New Year’s Resolutions: Nudge Yourself Towards Success

Posted on January 22, 2017 // 2 Comments

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It’s now late January. According to “the internet”, over 30% of people have already failed at their New Year’s Resolution. Well, I say let’s have a do-over since I haven’t even got around to making mine yet. Jonathan Clements has an excellent post called Committed where he outlines some strategies to help improve our chances of success. I’ve re-worked them below according to my own tastes. In my view, all of them involve making failure painful and/or inconvenient (really the same thing, just different levels and frequencies of pain).

  • Tell everyone. Announce your resolution on Facebook, Instagram, or other widespread manner. Somebody (frenemy?) will likely follow-up. You’ll want to avoid the mild shame from lots of people you know sorta well.
  • Tell just one important person. Share your resolution and deadline with a person whose opinion you care about. You’ll want to avoid that acute shame from a close friend or relative.
  • Tell nobody, but bet money on it. You could set up a bet with a friend, or use a website like DietBet. You’ll want to avoid the financial pain from losing money.
  • Put hurdles between you and bad habits. Want to spend less? Use cash for everything. Institute a cooling-off period of 1 week for every $100 of cost. Cut up or freeze your credit cards in ice. Cancel any “bad” subscriptions, and make yourself pay for it manually each month. (Try Trim if you need some help canceling things.) Remove junk food from the house, so you’ll have to go out and buy it. Make it a hassle.
  • Make it automatic. Make “good” subscriptions. Set up (or increase) an automatic paycheck withdrawal for 401(k) and/or IRA retirement accounts. Set up an automatic transfer to your savings account. Sign up for a service like Digit. After the initial setup, the lazy thing is now the good thing.

You might use one, or you might use all of them, depending on your specific goal.

Photo credit: Angus and Phil comic by Annie Taylor-Lebel.

Filed Under: Behavioral Economics, Budgeting, Frugal Living, Goals //

Qapital App Review: Rules-Based Automated Savings Account – Free $5 to Start

Posted on May 15, 2016 // 2 Comments

qapital0Before we let them take over the world, computers must first prove their worth by helping us become better savers and investors. Importantly, we humans have a horrible tendency to put off saving when we have to manually do it each and every time.

Fintech start-up Qapital intends to fix this by automatically setting aside money based on a customized selection of rules. At it’s core is a free, FDIC-insured savings account held at Wells Fargo with no minimum balance or monthly fees. They are also giving out five bucks to start (details below).

qapital1   qapital3

Here are the current rules available:

  • Round-up Rule: Round up your purchases and save the difference every time you buy something. Ex. You can round to the nearest $1, $2, $3, $4, or $5.
  • Spend Less Rule: If you spend less than your target budget amount, then save the difference. Ex. Spend less than $15 at Starbucks during a week, then save the difference towards a goal.
  • Guilty Pleasure Rule: If you buy something you’re trying to resist, Qapital will automatically save some money for you. Ex. Save $10 every time you make a purchase at McDonald’s.
  • Set & Forget Rule: A traditional rule where you save a fixed amount daily, weekly, or once a month. Ex. Save $50 every week.
  • Apple Health Rule: If you hit your fitness target, Qapital will save towards your goal. Ex. Save $50 towards vacation goal every time you take 500 steps.
  • IFTTT Rules: Use the IFTTT service to trigger a money transfer.
  • Freelancer Rule: Every time you receive a large deposit, save 30% of it towards taxes.
  • 52 Week Rule: Save $1 the first week, $2 the second week, and so on for 52 weeks. (This adds up to $1,378 by the way!)

You must be 18 years old and link up an existing US-based checking account as the funding source. Trial deposits are used for verification using account and routing numbers. To prevent a million little transactions, withdrawals from your checking account to your Qapital account are only done twice a week. You can make move money back into your checking account at any time.

You can also add a credit card such as Citi, Chase, or American Express to trigger the rules, although you can’t use it as a funding source.

If Qapital is free, then how do they make money? They don’t charge any fees directly. They make money by keeping any interest that might be earned on your savings balance. Given that the top savings accounts pay roughly 1% APY, that means for every $100 in the account you’re losing out on $1 a year. They promise not to sell your transaction data.

