The other day, a law student at MIZZOU sent me an email asking for advice on personal finance software. I discussed this with the geekiest member of our faculty and his summary of the marketplace was quite informative. Thus, it is this week’s Tip of the Week.
First, when considering personal finance software you have two primary choices. You either (1) purchase desktop software that you install locally on your personal computer or (2) you utilize online software that you are able to access from any on-line computer. We’ll discuss the advantages and disadvantages of each, leaving the decision of which to utilize to the reader.
Desktop Software
Advantages:
· Security is good as the data are on your personal computer. Viruses, however, can steal your information or your hard drive could crash. That said, any computer user should have strong anti-virus software installed and have backups made of important files.
· It can be set up to work with other on-line accounts and to self-update information.
· Desktop software is more flexible, allowing you to classify more accounts than most online versions.
· If you utilize Quicken or Microsoft Money, you have the strength of either Intuit or Microsoft’s word that the product will be continually enhanced.
Disadvantages:
· You will have to pay for upgrades, often costing between $50 and $100 every 2-3 years.
· The software is only on your machine, making it difficult to view over the internet. It is true that the software can publish to an online site, allowing you to view some pieces of your information over the internet, but these are not as sophisticated as the online software.
· The potential loss of data is very real, as too few people back up the data on their computers.
· The software is not updated as often as the online software.
Online Software
Advantages:
· Online software is accessible from wherever you can use the internet, including your mobile phone.
· Updates are automatic. Some sites regularly retrieve information from your online accounts.
· All the processing of data goes on through secure servers and is backed up by the provider.
· You can share information with others. For example, a husband or wife can let each other see their finances at the same time from different locations.
· Some provide free services such as bill pay.
Disadvantages:
· All of your account information is online. If someone hacked into the servers of the online provider, your data could be compromised.
· Online software is not as flexible. Some procedures may not be able to be accomplished by the online software (e.g., savings bonds).
What it comes down to is your personal comfort level and your satisfaction with the product for the purposes you need. Luckily, most of these products offer free trials online. As a point of departure, I would download some of the free trial software onto your desktop and try out some of the online services.
Desktop:
1. Microsoft Money: http://www.microsoft.com/money/default.mspx
2. Quicken: http://quicken.intuit.com/help-me-choose.jhtml?lid=site_banner
Online:
1. Yodlee: http://www.yodlee.com (choose the Yodlee Money Center link)
2. Quicken Online: http://quicken.intuit.com/help-me-choose.jhtml?lid=site_banner
3. YNAB (You Need a Budget): http://www.youneedabudget.com/aw/quicken.php?gclid=CPG34auk9JICFQ4JPQodZHEvzQ
Our geek uses Yodlee. It is free, and they are constantly updating. Moreover, they actually sell their services to banks and other institutions. Personally, I don’t use any of them. I use a spreadsheet application that I wrote and have used for several years. The trouble is that I’m old and way behind on the evolutionary curve. This weekend, I plan to explore these options to see if it is time for me to move into the 21st century with you.
If you have any questions, let me know. Between The Geek and I, we’ll do our best to help.
- Robert O. Weagley, Ph.D., CFP(r)
Chair, Personal Financial Planning
University of Missouri
Columbia, MO 65211
NOTE: This is the fourth of our new MU Financial Tips of the Week and was written by Rob Weagley, Ph.D., CFPTM, Chair of the Personal Financial Planning Department, University of Missouri, with lots of support from Andrew Zumwalt. Andrew is the Director of our MoTax program where we enhance financial education through taxpayer assistance - a program aimed at low to moderate income households. I appreciate hearing from you about ideas for future “Tips”. Thanks. – Rob Weagley
Friday, April 25, 2008
Tuesday, April 22, 2008
How to get rich in America
· Recognize how lucky you are to be you. First, you’re either an American or you are being educated in America, a country with 6% of the world’s population and 35%-40% of world’s wealth. In an absolute sense, what you already have at your disposal in terms of freedom and financial resources exceeds that of most of the rest of the world’s population. Be grateful for this and return the favor by making a positive difference in our world.
· Understand the power of compound interest. You probably won’t get rich from your earnings – at least most people can’t. Always pay yourself first, save your money, save religiously, save 10% of your first paycheck after graduation – every paycheck until you retire. You’ve heard this before, but it bears repeating. A 22 year-old, with a $30,000 / year starting job, saves $3,000 per year the first year. With 3% inflation in earnings/savings; a 5% rate of return above the rate of inflation, the saver would have $479,100 in “real” dollars (adjusted for inflation) when they retired. (Or, $1,811,764, as measured by the number of greenbacks/dollars.) If they wait until they are 32 to begin saving for retirement, their retirement funds would shrink to $270,961 (real) or $762,447 (nominal). This is huge.
