Posts filed under 'Firevalt'
A recent article in the Las Vegas Review-Journal shows that most teenagers are financially illiterate. On average, most high school seniors “could correctly answer barely half of the questions on a test about personal finance and economics.” They were also oblivious to the dangers of government spending and the concept of having to pay for the retirement of others through Social Security.
It wasn’t a matter of demographics. “From the richest families to the poorest, most parents aren’t talking to their children about money.”
The RJ suggests taking time at family dinner to discuss personal finance principles. Children aren’t likely to learn these principles if not from their parents.
Source: Las Vegas Review-Journal
April 21st, 2006
I really liked how Mary Hunt, author of a book by the same title, defined “debt-proof living”. This concept touches on so many virtues:
Debt-proof living is a lifestyle where you spend less than you earn; you give, save, and invest confidently and consistently; your financial decisions are purposeful; you turn away from compulsive behavior; you shun unsecured debt; you borrow cautiously; you anticipate the unexpected; you scrutinize your purchases; and you reach for your goals by following a specific plan.
Debt-proof living is about generosity, gratitude, and obedience. It is about sound choices and effective decisions. To debt-proof your life means to know exactly what to do with your money and have the freedom to earn and spend it when and how you choose. Debt-proof living is a way of life — a financially disciplined lifestyle that produces peace and joy.
Via: Debtspiration
April 19th, 2006
I’m fascinated by a new company called Prosper that recently sprung up. It is an online market for lending and borrowing money — sort of an eBay for financing. For instance, a borrower could post a request for $8,000 at 8% to purchase a new car. A lender might find and accept that offer, in which case the lender’s money goes directly to the borrower. Prosper takes care of running credit checks on the borrowers, intermediating the transfer of money, and skims off 1% as a fee.
As you might expect, the potential for good here is enormous. Since banks charge high interest rates to borrowers and offer very low interest rates to savers, Prosper’s smaller margins could mean real savings (and earnings) for borrowers and lenders.
Of course there is some sense of security in dealing with a bank, but I’ll be interested to see how Prosper does over time and whether or not this becomes more mainstream.
P.S. There is another company like this in the U.K. called Zopa.
April 5th, 2006
Does using financial management software make you wealthier? Does budgeting eliminate debt? The answer is no, of course not. These are just tools that help you track where your money comes from and where it goes. Software and budgets only help you become wealthier as they change your behavior. Using those tools alone will do nothing if they don’t provide an incentive for you to improve your financial habits.
In 37signals‘ new book, Getting Real, they hit the nail on the head when they said:
“If it doesn’t change your behavior, then it just doesn’t matter.”
The financial tools we use should enhance our lives, not drain our time and create more clutter. Finance software should be really good at one thing - providing an incentive to increase wealth. (Is there really any other reason we’d spend so much time scrutinizing our finances?) In regards to the time we devote to our finances, we should waste less time trying to understand all the “bells and whistles” of our finance software and more time thinking about how to spend less and invest more of our money.
Sources: Getting Real book
March 30th, 2006
Scott Berkun, a project management and product design consultant, writes about the importance of being frugal; not with money, but with our attention. He explains in his essay, Attention and Sex, that we determine the value of something by deciding how much attention we devote to it.
Law of lost attention: The value of something you spend attention on is dependent on how much attention you spend on it.
I feel this if very applicable to personal finance, entrepreneurship, or anything we wish to improve or succeed at. If financial independence is a high priority, are we devoting enough of our attention to our finances so that goal becomes a reality? We can ask that question about any ambition we have to determine if it is really valuable to us.
This is an excellent lesson for me because the time I spend on the important things in my life is often at the mercy of several less important things I try jamming into my day. Learning to focus my attention on the worthwhile will bring me the success I seek. In our day and age of mult-tasking, we divide our attention over many trivial things, and focus less on the things that will bring satisfaction and meaning.
“There isn’t a single great work in the history of civilization, no novel, symphony, film, or song that was completed as a 1/5th time-slice between e-mail, IM, cellphones and television.”
Sources: Attention and Sex
March 24th, 2006
Google just released a tool for tracking stock quotes, financial news, and market data: Google Finance. I’ve always known Yahoo Finance to be the leading site for market information, but Google Finance might give it a run for its money (pun intended). For example, Google Finance has slick dynamic graphs for checking stock prices over time. Definitely worth a look if you follow the financial markets.