Get $5 free to start. Right now, Qapital has a refer-a-friend promotion where a new user can get $5 if they are referred by a current user and open a new Qapital account with a least one deposit. Here is my special $5 referral link. Thanks if you use it!

Recap. Qapital is another iteration of “let me save for you” concept, previously seen in the “Keep the Change” program from Bank of America and the “round up to the nearest dollar” system from the Acorns app. Qapital differs in that they offer a wider variety of rule-based triggers, they are free while working with any credit card, and your only option is an FDIC-insured savings account (no stock investing). Overall it is a nice execution, although I predict that this idea will become more common across many different financial institutions over time (i.e. other people gonna copy it).

Setup is relatively easy and the user interface is good; I’ve set up a few rules for myself. I like that you can round up purchases into a simple savings account instead of the tax complexity of buying tiny bits of ETFs. There is no phone number, but there is in-app chat and e-mail support. My question was answered within an hour during their business hours. The app has worked fine so far while rounding up my purchases, but I’ll be interested to see if it keeps my attention several months from now.

More screenshots:

qapital2   qapital4

Next up: Digit.

Filed Under: Budgeting, Deals & Offers //

Nickel: Kid Allowance App + Debit Card + Set Your Own Custom Interest Rate

Posted on April 13, 2016 // 8 Comments

nickelapplogo

If you’re reading this, you obviously value financial knowledge and creating a secure life for you and your family. If you have kids, then you want them to develop the same skills. The NYT bestseller book The Opposite of Spoiled explored the many modern ways to teach kids about money. One recommendation for allowances is to split it up into three jars: savings, giving, and spending.

For that saving jar, an additional hack would be to pay your kids interest on their savings. For example, you could pay a monthly interest rate of 10%, which is huge in the adult world, but for a kid you need it to be large enough to be “felt” and hopefully teach them the following concepts:

  • Regular, automatic savings. Let’s say you give them $10 a week that is automatically saved. (They don’t manually move money over every week, it just happens like a 401k plan.) Even with no interest, two and half months later, they’ll have a hundred bucks!
  • Passive income. Now you could introduce the concept of paying interest. When they see their $100 pay $10 in interest at the end of the month, perhaps they will start to understand the power of passive income. “I could keep the $100 in there and still get to spend $10 every month forever!”
  • Compound interest. Now show them how they can get interest on their interest. If they start with $100, don’t take any money out, don’t save a penny more, at 10% monthly interest they will still have $314 after 12 months of compounding.
  • Compound interest + regular savings! If they start with $100, don’t take any money out, keep saving another $10 a week, at 10% monthly interest they will have $549 after a 12 months of compounding. This is starting to become serious money!
  • Passive income revisited. A year later, that passive income isn’t $10 a month anymore, it has become $55 a month! This would be a good time to tell you that parents pay the interest, so if you have a little Warren Buffett at home you should set a cap on interest payments upfront. 😉

There are a growing number of “allowance apps” to cater to this market, but Nickel (iOS only, Android “not yet”) is one of the first services that I’ve seen implement this custom interest rate feature. Designed for kids age 8 and up, Nickel offers a reloadable debit card and a smartphone app for you and the kid. The parent can view all transactions and control things like allowance amount, one-time transfers, and interest rates.

Much like adult prepaid cards with 5% APY savings accounts, there are two buckets of money: the “Card” account which is available to spend via Mastercard debit, and “Pocket” account which earns interest. Here’s a 1-minute video explainer and some screenshots of the interest rate feature:

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Finally, apps are cool, but let’s not forget the core values and character traits that lead to good behavior in general.

Filed Under: Banking, Budgeting, Family //

Weight Management vs. Money Management: Taking the Long-Term View

Posted on July 14, 2015 // 16 Comments

nodietI’m currently reading Smart People Don’t Diet by Charlotte Markey. The book offers a “science-based approach” to weight management backed by academic research from scientists, doctors, nutritionists, and psychologists. Sounded good to me. The main takeaway from the book so far is exactly what the title says: Diets don’t work.