· Resist temptation for immediate gratification. We’ve talked of this often. Bad consumption decisions can cost you a fortune. Don’t gamble. Don’t let your ego be tied to what you own.
· Take good care of your health. Exercise and eat well to lower your medical bills. This gives you greater income, leading to more savings, and on to greater wealth. Take a class in nutrition/fitness. Besides, you’ll feel better!
· Get a good education. You’re doing that! Most of you are in college or have completed a college degree. Know how special you are, as only 24% of the US population has a bachelor’s degree and 9% an advanced degree!!!
· Consider the financial benefits of being married. Research shows that married people earn more and have greater wealth than single people. They should, as they often have two incomes and are likely to have two brains. Married people tend to be healthier, happier but remember to marry the right person, as divorce can undo the best laid financial plan.
· Establish and maintain an emergency fund. Increase your insurance deductibles and maintain adequate insurance coverage in each of these areas: Health/Disability, Life, Property/ Casualty, Retirement Savings, and Liability.
· Don’t try to beat the market. Index funds work well. If you don’t believe me, read the old book; Winning the Loser’s Game, by Charles Ellis. If you’d like others to manage your money, at least understand your investments. When you are getting started, remember that small investors have small portfolios and that it is hard to be well diversified with a small portfolio. Once you’re wealthy, you can take some of your money and make some riskier individual investments.
· Strive for a balanced life. Live a principled life that is full of integrity and responsibility. At the University of Missouri we have Four Values: Respect, Responsibility, Discovery, and Excellence. While these are pretty good cornerstones upon which to build your life, you’ve your own values. Remember the person you want to be and strive to be that person.
NOTE: This is the third of our new MU Financial Tips of the Week and was written by Rob Weagley, Ph.D., CFPTM, Chair of the Personal Financial Planning Department, University of Missouri. He appreciates hearing from you about ideas for future “Tips”. Importantly, feel free to forward our “Tips” to others and remind them that they can sign up to receive the tip by sending an email to financialsuccess@missouri.edu with “Subscribe” in the Subject Line. Thanks. – Rob Weagley
Robert O. Weagley, Ph.D., CFP®
Chair, Personal Financial Planning
University of MissouriColumbia, MO 65211
Monday, April 14, 2008
Finding Money Where You Least Expect It…
If I were to offer you $10, with no strings attached, would you turn it down? Of course you wouldn’t. That $10 would immediately apply to the asset side of your personal ledger and your net worth would immediately be $10 greater. Knowing this, however, does not stop you from burning, drinking, or driving this same $10 away from your assets each and every day, week, and, over a year, these decisions can amount to hundreds, perhaps thousands, of dollars.
For this Tip, I want to focus on things that you already pay for, where you can save some money for your future, without sacrificing your present…..Sounds like a win-win to me, so let’s begin.
Cell-phone service: How many minutes per month do you use your cell phone? If you’re paying for 2000 but only using 400, you might be able to change your plan and save some money. Be careful of early termination charges but I recently surveyed Sprint plans, as an example, and found that if one were to reduce their minutes from 1450 to 1350, they would save $10 per month, or $120 a year. Not a bad start.
Checking Account: Have you compared the charge on your checking account with other options, since you opened it? Have you ever looked at a credit union to see what interest you will receive and at what cost? How many checks do you write and would paying a small fee per check cost as much as the lost interest from the “free” account that requires you to keep a balance of $2,500 earning today’s low rates? Compare this to the 3% per year that you could earn at an alternative bank.
Auto Insurance: Don’t expect your insurance agent to ask you if you’re eligible for a discount, you should ask her. Are you a good student? Did you take driver’s education? Do you have a clean driving record for an extended period of time? If you can answer yes to these questions, you might save some money. GET YOUR EMERGENCY FUND ESTABLISHED and raise your deductibles to $1,000 from $250. This can save you 30% of your premium dollars, amounting to $500 per year, according to the Insurance Information Institute. If you have an old car, drop your collision insurance and cover the loss from your emergency fund. These savings can be saved each year to maintain your emergency fund or to add to your savings for your other financial goals.
