The Problem with Mint.com

Posted on May 7, 2012 Written by Leave a Comment

Mint.com is a great tool designed to give you a record of what’s going on in your financial life.  Right?  Well, sorta.

At Mint.com you create a free account, then you authorize them to connect to all of your financial institutions…at least the ones that are compatible with it.  Then, as you transact during the course of a normal day, Mint downloads what it sees at your bank and arranges it in a nice, neat presentation complete with charts and reports and…well, it’s cool…but…

…here’s the but.  Mint.com doesn’t do anything to help you plan.  Oh sure, there’s a budgeting “tool” that’s nothing more than a group of indicators that notify you when you’ve exceeded what you define as your budgeted amount.

(the real problem with budgeting tools is that they assume you already understand the underlying theory behind what a budget really is..a plan, that you create.)

So, if you, like most of the rest of the world, estimate that you spend X on something every given month, then you might set the budget at X and just wait until the software tells you you’ve exceeded your budget.  It’s at this point that the lack of discipline is revealed as you breeze right on by the amount you set and just keep on spending.

Back to the point.  Mint.com doesn’t do anything to help you plan…no, let’s say… forecast instead.  There’s no way to project a future balance based on your current spending plan compared to your balances and your income.  It only tells you what you already know.  That’s not very valuable to me…but I guess that’s why the “service” is free.

Filed Under: Personal Finances, Planning and Budgeting Tagged: , , , ,

A Quick Note on Borrowing To Save

Posted on October 12, 2011 Written by Leave a Comment

Borrowing to save?  Yep.  That’s what I said.  Borrowing to save.

If you know me, you know that I detest debt.  I will NOT borrow money, and I also won’t lend it.  I have enough of a history of debt, and I’m done with it, permanently.  It’s worth it to me to suffer now so I won’t be a slave any more.  Period.  It has ruined aspects of my life, and it has ruined relationships.  It’s not worth it.

With that said, the inspiration for this quick note (grin) came from a recent comment on a post that I left on Facebook.  The comment goes something like this:

I love the part about saving, but sometimes you have to refinance in order to save.

If your brain just popped like the tin lid on processed food and your palm found its way to your face because you know better, then good for you.  You have 20% of the equation solved.  The remainder is 80% behavior.

Myth.  Refinancing will free up extra money so you can save.

Truth.  Most Americans who refinance to free up some of their income will spend the difference.  They won’t save it.  True wealth-building savings comes 2nd to giving, not 2nd to spending.  You see, the healthy flow of your income should look something like:

1.  Give

2.  Save

3.  Spend

IN THAT ORDER

You give to your charities or cause or church first.  After that, you pay yourself by SAVING.  Don’t you work hard?  Why would assign your most valuable wealth building tool (your income) to someone else after you’ve already completed your giving.  The bank is not a charity.  Finally, what’s left over is what you learn to live on.  If you can’t cut lifestyle AND increase income, you’re always going to be broke.

Do it any other way and I would challenge that the person who GIVEs SAVEs SPENDs will outperform the person who SPENDs SAVEs GIVEs.

If your mindset tells you that the only way that you can save is to combine your loans into one lower payment so you have extra money at the end of the month, then you’re already losing financially.  Rich people ask the question “How much does it cost?”  Poor people ask the question, “What’s the monthly payment.”

The implication by someone who would refinance in order to save is that they also are concerned more with the monthly payment than they are with the total cost over time.  Now, I don’t know the particular person who made this comment, but they’re about as normal as the average broke American, buying into these types of lies.  They probably don’t have an emergency fund, and they probably owe many people lots of money.

The reason that being concerned with the monthly payment keeps you in a rat race of “brokeness” is because in order to get rich, it takes TIME, and people focused on monthly payments are financially myopic.  Investments take time and hard work.  Growth takes time…and hard work.  If you’re focused on how much this month, then you’ll miss how much it really costs.

A good example is the simple difference between a 15 year and 3o year mortgage.  If you compare the two, a 15 year note for $100,000 at 4% yields a monthly payment of $739.69 and has a total cost of $133,143.83.  A 30 year note for $100,000 at 4% yields a monthly payment of $477.42 and a total cost of $171,869.51.

So, you save $262.27 per month by taking the 30 year but by doing so, your total cost increases by $38,725.68.  That means that you have to save $262.27 per month for 147 months just to break even on the added TOTAL COST of the note, and then you’ll STILL HAVE 213 months of mortgage payments left.  On the plus side, that means you’ll have a pretty healthy savings account by then.  But wait.  If that’s the case…if you’re able to save the difference after financing the loan, or re-financing, then why weren’t you able to save before you had the loan?  What makes you think you’ll have the discipline to carry this out when you don’t have any savings to begin with?  If you DID have the savings to begin with, then you wouldn’t be borrowing any money, and the $100,000 home would cost you just that.  $100,000.  At best, you’d have a healthy down payment, reducing the overall cost AND the monthly payment.