Why? You can’t achieve permanent weight loss with a temporary plan. A diet is almost always a short-term gimmick, like “no carbs” or “eat only this smoothie for lunch” or buying meals from Nutrisystem. Once you go back to your original eating habits, you’ll go back to your original weight. Therefore, any changes you make should be something you can maintain for the rest of your life. Can you really not eat bread ever again? Or eat processed frozen meals forever? For a few people yes, for most people no.

Looking at everything through the long-term “rest of your life” filter encourages you to consider carefully and find changes that are sustainable. Skip the ideas that are unreasonable (for you). These days, there is no way I am waking up early to work out every day. I will probably never be a vegan or even vegetarian. However, I can exercise twice a week in the evenings and reduce my portion sizes.

It feels natural to compare weight management and money management. For weight loss, you are consuming and burning calories. For personal finance, you are earning and spending money.

  • In terms of consuming less calories, this meant consciously choosing food that truly give me joy, and cutting back significantly on the rest. I love cheese, crusty bread, and roasted vegetables. I discovered that I could reduce the following to once a week or less without significant pain: beer, desserts, and red meat. Research supports the idea that for weight loss, eating less is far more important than exercising more.
  • In terms of managing my spending, I tried to identify the things that truly give me joy, and cutting back significantly on the rest. I plan to always spend a big chunk of money on travel every year. On the cutting room floor: I spend very little on clothing and entertainment, I never go to bars or clubs, and I dine out at restaurants less than once a week. Here, your savings rate is most critical, which places high importance on your income levels as well.
  • One-time actions can also be sustainable as you don’t have to use up your willpower over and over, such as moving into a smaller house (lowering housing, maintenance, insurance, and utility costs all at once). In terms of eating, simply never allowing certain tempting foods to enter your home will help you avoid eating them (salty, crunchy things like potato chips are my weakness).

Can I keep all of this up forever? I don’t know, some stuff I’ve already kept up for years, and others have only lasted the last 6 months or so.

  • I suppose you could argue that if you manage to accumulate a big enough pile of money, you could never have to work again. But even that assumes a certain level of long-term discipline, as many people with many millions of dollars still manage to go broke all the time.
  • No matter how much or how long you starve yourself, there is nothing that will allow you to eat junk food all the time without gaining weight again. On other hand, this also means that even if you eat horribly for a day or even over a month, you can still recover. Now I don’t feel too bad about that bag of Cheetos I had for “lunch”. 🙂

Which reminds me… taking the long-term view also means you need to expect failures, both financially or weight-related. The important thing is to accept that you stumbled, pick yourself up, and keep moving forward. You’ve got the rest of your life to go, right?

Filed Under: Book Reviews, Budgeting //

Feel Like You’re Always Eating Out? You’re Not Alone.

Posted on October 2, 2014 // 6 Comments

Here are some charts illustrating a couple of interesting food trends in the US.

Americans are spending a smaller percentage of their income on food than ever. From America’s Shrinking Grocery Bill:

In 1984, the average U.S. household spent 16.8 percent of its annual post-tax income on food. By 2011, Americans spent only 11.2 percent. The U.S. devotes less of its income to food than any other country—half as much as households in France and one-fourth of those in India.

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But you see that big orange slice of the chart?

We are also spending a larger percentage of our food budget on food prepared away from home than ever. From Cheap Eats: How America Spends Money on Food:

foodathome

Looking at the chart, it seems like only a matter of time before we eat out more often than we eat in.

Our peak period of eating out was after the birth of our first child. It felt like we were whipping out the binder of take-out menus nearly every day. More recently, we completed the Dinner Boot Camp which contained a week-long plan for easy home dinners, and since then we’re on our 4th consecutive week of cooking dinner (and the following day’s lunch) at home at least 5 times a week. It’ll be hard to keep up, but doing a bit of planning before every week really does go a long way.

Filed Under: Budgeting, Frugal Living //

Manilla Shutting Down. Online Bill Management Alternatives?

