finances | Online Savings Blog

The Problem with Financial Media
02.22.08 | Money | 2 Comments | by junger

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Here at the Online Savings Blog, I don't claim to be an expert — just someone who is extremely interested in finances and the way the Internet influences your wallet.

In my time learning and sharing personal finance information, I've learned the hard way that most financial media doesn't care about your bottom line. They might say that they do (and perhaps some individuals do), but if they really cared, they wouldn't be in business.

The problem the financial media faces is that there is NOT a lot to talk about. Personal finance and investing is relatively easy.

There are a few basics that everyone should know and practice. I won't go into the details here, but beyond the fundamentals — which you can set up and live with every day of your life — there's not much you need to learn.

So what's there to talk about? Exactly.

If financial media really cared about you, they wouldn't tell you to invest in individual stocks. They'd tell you to invest in index funds. But that's it. There are a lot less index funds to talk about than there are individual stocks.

We've talked about biased financial advice before. Financial media is biased toward keeping their product in business.

They need to make sure that you continue to buy into what they have to offer, and there's only so many ways they can tell you the same things.

Media needs something to talk about. If they've already talked about the important things … well, what are you buying into?
5 Easy Ways to Cut Your Living Expenses
01.30.08 | Money | 0 Comments | by junger
Most financial advice says that, when you're saving, you should look to cut out your extra expenses: the latte factor, eating out every night, and services you pay for but don't use (like the gym).

It's true: you absolutely should.

But at some point, you're going to cut out everything you don't use. Where do you go from there?

In reality, we spend a lot of money just living: paying for a mortgage/rent, running water, electricity, heat, air conditioning and more.

They're all crucial to living a comfortable life and they all cost money. Here are 5 easy ways to cut your living expenses.
- Turn Stuff Off When You're Not Using It
  Right now, I've got the TV on in the other room and no one is watching it. That's a complete waste of electricity. I'm going to go turn it off. Okay, I turned it off. If you don't like turning everything off all the time, consider timers for your lights and setting your computer to hibernate after 20 minutes.
- Take Shorter Showers
  It may sound like a PSA for when a drought has hit, but do you really need to take such long showers? Again, I'm guilty of this, too — especially when I need to wake up in the morning — but I've found that a good cup of coffee can make up for a shorter shower.
- Use Real Plates and Utensils
  Paper plates and plastic utensils are super convenient, but they're one-time use items (unless you wash them, which I've known people to do). If you've got real dishware and utensils, use them.
- Open Your Windows to Cool Down
  Fresh air is so much better than air conditioning, isn't it? It's also a lot cheaper. Use nature's AC the next time your house is hot and you need to cool down.
- Plan Your Meals Out in Advance
  We find we have the most success in deciding what to buy at the supermarket when we know what we're going to be eating in advance. Just like going to the supermarket hungry is a bad idea, going without knowing what you're buying is a bad idea. If you decide in advance what you're going to be eating, you'll buy exactly what you need.
What easy things are you doing to cut your living expenses?
10 Smart Money Moves We Made in 2007
01.04.08 | Money | 4 Comments | by junger
2007 was a great year for us financially. No, we didn't win the lottery or get any other kind of windfall, but we made a bunch of smart money moves that will pay off well in the long run.

Here are 10 smart money moves we made in 2007, in no particular order.
- We Moved Cities
  It wasn't a cheap move, but by moving to a more affordable area, we're much more prepared to purchase real estate. Moving is not a small change — but it can have big effects on your financial situation.
- We Started a Housing Fund
  In order to meet our home-savings goal, we opened a new online savings account earmarked for housing money. Every month, HSBC automatically pulls money from our checking account and deposits it — paying ourselves first.
- We Started Using Index Funds
  Rather than trying to beat the market (an unsuccessful long-run plan), we transferred our Roth IRAs from Ameriprise to Vanguard, investing in low-cost index funds.
- Increased Monthly Roth IRA Contributions
  In addition to our move to Vanguard for our Roth IRAs, we increased our automatic monthly contributions. Last year, we used a chunk of money from our tax returns to max out our Roth IRAs — this year, we'll be closed to maxing them out without additional funds.
- Got a Promotion
  Earlier this year, I got a promotion at work, leading to more responsibility, more work and, yes, more money. While my paycheck is a bit fatter, our lifestyle isn't. We're spending nearly the same amount of money as we were before the promotion — pocketing the difference for savings.
- Bumped Up 401(k) Contribution to 10%
  At the same time I got a promotion, I upped my 401(k) contributions to 10% of my salary. Because I did it at the same time my pay went up, I never "knew" the difference and questioned its worth.
- Opened an FSA
  As I've said, the smartest $400 I ever spent was on my FSA. With a flexible spending account, the money comes out pre-tax, and with a debit card, purchases are seamless. Since it's not coming from my normal accounts, it's like buying things for free!
- Joined Yodlee to Track Finances
  If you don't know where your money is going, you don't know how to save. Even though we use a written budget, we joined Yodlee for more automatic budgeting and to track all of our accounts and net worth.
- Downgraded Cell Phone Plan
  I wasn't using all of my cell phone features, so why should I pay for them? Earlier this year, I downgraded my cell phone plan, saving money every month on features I don't use. (Even though Spring screwed up my plan change.)
- Automated Our Finances
  Even though we think about our finances daily, we don't worry about when bills are due or if we can pay for them. Nearly all of our bills are paid automatically, our savings are transferred without a key stroke, and our salaries are deposited directly.
Well, you've heard our smart money decisions for last year. Now, we want to hear yours.

