monitors, we’ve also written a couple handy runtime specific methods that result in automatic instrumentation for Rails or Java endpoints. I’ll discuss these more below.

We also manage a separate repository for SLO definitions. We left this outside of application code so that teams can modify SLO target goals and details without having to redeploy the application itself. It also made visibility easier in terms of sharing and communicating different team’s SLO definitions across the org.

Monitors in code

Engineers can choose either StatsD or Micrometer to measure complicated experiences with custom metrics, and there’s various approaches to turning those metrics directly into monitors within Datadog. We use Coach CLI driven yaml files to support metric or APM monitor types directly in the code base. Those are stored in a file named .coach/datadog_monitors.yml and look like this:

monitors:
– type: metric
metric: “coach.ci_notification_sent.completed.95percentile”
name: “coach.ci_notification_sent.completed.95percentile SLO”
aggregate: max
owner: sre
alert_time_aggr: on_average
alert_period: last_5m
alert_comparison: above
alert_threshold: 5500
– type: apm
name: “Pull Requests API endpoint violating SLO”
resource_name: api::v1::pullrequestscontroller_show
max_response_time: 900ms
service_name: coach
page: false
slack: false>

It wasn’t simple to make this abstraction intuitive between a Datadog monitor configuration and a user interface. But this kind of explicit, attribute-heavy approach helped us get this tooling off the ground while we developed (and continue to develop) in-code annotation approaches. The APM monitor type was simple enough to turn into both a Java annotation and a tiny domain specific language (DSL) for Rails controllers, giving us nice symmetry across our platforms. . This `owner` method for Rails apps results in all logs, error reports, and metrics being tagged with the team’s name, and at deploy time it’s aggregated by a Coach CLI command and turned into latency monitors with reasonable defaults for optional parameters; essentially doing the same thing as our config-driven approach but from within the code itself

class DeploysController

For Java apps we have a similar interface (with reasonable defaults as well) in a tidy little annotation.

@Sla
@Retention(RetentionPolicy.RUNTIME)
@Target(ElementType.METHOD)
public @interface Sla {

@AliasFor(annotation = Sla.class)
long amount() default 25_000;

@AliasFor(annotation = Sla.class)
ChronoUnit unit() default ChronoUnit.MILLIS;

@AliasFor(annotation = Sla.class)
String service() default “custody-web”;

@AliasFor(annotation = Sla.class)
String slackChannelName() default “java-team-alerts”;

@AliasFor(annotation = Sla.class)
boolean shouldPage() default false;

@AliasFor(annotation = Sla.class)
String owner() default “java-team”;>

Then usage is just as simple as adding the annotation to the controller:

@WebController(“/api/stuff/v1/service_we_care_about”)
public class ServiceWeCareAboutController {

@PostMapping(“/search”)
@CustodySla(amount = 500)
public SearchResponse search(@RequestBody @Valid SearchRequest request) {…}>

At deploy time, these annotations are scanned and converted into monitors along with the config-driven definitions, just like our Ruby implementation.

SLOs in code

Now that we have our metrics flowing, our engineers can define SLOs. If an engineer has a monitor tied to metrics or APM, then they just need to plug in the monitor ID directly into our SLO yaml interface.

– last_updated_date: “2021-02-18”
approval_date: “2021-03-02”
next_revisit_date: “2021-03-15”
category: latency
type: monitor
description: This SLO covers latency for our CI notifications system – whether it’s the github context updates on your PRs or the slack notifications you receive.
tags:
– team:sre
thresholds:
– target: 99.5
timeframe: 30d
warning_target: 99.99
monitor_ids:
– 30842606

The interface supports metrics directly as well (mirroring Datadog’s SLO types) so an engineer can reference any metric directly in their SLO definition, as seen here:

# availability
– last_updated_date: “2021-02-16”
approval_date: “2021-03-02”
next_revisit_date: “2021-03-15”
category: availability
tags:
– team:sre
thresholds:
– target: 99.9
timeframe: 30d
warning_target: 99.99
type: metric
description: 99.9% of manual deploys will complete successfully over a 30day period.
query:
# (total_events – bad_events) over total_events == good_events/total_events
numerator: sum:trace.rack.request.hits{service:coach,env:production,resource_name:deployscontroller_create}.as_count()-sum:trace.rack.request.errors{service:coach,env:production,resource_name:deployscontroller_create}.as_count()
denominator: sum:trace.rack.request.hits{service:coach,resource_name:deployscontroller_create}.as_count()

We love having these SLOs defined in GitHub because we can track who’s changing them, how they’re changing, and get review from peers. It’s not quite the interactive experience of the Datadog UI, but it’s fairly straightforward to fiddle in the UI and then extract the resulting configuration and add it to our config file.

Notifications

When we merge our SLO templates into this repository, Coach will manage creating SLO resources in Datadog and accompanying SLO alerts (that ping slack channels of our choice) if and when our SLOs violate their target goals. This is the slightly nicer part of SLOs versus simple monitors – we aren’t going to be pinged for every latency failure or error rate spike. We’ll only be notified if, over 7 days or 30 days or even longer, they exceed the target goal we’ve defined for our service. We can also set a “warning threshold” if we want to be notified earlier when we’re using up our error budget.

Fewer alerts means the alerts should be something to take note of, and possibly take action on. This is a great way to get a good signal while reducing unnecessary noise. If, for example, our user research says we should aim for  99.5% uptime, that’s 3h 21m 36s of downtime available per 28 days. That’s a lot of time we can reasonably not react to failures. If we aren’t alerting on those 3 hours of errors, and instead just once if we exceed that limit, then we can direct our attention toward new product features, platform improvements, or learning and development.