Posted on May 12, 2014 // 36 Comments

checkappA few readers e-mailed me to let me know that bill management website Manilla.com announced that they will be shutting down. Surprising, as they were just mentioned in Money magazine last month!

Manilla will be closing on July 1, 2014. This was a hard decision given that, over the past three years, Manilla has won many awards […] but was unable to achieve the scale necessary to make the economics of the business viable.

As noted in my now-useless Manilla review, many people enjoyed having all of their bills located in a central place. It was also nice that they offered to store all your old bills forever… or in this case September 30, 2014 after which they will be destroyed.

What are good Manilla alternatives? Here are several services that offer similar features in no particular order, please feel free to add more in the comments. I haven’t gotten to try them all out yet, so share your experiences as well.

  • Finovera – “Our mission is to make the process of receiving, managing, paying and organizing household bills and documents simple, automatic and effortless.”
  • Enfold – “Enfold is a free-for-life virtual filing cabinet where you can safely store and organize all your important documents and account information.”
  • MoneyStream – “Not just an organizer or bill-payer, MoneyStream brings everything together in one secure place—and then shows you a future view of your money so you can see at a glance where you stand and where you’re going.”
  • Check (formerly PageOnce) – A free smartphone app that both organizes and tracks balances, with the added feature of letting you pay your bills through the app. I don’t think it stores past statements past a certain time period.
  • Mint – Owned by Intuit, Mint is more budget-centric and tracks all of your transactions. You can’t pay bills through the software (although it will send you bill reminders) and it doesn’t store actual monthly statements.
  • Mobilligy – “Mobilligy puts all of your bills in one app that lets you review, manage and pay your bills for free – anytime, anywhere.”
  • FileThis – “FileThis is like a personal assistant for your paperwork. It automatically collects, files, tags, and organizes your online documents in a digital filing cabinet. Never lose another bank statement, legal paper, tax form, insurance document, or other important piece of paperwork.”
  • Doxo – “All your provider accounts and information together at last. Back up all your critical documents automatically to your personal cloud storage. Receive and pay bills from connected providers with doxoPAY.”
  • Personal Capital – similar account aggregation focus as Mint, plus some investment portfolio analysis features.
  • Zumbox – “Your postal mail delivered online. Your documents stored securely, forever.”
  • Intuit Paytrust = “PayTrust’s all-in-one online bill pay allows you to easily receive, track, and pay all your bills online.”
  • MyCheckFree – “Receive and pay your e-bills at one easy, secure location.”
  • Yodlee Labs – “This is a site where Yodlee will launch (and test) all of its latest (account aggregation) products before they are launched anywhere else in market.” If you just want most recent, most-refined version, sign up at Yodlee Moneycenter.

With Manilla and Everpix, I am reminded that any offer to store your stuff “forever” really means “as long as we keep making enough money”. Personally, I’m still using my bank’s Online Billpay service along with AutoPay with credit card where possible. For archival purposes, I download any paperless bills in PDF format to a folder on my computer, which is automatically backed up daily to my external hard drive and also instantly synchronized with my free Dropbox.com cloud account. However, if I can truly view and pay all my bills in one simple mobile app and a few taps, I’d be up for that.

Filed Under: Banking, Budgeting //

LearnVest 50/30/20 Budgeting Pie Chart

Posted on March 21, 2014 // 11 Comments

LearnVest is (yet another) online financial advisor, but they are more focused on money management and life planning than nitpicking asset allocation details. Founder Alexis Von Tobel’s book Financially Fearless is on my (long) reading list, and here is one reason why – Per this Businessweek article, their budgeting advice is based on splitting up your take-home pay into three major categories with their 50/20/30 plan:

lvpaycheck

  • 50% towards Essentials, which includes housing, transportation, utilities and groceries.
  • 20% towards Savings, which can be retirement accounts, emergency funds, or debt payments.
  • 30% towards Lifestyle Choices, which are whatever things you value and make you happy. Eating out, shopping, childcare, cell phone plans, entertainment, and so on.