Clothing: Reduce your clothing expenditures by shopping around for items that you need. We can all think of something that is hanging in our closet that we don’t wear that we wish we had not purchased on impulse. How many of you have ever shopped at a used clothing store for clothing items that you wear infrequently like ski sweaters, umbrellas (lose them often), or costumes (usually worn once)? Often, in college towns, there are stores operated by upper-middle class citizens where clothing is donated for those of lesser means to purchase. This upscale resale can be a bonanza for today’s students.
Drinks: Occasionally I see students in line at the local coffee shop spending $2.00 for a cup of coffee they could purchase at the student union for $0.85. I’ve asked them why they do this and they say that the coffee is better at Barstucks. When I ask them how they know that, they admit that they’ve never purchased coffee at the student union. This problem is greater if you like to buy the chocolaty, sugary concoctions (besides the empty calories). Think what saving a little over $1/day can mean at the end of the month and what it could do for your ability to pay for the things you really need. Advice: Save the lattes for when you’re truly able to afford them. Then, with your savings over the years, buy stock in the company that sells them!
Credit cards: First (I shouldn’t have to write this to our readers), use your credit card as a convenient way to make purchases but do not carry a balance and pay the finance charges that come with high interest rates. If you do carry a balance, shop around for a card with a lower rate of interest. Finding a rate of interest of 14% instead of 16% can make a difference in the cost of carrying a balance. If you have a balance of $2,000 and, assuming you make the minimum payment of 3% of the original balance or $60 per month, you’ll spend $547 in interest, compared to $662 in interest at 16%. Moreover, you’ll repay the loan 2 months sooner. Whenever you get the balance paid try very hard to keep from carrying a balance on your credit card. Very few things we need bad enough to pay 30% more for them ($662/$2000 = 33%)!
These six ideas, from a multitude of possible ideas, can save you $1,380 per year which could add up over time to over $300,000, if you invested the savings at a modest rate of 7% for the next 40 years. Moreover, for most of the above changes in behavior, no one will notice the changes – except your banker, investment advisor, or significant other.
For more information on:
Checking accounts:
http://www.in.gov/dfi/education/Money_Smart/checking_account_information.htm
https://www.mcua.org/
Auto Insurance:
http://www.insurance.mo.gov/
Credit Cards:
http://moneycentral.msn.com/banking/services/CreditCard.asp
NOTE: This is the second of our new MU Financial Tips of the Week and was written by Rob Weagley, Ph.D., CFPTM, Chair of the Personal Financial Planning Department, University of Missouri. He appreciates hearing from you about ideas for future “Tips”. Importantly, feel free to forward our “Tips” to others and remind them that they can sign up to receive the tip by sending an email to financialsuccess@missouri.edu with “Subscribe” in the Subject Line. Thanks. – Rob Weagley
- Robert O. Weagley, Ph.D., CFP(r)
Chair, Personal Financial Planning
University of MissouriColumbia, MO 65211
For this Tip, I want to focus on things that you already pay for, where you can save some money for your future, without sacrificing your present…..Sounds like a win-win to me, so let’s begin.
Cell-phone service: How many minutes per month do you use your cell phone? If you’re paying for 2000 but only using 400, you might be able to change your plan and save some money. Be careful of early termination charges but I recently surveyed Sprint plans, as an example, and found that if one were to reduce their minutes from 1450 to 1350, they would save $10 per month, or $120 a year. Not a bad start.
Checking Account: Have you compared the charge on your checking account with other options, since you opened it? Have you ever looked at a credit union to see what interest you will receive and at what cost? How many checks do you write and would paying a small fee per check cost as much as the lost interest from the “free” account that requires you to keep a balance of $2,500 earning today’s low rates? Compare this to the 3% per year that you could earn at an alternative bank.
Auto Insurance: Don’t expect your insurance agent to ask you if you’re eligible for a discount, you should ask her. Are you a good student? Did you take driver’s education? Do you have a clean driving record for an extended period of time? If you can answer yes to these questions, you might save some money. GET YOUR EMERGENCY FUND ESTABLISHED and raise your deductibles to $1,000 from $250. This can save you 30% of your premium dollars, amounting to $500 per year, according to the Insurance Information Institute. If you have an old car, drop your collision insurance and cover the loss from your emergency fund. These savings can be saved each year to maintain your emergency fund or to add to your savings for your other financial goals.
