Myths On Money

The complexity of the current credit crisis we are facing can be daunting. Understanding how the credit crisis happened can be even more daunting than understanding what the crisis even is.

But I have to tell you that I was blown away by this video by Jonathon Jarvis. He breaks down the crisis so simply and cleanly that it makes perfect sense. Plus, the visualizations are fantastic, and make it fun to watch. It’s a smidge on the long side, but trust me, it’s worth finishing.

This video answers all of the following questions:
What is the credit crisis?
What caused the credit crisis?
What is a sub-prime mortgage?
What is a credit default swap?
What is a collateralized debt obligation?

Check it out. You will not be disappointed.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Today, we are going to take a look at my favorite online (and FREE) personal finance software: Mint.com.

Traditional Software

For a number of years, I used Quicken’s basic finance software to track my expenses and monitor my budget. While the program was very good, there were a few ways in which these new online tools are better suited for most people. The primary challenge was the complexity of Quicken. While uploading our transactions and categorizing them was fairly straightforward, accessing the reports could be quite confusing. The software is very powerful and has many many useful reports, but the problem was that I did not know how to use the vast majority of the reports, and setting them up to be easily useful was very difficult. The complexity and wide array of available reports made it a bit time consuming to use, and somewhat frustrating at times. I didn’t want to spend a lot of time budgeting, so as a result I did not track my finances as closely as I would have liked.

Mint.com

The first thing you may notice when you go to Mint.com is the fresh, very Web 2.0 styling. The visuals and colors all pull together to make the site very easy on the eyes. But, we’re not here for fine web design, are we?

Setting up your accounts in Mint is very very easy. Just enter the name of your bank, then the log in information, and you’re done. Mint’s claim that you can set up your account in 5 minutes may be a bit of an exaggeration, but not by much. I think it took me about 7 minutes to set up all my accounts. Very easy, simple, and straightforward.

Mint.com automatically updates all of your accounts each time you log on. When it updates, it categorizes your expenses for you. The categorizations it makes are pretty accurate, but you will of course need to check on the them and make some changes.

My favorite thing about Mint is that it shows you your net income for each month. This chart helps you gauge how well you are doing month by month, and if you are having success in saving money. It also shows you if your spending is trending upward or downward, and by how much. As you can see, I made a major purchase in September, followed up with some bonus income in October. But, as a whole, my net income each month is positive. This is what you want your net income to look like also. If you have negative net income, then there is a major problem and you need to take drastic steps to change your spending habits.

One thing to make sure you use on Mint is the budget tool. It is VERY simple and easy to read. You simply enter how much you want to spend in a given category each month. Then, as the month progresses, the budget area will keep a running total of how much you have spent in those categories. Piece of cake.

Another great thing about Mint.com is that it is super easy to pull up a pie chart showing the areas where you are spending your money. The pie chart allows you to drill down into the data for each category. So, if you see the category “Groceries”, you can click on it and it will change the chart to show you all you “groceries” purchases. Then you can click on a purchase to go to the transaction page for that transaction to view the details and make any changes that may be needed.

Mint also provides you with alerts when it notices a change in your spending habits, or when you are over budget. You can choose to have Mint email you when you overspend on your budget, or when you have unusually large transactions occur. You can always opt out of the emails, but the main page of Mint will always display these alerts for you.

Overall, Mint.com is the best personal finance software I have ever used. It is fast, easy, convenient, and powerful. I recommend all my readers use Mint.com.

Even among top earners, “most people think ‘rich’ is more than what they have,” says Mr. [Ronald] Wilcox.

It’s natural to compare our lot with that of our neighbor. But we tend to fixate on the most obvious signs of status and success, while turning a blind eye to other telling details.
The Wall Street Journal

I think about this kind of stuff a lot. We have a great tendency to measure our financial success by how our possessions compare to the possessions of our neighbors. Here’s an example from my life. I think people sometimes laugh at me for the car I drive. I drive a gently used, 1995 Civic, and I absolutely love it. It’s not perfect. The steering wheel squeaks a bit when you turn it in freezing temperatures. The trunk has a small dent where I accidentally bumped into the bumper of a truck in a tightly packed parking lot. But it runs great. It has never broken down in the 8 years it has been in our family. It gets around 40 mpg on average. Because it’s small and can’t do all that much damage in an accident, the insurance is very affordable. People probably see me in it and think I’m poor. And that’s a shame. Because this amazing little car is one of the big keys to my financial success. So I really don’t care what people say about me behind my back when they see me drive by in my little wonder car.

When I see someone driving an expensive car, living in a big expensive house, etc, I don’t envy them. Far from it. Rather, I pity them. Pity, you say? How can you pity the guy in the $60,000 Mercedes? Easy. I know how he got that car. He financed it of course. So, instead of his car showing me his great “wealth”, it shows me how indebted he is. And I find it sad that he is in debt. Do you have debt? Is it good? Does it make you feel great inside, knowing that you owe money and that others have power over you because of it? No! Being in debt does NOT feel good. I can’t even imagine owing as much money as the man in the Mercedes. So I feel bad for Mercedes-man. He doesn’t have wealth. He has debt. He is a slave. He is owned by a bank, a credit union, or a dealership. I, in my cheap car, am free. Which would you rather be? Do you want to LOOK rich, or BE rich? Truth to tell, I want both, don’t you? I would love to drive a Mercedes or a BMW or a Ferrari and know that I actually own it. I mean, how cool would that be? The truth is that you can have both. Really. Just not right now. Can you be patient? You have to not look rich for a while now, so that your wealth can have a chance to grow. Once it grows and reaches a certain stage of financial maturity, then you can cut loose if you want, and you will both BE and LOOK rich, if you wish. Just wait. Live on less now, save your money, earn that interest, and become rich. I think it’s much easier to look rich when you actually are rich, wouldn’t you agree?

I think, though, that when you get to that point, you will find that looking rich is over hyped, and you won’t care if you look rich or not. Maybe I am wrong, but I think a life of thrift is great for showing us what’s most important to us, and it’s usually not money (if money was most important to us, then we wouldn’t be thrifty because then we would not LOOK rich). Yes, I would like a Mercedes. Do I think I will ever actually own one? Probably not. When I get to my financial freedom point, I think I will use my money for other things. What things? The same thing I have always spent my money on, the things that are most important to me.

You know those little things you carefully cut out of the paper each week, then promptly lose/forget about? Those are coupons. Everyone knows about coupons, and how much money they can save when you use them to buy things you normally purchase. The good news is that coupons exist in the digital world, too, in the form of coupon codes.

The trouble I always have with coupon codes is that I NEVER seem to have one. Ever. Well, I decided to do something about that the other day. The result: I found RetailMeNot.com

Retailmenot works a little differently than some coupon code sites you may have been to. In Retailmenot, users submit codes that they have found. Others try the code, and report on whether or not it worked. So when you go to Retailmenot, you find can find a whole list of coupons codes for the website you are curious about, and a ranking for how frequently the code worked when people tried it. I have used it several times already, and it has worked great.

The thing that really sets retailmenot apart from the crowd, though, is its downloadable browser extension. If you use Firefox or Internet Explorer (and possibly other browsers), you can download an extension for your browser that will check every site you go to, and then automatically inform you if retailmenot has coupon codes for that site! So, from the moment you visit a potential shopping site, retailmenot will notify you of possible savings. It’s like walking into Walmart and being handed a book of actual, usable coupons. It doesn’t get any easier to save money than that!