This is an interesting way to make people streamline their budgets. I don’t recall any other personal finance book breaking things down like this. 20% is a pretty good starting point for savings, and I like that there is explicit room for the fun stuff. (Though the fact that “childcare” is under Lifestyle Choices may be somewhat controversial. If you pay for daycare, it is not uncommon for that to be a huge chunk of your expenses.)

LearnVest has several free features and mobile app, including a Mint.com-like app that tracks your spending and matches it up with their 50/20/30 pie chart. However, they will try to upsell you a more personalized advice packages with Certified Financial Planners. Their target demographic is young professional women, but I didn’t really notice when using it briefly so far. Anyone else use them for longer?

Filed Under: Budgeting //

Statistical Proof of Lifestyle Inflation!

Posted on March 16, 2014 // 11 Comments

The idea that as people earn more, they tend to spend more as well has been termed lifestyle inflation. Derek Thompson in this Atlantic article illustrates this concept using data from the Bureau of Labor Statistics. A family led by a high-school graduate has average annual spending of $35,000. A family led by a Bachelor’s degree holder earns and spends nearly double that at $63,000. Yet both groups spend about 50% of their income on housing and transportation, much like the average household:

housingcars

Families with radically different incomes—from lawyers and doctors down to high-school dropouts—all spend about half of it on homes and getting around, which suggests an historically tight relationship between marginal income growth and marginal spending growth on real estate and transportation. You get a raise, you shack up with roommates. You get another raise, you get nicer studio. A bigger raise and you move out to the suburbs and buy a house—commensurably increasing your spending on transportation (bigger car + gas).

We earn more, and we use that extra money to buy bigger houses, nicer cars, and more gas. This blog talks a lot about financial independence, and for most people early retirement is all about your savings rate. Most people spend over 95% of what they earn (source). Early retirement involves spending closer to 60%.

However, we tend to hang out people of similar income and thus we are pulled into “keeping up with the Joneses”. Even if you earn a comfortable income that is well above average, lifestyle inflation can kill any dreams of early retirement. Focusing on managing the big targets, housing and transportation costs, can help.

See also: Your Entire Financial Life in One Deceptively Simple Chart

Filed Under: Budgeting //

AT&T Mobile Share Value Plan Discounts

Posted on March 10, 2014 // 7 Comments

AT&T Wireless has changed the pricing on their Mobile Share Value Plans, with unlimited talk, unlimited text, and 2 GB of shared data across all lines now costing $40 + $25 per line if you are off-contract. That’s means two lines with 2 GB of shared data would cost just $90 total (off-contract old phone or bring your own used phone), competing more closely with T-Mobile and Straight Talk. If you do sign a contract, the cost is $40 + $40 per line ($120 total for 2 lines) because you need to pay back the value of your subsidized new phone.

In addition, AT&T will let any customers who signed a contract on March 8th, 2014 or earlier get this pricing even if you are still in contract, provided you switch to a qualifying Mobile Share Value plan. This means that a 2-line plan formerly running $135 can now just be $90. The 2GB, 4GB, and 6GB data tiers all offer a promotional rate. If you upgrade to a new phone on contract in the future, the rate will go back to $40 per phone.

Bring on the price wars. Good news for the consumer! As always, see if you can stack an employee or student discount as well.

More: AT&T website, Verge, Engadget

Filed Under: Budgeting, Deals & Offers //

15-Minute Resolution: Save More For Retirement Today

Posted on January 7, 2014 // 3 Comments

The problem with most New Year’s resolutions is that they just take a moment to make but to actually accomplish it you’ll need to re-make that decision hundreds of times. If you’re trying to be healthier, every single day you’ll have to choose the grilled chicken with steamed vegetables instead of the bacon cheeseburger with fries. Walking the stairs instead of taking the elevator. Willpower is like a muscle, and it gets fatigued after a while.

The good news is that if you want to save more, automation technology allows you to make a decision now and never be asked about it again. If you can, consider simply increasing your 401(k) contribution rate by 1% (or more). Just log into your account today and make the change. Today being the operative word! Let’s see how much 1% is for a household with a single earner making $50,000 gross per year. For simplicity, let’s say they live in a state without income tax. If you are paid bi-weekly, putting away $500 pre-tax annually (1%) into a Traditional 401k amounts to an additional $19 per paycheck.

