Financial Symmetry News & Views

Posts Tagged ‘Everyday Life’

With the end of the first quarter of 2010 behind us, now is a great time to review your budget.

When checking up on your budget, it is important to look over a specific amount of time for comparisons to actual expenses. Comparing expenses on a monthly basis can be a source of frustration as there are many fluctuations that occur throughout the year (holidays, vacation, etc.).

Therefore, it is important to measure your progress against a rolling year period.  For example, if you have been using a budgeting tool for one year or longer, you would want to compare from February 1, 2009 to March 31, 2010.  If you are just getting started, looking at smaller increments of time, like three or six months, can also be helpful.

No matter what your time frame is, here are a few tips to help streamline and update your budget:

• Budgeting software often has trouble correctly categorizing a few expenses.  Take a quick look at your transactions and identify and correct those that are mislabeled. If you are using Mint.com, be sure to take advantage of their easy to read ‘trend’ section.  You can see where you’ve spent money over specific categories in charts that allow you to drill down to the transaction level, helping to spot inaccurate transactions. If you don’t use budgeting software, compiling data from your receipts and statements will be a good way to get you started.  Remember, you are trying to identify how to spend less than you earn.
• Revisit the items you have budgeted.  Now that you have been tracking for a few months or longer, are your budgeted items realistic? Maybe some adjustments need to be made to common expenses like household utilities, food and dining, transportation costs (including gas and regular maintenance), and discretionary (misc. spending).
• It is common for your expenses to fluctuate over time and for some expenses to occur only during parts of the year.  Some items, like car insurance, homeowner association dues, and professional fees may be paid quarterly or semi-annually, so be sure to include those expenses in your budget now.
• If you are spending more than your budgeted amount on a regular basis, take some time to plan out ways to reduce your spending.  Little things like taking your lunch to work once or twice a week, making coffee at home, or planning errands around one trip can all add up over time.
• Have you had any lifestyle changes that should be reflected in your budget?  A home purchase, renovation or new child can increase (or decrease) spending and should be accounted for.  Adding new expenses to your budget while taking time to review your overall spending picture can help set you back on track.

On Tuesday, September 15th, Allison Berger, CFP® and Chad Smith, CFP®, both junior partners at Financial Symmetry, Inc., returned to their alma mater to speak to NC State’s Personal Finance Club, which is based in the College of Management.

The club was created for students who are interested in careers in financial planning, who want to expand their networks and their knowledge of personal finance.

Berger & Smith talked to the group of students about how they started their careers, the importance of managing their personal finances, and some advice on finding jobs in a tough economic climate.

“Be creative.” said Berger. “Everyone has to start somewhere. If you are interested in a specific field, be open to taking an internship or part-time position if you are not able to find full-time work. This could always lead to a more permanent situation or provide you with skills that make you a more attractive candidate to other employers.”

They also encouraged students to start a 401k plan at work, citing that “Starting a savings and investment plan early in your career can help you accumulate wealth more easily than someone who doesn’t start saving until their 30’s or 40’s.”

Chad Smith & Allison Berger are NCSU College of Management alumni, both receiving bachelor’s degrees in Business Administration with concentrations in Finance (in 2000 & 2004, respectively).

To read more advice given by Smith & Berger, and learn more about the Personal Finance Club, click here for the full article.

Looking for a way to better track your budget? Throughout the upcoming weeks, we will be bringing you personal reviews of some of the budgeting software available. Some will be free, online websites, while others will be computer software programs available for purchase or download.

Our first review comes from Heather Zaczek, our Operations Specialist, who has been using Mint.com for a little over a year.

What is Mint.com?

Mint.com is a free, online account aggregation tool that can help you plan, manage and stick to your budget. Setup is quick and easy—you can expect to have your accounts linked to Mint within a couple of minutes. Security is good, being at or above most institutional banking websites. Mint never asks for your account numbers, name or other personal identification information. Money cannot be accessed, moved or transferred within Mint, and all data stored at Mint is backed by bank-level data security protections.

How Do I Set Up an Account with Mint.com?