Clothing: Reduce your clothing expenditures by shopping around for items that you need. We can all think of something that is hanging in our closet that we don’t wear that we wish we had not purchased on impulse. How many of you have ever shopped at a used clothing store for clothing items that you wear infrequently like ski sweaters, umbrellas (lose them often), or costumes (usually worn once)? Often, in college towns, there are stores operated by upper-middle class citizens where clothing is donated for those of lesser means to purchase. This upscale resale can be a bonanza for today’s students.
Drinks: Occasionally I see students in line at the local coffee shop spending $2.00 for a cup of coffee they could purchase at the student union for $0.85. I’ve asked them why they do this and they say that the coffee is better at Barstucks. When I ask them how they know that, they admit that they’ve never purchased coffee at the student union. This problem is greater if you like to buy the chocolaty, sugary concoctions (besides the empty calories). Think what saving a little over $1/day can mean at the end of the month and what it could do for your ability to pay for the things you really need. Advice: Save the lattes for when you’re truly able to afford them. Then, with your savings over the years, buy stock in the company that sells them!
Credit cards: First (I shouldn’t have to write this to our readers), use your credit card as a convenient way to make purchases but do not carry a balance and pay the finance charges that come with high interest rates. If you do carry a balance, shop around for a card with a lower rate of interest. Finding a rate of interest of 14% instead of 16% can make a difference in the cost of carrying a balance. If you have a balance of $2,000 and, assuming you make the minimum payment of 3% of the original balance or $60 per month, you’ll spend $547 in interest, compared to $662 in interest at 16%. Moreover, you’ll repay the loan 2 months sooner. Whenever you get the balance paid try very hard to keep from carrying a balance on your credit card. Very few things we need bad enough to pay 30% more for them ($662/$2000 = 33%)!
These six ideas, from a multitude of possible ideas, can save you $1,380 per year which could add up over time to over $300,000, if you invested the savings at a modest rate of 7% for the next 40 years. Moreover, for most of the above changes in behavior, no one will notice the changes – except your banker, investment advisor, or significant other.
For more information on:
Checking accounts:
http://www.in.gov/dfi/education/Money_Smart/checking_account_information.htm
https://www.mcua.org/
Auto Insurance:
http://www.insurance.mo.gov/
Credit Cards:
http://moneycentral.msn.com/banking/services/CreditCard.asp
NOTE: This is the second of our new MU Financial Tips of the Week and was written by Rob Weagley, Ph.D., CFPTM, Chair of the Personal Financial Planning Department, University of Missouri. He appreciates hearing from you about ideas for future “Tips”. Importantly, feel free to forward our “Tips” to others and remind them that they can sign up to receive the tip by sending an email to financialsuccess@missouri.edu with “Subscribe” in the Subject Line. Thanks. – Rob Weagley
- Robert O. Weagley, Ph.D., CFP(r)
Chair, Personal Financial Planning
University of MissouriColumbia, MO 65211
Friday, April 4, 2008
Financial Spring Cleaning
With spring approaching, many people engage in “Spring Cleaning”, where they clean out the clutter that has accumulated during the winter months. This is also a good time to ‘air out’ your finances as well. If you have had some major life events since the last time you examined your financial life, you might discover some dusty financial accounts that you have forgotten.
As people age, they accumulate checking and savings accounts. Often, one of the first tasks involved with moving to a new location is to setup accounts with local financial institutions; however, people often forget to close down the accounts at the place they moved away from. Similarly, married couples often start new joint checking and savings accounts, but often leave their old accounts from their single years open. Savers interested in the highest interest rates move their money around as they chase after the highest yielding accounts. Oftentimes, they leave their old accounts open either through neglect or on the chance that the account may again be an interest rate leader.
The accumulation of dusty accounts also happens with retirement accounts. Employees will change jobs and often leave their old 401(k) or 403(b) with their old employer. Employees that find themselves to be quickly climbing the corporate ladders between companies may find themselves with several retirement accounts, each having different rules and investment options. Keeping tabs on each of these accounts and maintaining an overall picture can be daunting.
What are some of the problems with leaving accounts open? First, it makes recordkeeping much more complicated. Receiving multiple statements in the mail at the end of each quarter or month can strain simple recordkeeping systems, especially if the accounts hold negligible amounts of money. Furthermore, multiple accounts can cause headaches at tax time. If you receive an interest statement showing that you earned $25 in interest after you’ve filed your tax return, you will have to amend your return with the complicated and costly 1040X. The $25 interest may cost you upwards of $150 in additional tax preparation fees. Second, you may be charged inactivity fees if your account shows no activity. These fees, ranging from $5 to $10 per month, may slowly eat away at your account balance, until your account turns negative. Thirdly, it may cause headaches for your heirs. If you have a hard time keeping track of your accounts, imagine what your heirs will feel as they try to untangle your financial situation.