Google Finance
March 21st, 2006
I read a post recently at MyMoneyBlog entitled “How do YOU budget?” I wasn’t sure how to answer that question. What does the word “budget” mean? I think for most people it means pre-determining how much money can be spent on each expense category per month; for example, $100 for food, $30 for entertainment, $75 for gas, etc. This type of budgeting is often compared to losing weight by dieting because, like dieting, it’s tedious and requires a lot of motivation to stick to it. It seems to focus too much on the “means” rather than the “end”, and that’s not satisfying. This is not the way I budget.
Another way to budget – the way I prefer – is to compare all your monthly expenses (out-goes) to your monthly income (in-goes) with the goal of being cash flow positive each month. This type of budgeting seems to be more effective because it eliminates the tedium of budgeting for each specific category. To stay consistent with the “losing-weight” comparison earlier, I would compare this second type of budgeting to playing sports as a way to lose weight and become healthier. Unlike dieting, playing a sport is enjoyable to most people, but can still achieve the same result (weight loss). The out-goes vs. in-goes method of budgeting, like sports, focuses mostly on the end result – win or lose. To simply see each month if I’ve won (out-goes < in-goes) or lost (out-goes > in-goes) is much more motivating and easier to stick to than the first method. Budgeting for each individual expense category becomes unnecessary because the motivation to “win” encourages me to manage all my finances responsibly.
Which type of budgeting do you prefer?
March 14th, 2006
I’m a Mac user now, but when I had a PC I used Microsoft Money. I used it for a couple of years, keeping track of all my incomes and outgoes. Sometimes I typed the entries, sometimes I downloaded them from my bank’s website, but each transaction always included the date, the payee, the amount, and a category I assigned it to. I prided myself on managing all the data so well and keeping it all clean — e.g. no derivative spellings such as Walmart, Wal-mart, etc. At the end of the year I found it fascinating to see how much I had spent at Wendy’s, or on shoes, or how many of the transactions were for the same exact amount.
But I’m not sure if all that data helped me much. I don’t believe complicated or even interesting reports made me a better steward of my money. I had tons of information but not much wisdom. That was the natural outcome of what I believe is a common practice for many people — copying their bank statements to a computer program.
What we need is wisdom, and it would probably help if there weren’t so much information to get in the way.
Do you pay yourself — putting aside a portion to savings or investment — each paycheck? Do you live within your means? Do you live frugally? Wisdom is to live these principles.
Who cares if you misspell Walmart?
March 11th, 2006
If you’re in debt, we want to help you get out. If you’re already out, we want to help you save and invest. Our goal is that everyone should be free of consumer debt and be saving, or especially investing, a portion of their income each paycheck.
Get-rich-quick schemes are everywhere, but they haven’t prevented us from reaching an all time high in consumer debt and personal bankruptcies. While every retailer, car dealer, and credit card company makes it easy to get into debt, no one has made it easy to manage or get out of. We want to fix that.
Getting out of debt is the baseline. Once you’re living within your means (outgo < income) and have paid off all your debts, you’ll need to plan for your future. That includes both “rainy day” emergency funds and your formal retirement. Expect that you are the only person who will be responsible for your retirement. You’ll need to set aside savings now to get there.
But then for some, retiring comfortably at 65 isn’t ambitious enough. Many people want financial independence and the resulting freedom, and they want it soon. That’s unlikely to happen from savings alone. To really become financially free, you’ll need to make calculated risks, whether by investing in yourself (entrepreneurship) or by investing in other avenues you’ve studied out.
Like other aspects of life, we can learn to be masters of our finances and free ourselves from them. Then we’ll have time and energy for more important things.
March 5th, 2006
MIT has started a research program called SIMPLICITY. Their focus is “developing technologies for design—designs that are simpler to understand, easier to use, and, ultimately, more enjoyable.” Their vision of simplicity in design is right in tune with our goals for Firevalt, the financial managment web app we’re creating. Here’s an excerpt from MIT’s SIMPLICITY vision statement:
“[SIMPLICITY] is a radical reexamination of ways to break free from the intimidating complexity of today’s technology and the frustration of information overload. It is about inventing a future where less is more.”
“The vision of SIMPLICITY is one in which “simple” is not cheap or single-function, but rather elegant and easy to use. Think, for instance, of the beautiful iPod, which has less performance at a higher price than most if its competitors, yet still dominates the market.”
Read the rest of their vision statement here.
March 1st, 2006
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