The last part of defining our SLOs is including a date when we plan to revisit that SLO specification. Coach will send us a message when that date rolls around to encourage us to take a deeper look at our measurements and possibly reevaluate our goals around measuring this part of our service.

What if SLOs don’t make sense yet?

It’s definitely the case that a team might not be at the level of operational maturity where defining product or user-specific service level objectives is in the cards. Maybe their on-call is really busy, maybe there are a lot of manual interventions needed to keep their services running, maybe they’re still putting out fires and building out their team’s systems. Whatever the case may be, this shouldn’t deter them from collecting data. They can define what is called an “aspirational” SLO – basically an SLO for an important component in their system – to start collecting data over time. They don’t need to define an error budget policy, and they don’t need to take action when they fail their aspirational SLO. Just keep an eye on it.

Another option is to start tracking the level of operational complexity for their systems. Perhaps they can set goals around “Bug Tracker Inbox Zero” or “Failed Background Jobs Zero” within a certain time frame, a week or a month for example. Or they can define some SLOs around types of on-call tasks that their team tackles each week. These aren’t necessarily true-to-form SLOs but engineers can use this framework and tooling provided to collect data around how their systems are operating and have conversations on prioritization based on what they discover, beginning to build a culture of observability and accountability

Conclusion

Betterment is at a point in its growth where prioritization has become more difficult and more important. Our systems are generally stable, and feature development is paramount to business success. But so is reliability and performance. Proper reliability is the greatest operational requirement for any service2. If the service doesn’t work as intended, no user (or engineer) will be happy. This is where SLOs come in. SLOs should align with business objectives and needs, which will help Product and Engineering Managers understand the direct business impact of engineering efforts. SLOs will ensure that we have a solid understanding of the state of our services in terms of reliability, and they empower us to focus on user happiness. If our SLOs don’t align directly with business objectives and needs, they should align indirectly via tracking operational complexity and maturity.

So, how do we choose where to spend our time? SLOs (service level objectives) – including managing their error budgets – will permit us – our product engineering teams – to have the right conversations and make the right decisions about prioritization and resourcing so that we can balance our efforts spent on reliability and new product features, helping to ensure the long term happiness and confidence of our users (and engineers).

2 Alex Hidalgo, Implementing Service Level Objectives

This article is part of Engineering at Betterment.

These articles are maintained by Betterment Holdings Inc. and they are not associated with Betterment, LLC or MTG, LLC. The content on this article is for informational and educational purposes only. © 2017–2021 Betterment Holdings Inc.

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For the Hispanic American community, home ownership is commonly seen as one of the few ways to build wealth.

One reason may be the tangible nature of home ownership; a home is an asset you can both see and touch. Another reason may be the perception that owning a home ensures the wellbeing of your family. Yet, even with this focus on real estate assets, the Hispanic home ownership rate—at 50%—is still far from that of white Americans.

As of 2019, the wealth gap between Hispanic and white families stood at $0.21 per $1 of white American wealth. In this article, I’ll cover some reasons why Hispanic individuals may want to consider investing in the stock market alongside real estate as a path to building sustainable generational wealth.

Two reasons why investing in the stock market can help the Hispanic community.

I can relate to the instinct that home ownership should be “Item No. 1” on the financial checklist. I was 21 years old when my mother and I bought our first home. We needed at least $5,000 for a down payment, which might as well have been $50,000. After making some sacrifices, we finally saved enough to buy our first house for just under $150,000. It was all the money we had.

Reflecting back today as a financial planner with over 20 years of experience, I realize how risky our investment was. We achieved our goal of home ownership, but had no equity or savings with which to cover unexpected expenses.

Be prepared for emergencies.

What would have happened if one of us had gotten sick or injured? The expenses could have bankrupted us and cost us the house we had worked so hard to buy.

One of the most common tenets of financial stability is building an emergency fund. An emergency fund consists of your fixed expenses—like rent, food, childcare, etc.—saved in an account that you keep separate from your checking or savings account.

Typically, a robust emergency fund is three to six months of expenses, but starting off with a smaller goal that’s more motivating to you may help you reach it faster. You should also consider saving for your emergency fund in a low-risk investment account, since this will help your money’s value keep up with, or even surpass, inflation.

Build generational wealth.

Access to investments has changed dramatically over the past 20 years. Companies like Betterment now offer low cost investment options with low minimums and fees, offering young families the ability to use the money they already have to build wealth—all while mitigating the kind of financial risk that my mother and I took by putting every penny we had into buying a house.

Investing even a small amount and adding to your investments over time can be a great way to build wealth. If and when you finally decide to purchase a home, a portfolio of diversified investments alongside real estate is an ideal foundation from which to build solid, sustainable wealth for future generations.

Don’t be afraid to get started.

Today, there are few houses available for under $150,000. Young Hispanic Americans are earning more on average than previous years, but they face new barriers to home ownership. Many are burdened by student loans, lack of affordable housing, and limited inventory, among other factors. This does not mean that young Hispanic people will never purchase a home or build wealth. It just means that we have to be open to planning, saving what we can consistently, and investing in the stock market.

Betterment strives to help its customers build wealth more sustainably, so that families can achieve their financial goals—including home ownership—while helping to account for financial risks.

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Did you miss our previous article…
https://www.toroption.co/?p=83