Alternatively, it is quite easy to set up recurring online transfers from your checking account to either a savings account or IRA account ($100 a month, $50 a week, etc). Once set up, it will happen automatically and you won’t have to think about it. I like the idea of opening a online savings account, as it gives you a separate “savings jar” that psychologically you’ll be less likely to raid.

If you do it this week, you’ll already be done with your 2014 resolution!

Filed Under: Budgeting, Retirement // Tagged:

Chart: What Percentage of Your Budget Goes Towards Food? Should You Spend More?

Posted on December 5, 2013 // 9 Comments

Here’s another interesting chart from a Businessweek article about a food-delivery start-up called Blue Apron. It shows how food costs have decreased dramatically as a percentage of total U.S. consumer spending from 1959-2013.

I’ve seen similar stats before, usually to support the argument that food really isn’t that expensive and people can pay for higher-quality, healthier, more wholesome food. (Often by the people selling it.) Does allocating less than 10% of your budget to food mean that you are choosing to eating crap? Looking at this chart in isolation, I can see how you get there, but it isn’t that simple if you look at the bigger picture.

[Read more…]

Filed Under: Budgeting //

Ooma Phone Service Long Term Review + Referral Discount

Posted on October 8, 2013 // 45 Comments

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The Ooma Telo is a VoIP system that creates a home phone service through your broadband internet. Just plug in your regular landline phones and go. Features include unlimited domestic long distance, 911 service, caller ID, voicemail, and call waiting. In addition to the one-time purchase price, new customers must pay a share of government taxes and regulatory fees that works out to around $4.32 a month.

Consumer Reports rated it their #1 home phone service in their June 2012 issue. Here is a public Consumer Reports review video:

My Long-Term Review
I bought my system in December 2009 for a then-good deal of $158, and I remembered worrying about the FCC shutting them down because I couldn’t believe their business model could be so cheap over the long haul. Well, I’ve now gotten over 6 years of home phone service for that $158, working out to under $2 a month. (Early adopters with the original Core system were grandfathered out of tax recovery charges.) It appears now that as long as the government gets their share of phone taxes and fees, they won’t be shutting down Ooma any time soon. I’m glad I spent the extra $40 to port my previous landline phone number.

The best compliment I can give about the Ooma system that I don’t even notice that it’s not a landline. It just works. In my entire time of ownership I remember reading about a few hours of downtime in the middle of night, and nothing within the last year. The call quality is always great, and I can even use my fax machine with it. In some ways it’s even better than my old landline, because I can get e-mail notifications of voicemails and then listen to them on my computer or smartphone.

The “unlimited” phone service technically has a limit of 5,000 minutes per month under the explanation that it is meant for personal use. That works out to an average of nearly 3 hours per day, every day, so that’s close enough to unlimited for me. They do regularly bug you to upgrade to their Premier level of service which has added features for another $10 a month, but I’ve never felt the need to. Just make sure your number is on the Do Not Call list and you should be fine.

VoIP home phone service is best for those people who make a lot of calls at home. I worry about accumulated cell phone radiation when making a lot of calls on my iPhone, and thus always use a headset and keep the (hot) phone away from my body. Ooma helps alleviate that concern for long phone calls.

I would pick Ooma over other costlier alternatives like Vonage any day of the week. A possibly cheaper alternative is the Obihai + Google Voice combo, but it is dependent on Google continuing to provide free phone service every year. Another option that I have not tried is MagicJack Go which includes a year of free service but after that costs about the same as Ooma (~$3 a month). Whenever possible, lower those recurring monthly expenses!

Current Ooma Deals
Update: As I am an existing user, there is a refer-a-friend promotion right now where new Ooma customers can get Amazon gift certificate via my referral link when you buy direct. Compare with Amazon’s price on Ooma Telo. I’ve been using Ooma now for over 7 years!

Filed Under: Budgeting, Frugal Living //
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