Big news flash.  People don’t have a habit of positioning themselves such that they have extra money with which to save.  They typically spend first.  When they apply for loans, they approach their lenders with the mindset that says, “how much can I afford every month?”  The average bank then gives you a maximum price for your purchase to fit that number and then you’re tapped and won’t have the extra income to save the difference.  The bank wins.

Don’t fall into this trap.

Give.  Save.  Spend.  Sacrifice now so later you’ll be able to live crazy well and help others do the same.

Wall Street has nothing to do with your personal economy.

 

Filed Under: A Call To Action, Stupid Tax Tagged: , , ,

How to Settle A Debt for Less Than You Owe

Posted on September 27, 2011 Written by Leave a Comment

Being in the real estate Short Sale niche over the past 3 years has given me insight to how banks view their customers.  It’s also given me insight to the process involved in settling a debt for less than you owe.

I won’t go into detail about the different types of debts that you can have as most of them fall under the category of consumer debt.  I’ll focus primarily on these debts as they are the ones that are most often settled for less than is owed.  Consumer debt is basically anything that is not a mortgage.  There.  That makes it simple.  So how do we settle for less?

Let’s break it down to a rudimentary example.  You loan me $100.00 and I pledge to pay it back $10.00 at a time for 10 months.  For the first 3 months I pay on time, and you’re happy about that.  In the fourth month, I pay you late, and you extend some grace to me, but that doesn’t last long.  In the fifth month, I simply don’t pay you at all.

Quick recap.  You’ve loaned me $100.00.  I’ve paid you back $40.00.  I still owe you $60.00, but for some reason (and this is where the moral argument can be born), I am not paying you any more.  That reason may be legitimate, or not, but either way, the bottom line is, I owe you $60.00 and I am no longer paying.

It’s at this point that the relationship between the lender and the borrower becomes strained.  Whether you’re a bank, or just a friend lending money, you don’t want to have relationships in your life that become tainted by unfulfilled commitments.  They’re no fun.  Until the original agreement is either fulfilled, or renegotiated and ultimately settled, you’ll have tension.

(On a side note, the difference between a personal loan to a friend and a loan from a bank is that your friend probably cares about you and the value of the friendship isn’t worth the tension that a loan brings to it.  The bank, on the other hand, doesn’t give a crap about you.  They just want their money, and they’ll use every psychological tactic to instill fear in you to get what’s owed them.)

Both have one thing in common, however.  Both will always take less than you owe, if and only if they have come to believe they won’t get anything from you.  That’s the “hands in the air” feeling.

So in this example, I owe you $60.00 and I haven’t paid you in a long while, and it’s starting to affect my life in ways I don’t want.  So, to get the problem solved, I manage to strike a secondary deal with you (second to the original loan) and I offer you $20.00 to call it even.  You may want to know why, but ultimately, it’s been long enough that you no longer care about my hardship, nor do you want any excuses.  You just want some of your investment returned to you so you can go about your life and find better places to put your money.  So, you take it, and you settle the debt forever.

This simple exercise works whether you owe your friend $100, or you owe the bank $200,000.  Lawsuits are expensive, and nobody wants to go through them, so 99 times out of 100, he to whom you owe will take less than you owe when it comes down to it.

 

Filed Under: Tips and Tricks Tagged: , , , ,

The Value of Time, The Cost of Impulse, Hover Your Mouse

Posted on May 11, 2011 Written by Leave a Comment

Sounds like a great title doesn’t it!  What inspired me to post this evening?  Well, it’s as simple as an unbelievably obvious trap posted on Facebook that has been rampantly unleashed…

…it’s a trap that not only takes up your valuable time, but also spreads the disaster across every one of your friend’s walls, taking up their time…

…all because of impulse.

Let me jump to the moral of the story, even though I think I’ve mentioned it before.  Time is valuable, and there are thousands of @$$holes out there who don’t care about your time, and plan to attack you and your ignorance at every turn.  (Remember, ignorance just means you don’t know this fact.  It doesn’t mean you’re stupid inherently.)

One of the most overlooked aspects of most people’s personal economy is the actual value of their time.  A) You are worth more than you think you are. B) You are worth more than you think you are.  C) I’m wasting your valuable time by writing this a third time.

Your wage at work is not a defining factor of your value, because you aren’t working 24 hours, 7 days per week.  When you’re not working, what would you ask someone to pay you to give up your free time?  $25 dollars per hour?  $50?  $100?  Consider this as you spend free time.

Back to the problem at hand.