What were the smartest money moves you made in 2007?
Where Did My Money Go?
01.03.08 | Money | 3 Comments | by junger

You know you have to save money. You'd like to start investing. You'd like to go on a vacation.

But you don't have the money for it. Each of these scenarios leads you to the question: where did my money go?

This is the fundamental question to beginning your financial responsibility. The first step in simple money management is to spend less than you earn.

Chances are you know how much money you make. But do you know exactly how much money you spend, and where it goes?

Being as detailed as possible in tracking your spending is a huge first step to proper money management.

Here's how I do it.

I keep receipts for nearly every transaction I make, both cash, debit and credit card purchases. When I get home, I put them on my desk to add to my budget notebook, which tracks all my spending.

The most important receipts to ensure that you get are for purchases with tips and gas purchases. You'll find out why in a minute.

I also log onto my checking account online all the time, to double check that my transactions are correct and to find out when my monthly bills have been automatically deducted.

Online banking also helps when I forget to get a receipt or lose it somewhere in the process.

As I said before, certain receipts are more important to keep: gas and purchases with tips. This is because, when you buy things with a debit card, the correct transaction amount does not appear until the payment has cleared.

When you go out to a restaurant and pay (with tip) on your debit card, you'll notice that the pending transaction only deducts the amount for the meal: not the tip. So you can't rely on this number instead of a receipt — at least not if you add the purchase to your budget that day.

On the gas side, funds do not get deducted from debit cards (even those acting as credit cards) automatically. The process normally takes a few days.

So, I always keep my gas receipts to add to my budget that day, so I don't wait for it to appear online and forget about adding it.

In addition to keeping a budget with my monthly spending, I track my expenses online via Yodlee. The number isn't as precise as my hand-written budget, but once you've categorized a few of your transactions, Yodlee does the rest.

Want to start saving more money? Find out where your money is going first.
Money Management is Simple: Don't Listen to the Noise
12.28.07 | Money | 4 Comments | by junger

I like to read (and sometimes answer) the questions on LinkedIn (add me to your network) every so often, especially in the personal finance and Web development categories.

The other day, I ran into a great question with some not-so-great answers.

Money Management: They teach in school that best way to generate returns from capital is through proper money management. What is your money management method? How do you ensure that you are employing your savings profitably? What are the best ways to protect investments from market crash and along with saving taxes?

This question goes to the heart of managing your money.

How do you save? How do you ensure you're getting good returns on your money? How do you prepare yourself for highs and lows in the markets?

As is usually the case with LinkedIn questions, the people providing the answers are the ones hoping to make some money off of the question. There's nothing inherently wrong with that, but (as often happens) the answerers are providing poor information in hopes of making a buck.

Check out these answers.

From a Capital Market Professional: "I am afraid there is no direct answer. But there are mitigation possibilities. If you find the equity market has gone over board from medium / long term point of view, start moving moneys to fixed return investments (basically debts-deposits, etc)."

From a Manager Product Marketing: "Not having any investments takes away the sorrow of having to protect it. So I would say that proper money management is to spend it."

From the Owner of a Personal Wealth Management company: "Wealth Management - my thoughts though influenced by U.S. laws (eg. tax statues) are universal: [LINK TO WEBSITE]"

These aren't bad answers, per se, but none of them are truly helpful.

Money management isn't hard, and if you know the basics, you don't need to listen to the noise. Here's my answer to the question.

There are tried-and-true, easy ways to properly manage your money. You don't need to pay for someone to tell you these.

1) Spend less than you earn.
2) Pay yourself first.
3) Automate your payments and savings/retirement contributions.
4) Invest in index funds.
5) Diversify your investments — stock funds, bond funds and int'l funds.
6) Stick with it. Don't time the market.

On a side note, make sure you're getting the most from your checking/savings account. FDIC-insured online accounts often yield much higher interest rates than brick and mortars.

Most of these people are out there to make a buck off of you, but you don't have to be afraid of managing your own money. In fact, once you get the fundamentals down, you can even purchase investments that outperform the "professionals."
Why Living on a Paycheck to Paycheck Mentality Works
12.26.07 | Money | 1 Comment | by junger

Living paycheck to paycheck isn't a great way to manage your money, but there's something to be said about having a paycheck to paycheck mentality.

We have a nice retirement accounts, an emergency fund, and are even saving specifically for a house. But we still live with a paycheck to paycheck mentality — and I'm glad that we do.

If you have automated your finances — including monthly retirement contributions, debt payments and transfers to high-yield online savings accounts — then living with paycheck to paycheck mentality is okay.

Because our finances are automated, our money is constantly doing something. It's getting added to our Roth IRAs or it's going into our housing fund or getting direct deposited into our checking accounts.

But since many checking accounts (including ours at Bank of America) pay nothing in interest, there's no reason to keep more money in there than necessary. So we only keep a certain amount in our checking account — enough to get transferred via automatic payments or to our outside savings funds and for bills.

This forces us to live a paycheck to paycheck mentality, even though we're saving for now and saving for the future.

With a paycheck to paycheck mentality, you're waiting for that next paycheck, but not just to pay the bills. It's also to invest and to stick into a high-yield savings account.

It works. Give it a shot — find out where all your money goes (start a budget), automate it, and then watch your spending.

» Next Entries

The Problem with Financial Media

5 Easy Ways to Cut Your Living Expenses

10 Smart Money Moves We Made in 2007

Where Did My Money Go?

Money Management is Simple: Don't Listen to the Noise

Why Living on a Paycheck to Paycheck Mentality Works

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