I’ve been catching up on my stack of old magazines, and in the process discovering a bunch of new websites. One appropriate site to mention is Bundle.com, which describes itself as the “first money comparison site that lets you see how people just like you spend and save money.” Here’s a promotional video from them which walks you through it:

For example, this is what the households in San Francisco, CA were spending their money on in December 2009:

“House & Home” does not include mortgage or rent, but are things like utilities, home repair and improvements, and phone service. “Health & Home” includes insurance, child care, pet care, and charitable giving. Where does the data come from? Via their FAQ:

With a team of experienced statisticians and data junkies, we’ve compiled, tagged and sorted data from a (still-expanding) collection of sources. Our data comes from the U.S. government, from anonymous and aggregated spending transactions from Citi, and from third party data providers.

Aha, my sneaky Citibank card! This is exactly the kind of data I would think would be recorded and sold from aggregation sites like Mint.com. Now, is it just me, or is there no data available under the “Saving” tab?

I’ve been trying to track our expenses better using Mint.com, which means combing through transactions and manually correcting many of the automatic categorizations. I think it’s working, at least in that I hate doing it so much that didn’t make a purchase today so I wouldn’t have to categorize it later. 🙂

I found the home page chart greeting me today amusing:

We did pretty good this month, but it would seem like all we do is eat and drive (and in the case of fast food, probably both at the same time). I notice that housing and utilities aren’t included, but I’m not going to tweak the targets until I have a couple months of spending data first.

A reader recently asked me about what I thought about the fact that financial aggregation site Mint requires you to give them limited Power of Attorney when using their website. There was also a recent discussion on Bogleheads about it. You can find it in the Terms of Use Agreement page.

For purposes of this Agreement and solely to provide the Account Information to you as part of the Service, you grant Intuit a limited power of attorney, and appoint Intuit as your attorney-in-fact and agent, to access third party sites, retrieve and use your information with the full power and authority to do and perform each thing necessary in connection with such activities, as you could do in person. YOU ACKNOWLEDGE AND AGREE THAT WHEN INTUIT IS ACCESSING AND RETRIEVING ACCOUNT INFORMATION FROM THIRD PARTY SITES, INTUIT IS ACTING AS YOUR AGENT, AND NOT AS THE AGENT OF OR ON BEHALF OF THE THIRD PARTY. You understand and agree that the Service is not sponsored or endorsed by any third parties accessible through the Service.

Sounds serious! My first thought is that without this clause, Mint could not perform their intended service of being a one-stop shop for all of your online financial accounts. They would essentially have to walk up to every single site and ask for permission to be an official portal for them, yet at the same time be released from liability. That would be basically impossible.

In the end, you are giving up some of your rights in exchange for the convenience of having all your accounts checked for you at once. If you are worried about something going wrong with either Mint, a rogue employee, or a malicious hacker getting access to your personal information, then you might consider limiting what accounts you link.

Along that line, I would think that credit cards would be both the most helpful to link since you can then track your expenses, while also having the least exposure to fraud. This is because as long as you report any fishy behavior to your credit card issuers as soon as you find it, you likely won’t be liable for any unauthorized charges. (And if you monitor regularly with Mint, you’ll be that much more likely to notice…)

However, I for example would be more hesitant to link my Vanguard and Fidelity accounts with the bulk of my IRAs and brokerage accounts, as the benefits aren’t as great. Most of my net worth is stored at those brokers, and any screw-up would be highly stressful. Besides, I can usually check my balances at those sites separately with little added effort.

What do you think?

Yesterday, Mint.com announced that they were acquired by Intuit for $170 million. Not too shabby. Intuit is best known for personal finance products such as Quickbooks, Quicken, and TurboTax. They also released Quicken Online last year, which was basically a direct competitor to Mint.com. Both aggregate your spending and income by automatically accessing the data your financial websites, and analyze your habits for you. However, according to their press release, Intuit intends to keep both of the them separate:

Intuit intends to keep both the Mint.com and Quicken Online offerings, with each serving separate and equally important purposes. Mint.com will become the primary online personal finance management service that is offered directly to consumers by Intuit. Quicken Online will connect Quicken customers across desktop, online and mobile to deliver easy, anytime-anywhere access. This will help accelerate Intuit’s ability to create products and services that make managing money easier for all Intuit customers.