Online phishing scams, (which chew up your free time) are extremely easy to avoid, as long as you develop the mindset that they exist [and will never go away] at nearly every turn you take.  If you adopt this way of surfing then you’ll always be aware that you are a target in the scope of an unknown online “terrorist” (I know, exaggeration, but it feels like it anyway) looking to suck the life and time out of you (didn’t we establish that you’re worth more than you think?)  Many times the only thing that it accomplishes is eating up computer network bandwidth to slow down the system overall, i.e., Facebook.  Imagine what’s going on when a link that you click sends a message to all of your friends.  That’s 500+ (oh, sorry, are you not that popular?) people or even more that will get a message…times 500, times 500, etc., until millions, even hundreds of millions of people receive the nonsensical message.

So, how do you avoid these?

Concerning hyperlinks (if you don’t know what a hyperlink is, turn off your computer forever, or read this,) take it upon yourself to do a quick verification of the destination of the link.  P.S., this is a perfect opportunity to try out that hover idea, which I’ll explain below.

When you encounter a hyperlink, hover your mouse over it before you click it.  When you hold your mouse over the link, you’ll see, in the status bar at the bottom of your browser, the actual address that the link opens is revealed.

If the destination in the status bar is unrecognizable to you, DO NOT CLICK THE LINK, unless you know for certain you were expecting a message from someone with a specific link.

If the destination in the status bar is recognizable, but you’re unsure…DO NOT CLICK THE LINK. Instead, research the validity of the message sent to you.

Soon, you will come to understand that the time it takes for you to deal with these annoying problems isn’t worth the time it takes to deal with these annoying problems.  I know, like I said before, again, it sounds repetitively redundant, as well, but…

Anyway, as I was saying, sometimes the goofy messages you receive aren’t worth your time anyway, because the person sending them isn’t aware of the value of their own time.  So, if the link you receive is legitimate, but it encroaches upon your valuable time, politely delete it :) .

 

 

Filed Under: A Call To Action, Basic Life Skills of the 21st Century Tagged: , ,

Are You Running Red Lights With Your Money?

Posted on September 14, 2010 Written by Leave a Comment

There are 3 things that you can do with money.  You can give. You can spend. You can save. Concerning spending, there are two ways to measure whether or not your spending is effective in your life.  The first way is obvious…profit.  When you spend $1.00, will it return you $1.25?  Can you spend $7.00 on an antique dresser, refurbish it, and sell it for $70.00?  The second measure is utility.  Utility is a micro-economic term to describe an acceptable measure of enjoyment that you receive as a result of spending money.

One example I can think of is an ice cold beer at home versus an ice cold beer at a sports bar.  A 12-pack of beer will run you around $12-13.  That’s about $1.00 per beer.  A beer at a bar will run you $3 to $6 depending on the time of day.  The beer is the same, but the atmosphere is different.  If you’re willing to spend 200% more on a beer at a bar because the added benefit of being social is worth three times the cost, then to you, the measure of utility returns dollar for dollar, at the very least.  You see, when you spend $3.00 on a beer, it needs to be worth at least $3.00 to you for it to make sense, OR you’d have to be able to justify it by re-selling it for a higher price, which you aren’t going to do with this particular example.  For most, the $3.00 beer is worth far more than $3.00 as a measure of utility, which makes it a green-light expense.

When we increase the cost of doing something, the corresponding result must be either a financial gain, or a measure of utility that outpaces the cost.  If the incremental increase in cost does not return a greater increase in profit or utility, then it’s not worth doing, and will actually become a cost center in your life, hurting you in the long run.

We live in a world where there are plenty of “red lights” to indicate that we should not be spending, yet we see only green lights.

This isn’t so complicated, yet too many people act as if it is a green light world and run red light after red light without so much as tapping the “expense brakes.”  This process is about scrutinizing your results hard and understanding exactly where they come from.  Don’t pay for a second of anything until you’re sure the first one is producing great results!”

-Gary Keller, The Millionaire Real Estate Agent

Take inventory of the recurring expenses in your life that aren’t producing either a financial gain or increase in utility.  If it’s not doing anything for you, stop spending it.  Are you banking somewhere that charges you fees to hold your money?  Move your money somewhere else.  Are you parking in a paid parking spot when you live only two miles from work?  Ride a bike.  Is your girlfriend spending your money?  Shoot her.  (just kidding…please don’t shoot anyone, unless you’re a film maker.)

The whole point is that if you’re spending money without knowing about it, and you’re afraid to reach into the cookie jar (look at your financial situation), then you’re probably running red lights with your expenses.  Stop at the next red light and ask yourself if the money you just spent was worth spending.

Filed Under: Hey! Wake Up! Tagged: , , , ,
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