Myths On Money

I hate late fees, don’t you? Problem is, in the complexity of our daily world, things can slip past us sometimes. It happens.

That’s why I love this great tip from Isemel on the I Will Teach You To Be Rich forum.

I always pay my credit card off in full, but once in a while I forget to make the payment by the deadline. When that happens, there’s a ridiculous late fee of $29.99 or more.

Here is how to stop late fees once and for all: Get a bank account that offers free online bill pay. Set up automatic payments to the credit card, at regular intervals, of an amount that exceeds the minimum payment. For instance, if your minimum payment is typically $20, set up your online banking to automatically pay the credit card $20 automatically.

This way, even if you forget to pay the rest of the bill, you will have already paid the minimum and will not get hit with a late fee.

In my opinion, it is very effective to automate your finances as much as you can, because our finances are so complicated these days. When automating your bills, though, there are two problems to be aware of.

1. Insufficient Funds. Automatic bill pay can be problematic if you keep low balances in your checking account. A good way to try to prevent this is to schedule your bill payments to go out the day after your paycheck gets deposited.
2. Incorrect Billing. The other problem you might face is the possibility that you might be mis-billed, or that you simply won’t know how much you are spending. The solution to this problem is to track your expenses regularly. My favorite way to do this? Mint.com

By automating your bill pay, you remove the unknown element: you. Systems are great because thye are reliable. People (no matter how vigilent), are prone to forgetfulness and error. So, automate at least a minimal payment so you don’t get hit with fees, then pay the rest yourself so you don’t get hit with interest expense.

With interest rates at all-time record lows, refinancing is becoming quite a popular past time. The trouble is, refinancing costs money, and it can be hard to tell when it is a good time to refinance your mortgage. Here are a few tips to consider when thinking about refinancing:

1. How do the rates compare? This is the most straightforward and obvious question to ask. The benefit of reducing your interest rate by 4% is obviously greater than the benefit of reducing your rate by only 1%.
2. Don’t stress about waiting for “the bottom” to hit. This one is important for one very simple reason: no one knows when interest rates will bottom out. If it makes sense to refinance now, then do so. If rates drop more in the near future, it’s okay because you have already cashed in on a great deal. If you wait until you are sure that rates have bottomed out, then you are likely to miss out on the low interest rates altogether. Take the deal when it’s available. You’ll sleep better, and you’ll be certain that you’ve made a good decision.
3. Consider how long you plan on remaining in this home. The time you remain in your home is very important to all mortgage-related questions, and the question of when to refinance is not exempt. The reason this question is important is because it determines how much you will benefit from the decreased interest rate. If you can save $100 per payment, but only make 3 more payments, was it worth paying $5,000 for the refinance? Obviously not.
   
4. Get a calculator. If you’ve followed the blog for any amount of time, you have seen me do a number of calculations that may seem almost magical in their ambiguity. Trust me, no one has seen this more than I have. The truth is, in finance, the interrelations of all the factors that contribute to the final solution are anything but straightforward. There are certain trends, true, but because of the nature of the equations involved, the relationships are anything but one-to-one. So, get a calculator to help you decide when to refinance. It just so happens that I have one right on this very site that you can use. The actual functions of this calculator are complex, and delve deep into the more difficult concepts in finance, so I won’t go into detail as to how it works. Suffice it to say, it works, and you can use it to help you get an idea of whether or not you should consider refinancing. So go ahead, try it out.

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.

I like this video. It kind of illustrates how personal finance can be a lot simpler than we sometimes think it is. I will let the video speak for itself.

Couldn’t have said it better myself.