So, what to do: As the earth renews itself this spring, take some time to shake out the dust and breathe new life into your financial plans. Step back and examine your entire financial situation. Are you meeting the goals you’ve set for yourself financially? If you haven’t set any goals, now might be a good time to set some after you’ve organized your financial life. If you have multiple old checking and saving accounts, decide if you really need them and close the unneeded accounts. Consolidate your accounts so that your financial situation becomes easier to manage and less stressful. If you have multiple retirement accounts, you might want to consider rolling them into your current employer’s retirement plan or into your own retirement account at an independent financial institution. Take some time to update your net-worth statement, as well as to review your will and other end of life documents. If situations have changed since the last time you updated the documents, draft and sign new documents reflecting your current situation.
Taking care of these details now will likely make the financial aspect of your life less stressful for you throughout the year.
NOTE: This is the first of our new MU Financial Tips of the Week and was written by Andrew Zumwalt of our University Extension staff and Director of our MOTax program. We appreciate hearing from you about ideas for future “Tips”. Importantly, feel free to forward our “Tips” to others and remind them that they can sign up to receive the tip by sending an email to LISTSERVE@LISTS.MISSOURI.EDU with No Subject Line and in the body: subscribe financialtip your first_name your last_name . Thanks. – Rob Weagley
As people age, they accumulate checking and savings accounts. Often, one of the first tasks involved with moving to a new location is to setup accounts with local financial institutions; however, people often forget to close down the accounts at the place they moved away from. Similarly, married couples often start new joint checking and savings accounts, but often leave their old accounts from their single years open. Savers interested in the highest interest rates move their money around as they chase after the highest yielding accounts. Oftentimes, they leave their old accounts open either through neglect or on the chance that the account may again be an interest rate leader.
The accumulation of dusty accounts also happens with retirement accounts. Employees will change jobs and often leave their old 401(k) or 403(b) with their old employer. Employees that find themselves to be quickly climbing the corporate ladders between companies may find themselves with several retirement accounts, each having different rules and investment options. Keeping tabs on each of these accounts and maintaining an overall picture can be daunting.
What are some of the problems with leaving accounts open? First, it makes recordkeeping much more complicated. Receiving multiple statements in the mail at the end of each quarter or month can strain simple recordkeeping systems, especially if the accounts hold negligible amounts of money. Furthermore, multiple accounts can cause headaches at tax time. If you receive an interest statement showing that you earned $25 in interest after you’ve filed your tax return, you will have to amend your return with the complicated and costly 1040X. The $25 interest may cost you upwards of $150 in additional tax preparation fees. Second, you may be charged inactivity fees if your account shows no activity. These fees, ranging from $5 to $10 per month, may slowly eat away at your account balance, until your account turns negative. Thirdly, it may cause headaches for your heirs. If you have a hard time keeping track of your accounts, imagine what your heirs will feel as they try to untangle your financial situation.
So, what to do: As the earth renews itself this spring, take some time to shake out the dust and breathe new life into your financial plans. Step back and examine your entire financial situation. Are you meeting the goals you’ve set for yourself financially? If you haven’t set any goals, now might be a good time to set some after you’ve organized your financial life. If you have multiple old checking and saving accounts, decide if you really need them and close the unneeded accounts. Consolidate your accounts so that your financial situation becomes easier to manage and less stressful. If you have multiple retirement accounts, you might want to consider rolling them into your current employer’s retirement plan or into your own retirement account at an independent financial institution. Take some time to update your net-worth statement, as well as to review your will and other end of life documents. If situations have changed since the last time you updated the documents, draft and sign new documents reflecting your current situation.
Taking care of these details now will likely make the financial aspect of your life less stressful for you throughout the year.
NOTE: This is the first of our new MU Financial Tips of the Week and was written by Andrew Zumwalt of our University Extension staff and Director of our MOTax program. We appreciate hearing from you about ideas for future “Tips”. Importantly, feel free to forward our “Tips” to others and remind them that they can sign up to receive the tip by sending an email to LISTSERVE@LISTS.MISSOURI.EDU with No Subject Line and in the body: subscribe financialtip your first_name your last_name . Thanks. – Rob Weagley
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