One of the benefits of this deal seems to be that concerns about data safety might be alleviated. Millions of people trust Intuit with their tax returns, which are probably some of the most sensitive data out there, so they might be more comfortable with sharing their financial website passwords with Intuit.

On the other hand, the competition between Quicken Online and Mint.com probably inspired some extra features and also made sure that both services remained free. According to WalletPop, there are “no plans” to charge for either of these services for now. Both sites have improved a lot recently, I just hope that continues.

For the past several months, we’ve been using a crude but effective way of tracking our overall spending each month. The basic idea is that we only put the amount of money we actually want to spend into our primary checking account, and then pay all our bills out of that account. Everything else goes directly into either a high-yield savings account, an IRA/401k/403b, or a brokerage account.

Add in an appropriate buffer balance to avoid overdraft fees, and ideally our bank balances should look something like the sinusoidal line below:

So what is a proper spending goal? I would recommend looking at your current spending levels first, and then deciding on a numerical goal of say $X,XXX per month.

Or, for us, we decided that we wanted to live on only one of our incomes (the lesser one). So only that paycheck is direct deposited into our “spending” account, minus retirement account contributions. We pretend this account is all we have, carefully watching that the balance does not go below the buffer level. (We are signed up for e-mail alerts if we do hit that barrier.)

In addition, we note the high and lowest balances for the last 30 days. This helps keep a rough trend that we are headed in the right direction. Here is an graph made from the actual daily balances of our checking account from the last few months:

Benefits
The biggest benefit is that because it is so simple, we actually do it! By keeping all our other transactions separate, it really helps us pretend that we only have a certain income. It’s a reflex that when I see the balance get low, I get nervous and start changing my spending behavior. If we eat into the buffer one month, then the next month we have to dig our way back.

Also, looking at the big picture in this way prevents the cheating that sometimes happens when we have a large unexpected expense like a plane ticket to visit sick family or a surprise car repair. It’s so easy to ignore that chunk and say that we still did okay our regular categories like “Gas” and “Groceries”. And we all have unexpected expenses, right?

Drawbacks
This system really works best for those that already have a basic idea of what they spend each month, and aren’t looking for drastic changes. It does not provide any deep analysis, such as identifying areas to cut back. We’ll have to do that separately, or use another budgeting system.

I just filled up my tank for the least amount of money in a long time. When I first wrote about hedging against rising oil costs, the national average was $3.70/gal and headed towards $4/gal. Now it’s around $2.15. Remember when we were all afraid of $5 gas? Which got me thinking, perhaps now is a good time to reconsider hedging gas prices?

Example scenario: If you drive 12,000 miles per year and your car gets 25 MPG, that means an annual fuel bill of $1,920 with $4 gas. But with $2 gas, your annual bill is now only $960. Makes sense, a doubling of price from $2 to $4 again will lead to a doubling of cost – nearly $1,000 per year.

Now let’s say you buy $1,000 of one of the two major oil ETFs tracking crude oil prices, USO or OIL. (Use a broker with free trades.) If crude oil prices jump again, then the value of these stocks should roughly rise to compensate. If $4/gal comes back, your annual fuel bill would rise by $1,000, but your oil futures stock should also rise by $1,000. You’re virtually fully hedged this way, even if gas goes to $6/gal or higher.

So I suppose being fully hedged means buying as much oil ETF annually as you spend on gasoline in that time. Effectively, you are buying a year’s worth gasoline ahead of time and locking in that price. If gasoline wasn’t so difficult to store for long periods, you could do this manually.

Now, there is no free lunch here. If gas prices drop even further, then you won’t be able to benefit from cheaper gas either. A drop to $1 gas would leave you missing a savings of $500 per year, although I have a hard time seeing it drop that far.

Cost of hedging. Don’t forget, you could have invested that $1,000 somewhere else. If you assume an annual return of 8%, that’s a missed opportunity cost of $80 per year. Of course, we all know now that assuming stable 8% returns is not good. If it would have been held in a bank instead (a more likely scenario), then a 3.5% APY leads to an annual cost of $35, or $3/month.

Hedging is about having a price that you are comfortable paying, so that you don’t have to worry about unexpected price swings. Usually, it is also the case that you are more afraid of a potential rise than a potential drop. Gas prices have been one of the more volatile parts of our budget, and we could use this period of lower prices to build your hedge. Is it worth paying $3/month for such a hedge? I’ll let you decide.