Setting up an account with Mint is simple. To get started, you will create a user ID, which is normally your email address, and create a password. Once logged in, adding accounts is simply. Your asset and debt accounts are aggregated by providing your institution’s user ID and password for the particular site and Mint does the rest. Mint has a search feature to find the correct login website for a particular institution, although some smaller, hometown banks and credit unions may not be available for connection yet. Once you have your accounts linked with Mint, simple, easy to read charts and graphs are available to create a budget and track spending. Budgets are set up monthly, and you are able to quickly view past months to estimate for the current month’s expenses. Your monthly budget appears on the homepage to show where your money has been spent so far, and how close (or away) you are from estimates through a color-coded bar graph.

What are Some Features of Mint.com?

Overall, the website is fairly easy to navigate, with tabs for transactions, spending trends, investments and ways to save on the homepage. For a better sense of security, Mint has established an alert system that you can customize for each linked account. These alert settings can increase your financial protection and awareness of suspicious activity within your accounts, a great feature that takes minutes to set up. Alerts can be created to notify you if large purchases are made, credit limits have been reached, or low balances exist within accounts.

Mint also tracks your interest rates, credit card reward programs and your credit payment habits to look for ways to save money. If your ABC card is costing you more money than say XYZ card, Mint will suggest switching your cards while estimating your savings on an annual basis. The great thing about Mint’s suggestions is that they are running in the background rather than popping up on your homepage. Saving strategies are located on a separate page and can include customized views for checking, savings and investment accounts.

Are There Drawbacks to Mint.com?

Since Mint.com is free, you can expect a few areas to be less than perfect. There is not a feature to download transactions from institutional websites directly to Mint, and transactions cannot be manually added. Cash transactions can be split into different categories if you have a linked ATM transaction, which enables you to track each cent spent from the cash withdrawal. Another drawback is associated with linking transactions between accounts. For instance, Mint has a little trouble sometimes tagging transfers between checking and credit card accounts, making it difficult to match payment transactions in relation to specific dates. Mint’s reports are simple and informative, without elaborate graphics. Time lines can also become an issue when comparing data over long periods of time; Mint’s standard time frames range only from the time you linked your accounts forward, so older transactions may not be reflected. This may work out as a benefit of Mint if you are just starting with a budget and are not too concerned with past expenses.

Are There Any Additional Features of Mint.com that Make Budgeting More Interesting?

There are a few neat features of Mint that can make budgeting a little more interesting. Mint compiles data from users’ spending patterns so that you can compare your spending habits to those in your location—either state or large city. Mint also has a regularly updated blog with easy to understand financial concepts in every day language. A few recent posts include “The Pros and Cons of Online Banks” and “15 Ways to Eat Out More Spend Less.” Most blog posts include “Mint’s TakeAway” to provide suggestions on how ideas presented effect spending. Overall, Mint.com is a great, easy to use, free budgeting tool, that beats will outperform spreadsheets most of the time.

If you have any questions about Mint.com, feel free to contact Heather at hzaczek@financialsymmetry.com or 919-851-8200 ext. 205.

A key aspect of financial planning is managing expenses.  However, setting a budget and consistently monitoring it is easier said than done.  That is why we recommend using an expense tracking software to keep track of your spending.  Mint.com is a relatively new personal finance website that takes a lot of the work out of expense tracking.  Click the link below to watch an instructional video about how to use mint.com and learn the benefits and security features.

New research has found that men are more likely to take larger risks in their financial decision making than women. Using a sample set of a group of MBA students the researchers looked for a correlation between higher levels of testosterone and a willingness to take a chance on a less likely outcome if the potential payout was greater. After graduation, more male students will follow a career path into investment banking or trading on Wall Street where the stakes are always high.

http://www.fa-mag.com/fa-news/4408-testosterone-may-affect-financial-risk-aversion.html

The next NAPFA Consumer Webinar Series is scheduled for September 4th, 2009 from 1:00pm until 2:00pm.  Here’s a preview of the upcoming series, Kids & Money :

“Kids & Money

1:00 pm – 2:00 pm ET

Instructor Linda Leitz, CDP, CFP, EA,

NAPFA Registered Financial Advisor and

Author of The Ultimate Parenting Map to Money Smart Kids

How can you raise your children to be money smart? Linda wrote the book on raising kids to be smarter about money and will share her thoughts on steps you can take today to get your kids on the right money track.”

Click here to read more and to register:  Kids & Money Webinar.

Click here to view the August 7th webinar video, Money 101: Knowing the Basics.

Need a new appliance? You may be able to find the best deals on large appliances during September and October.

Sometimes certain purchases can put a strain on your budget, like a new refrigerator, furniture or computer. While there is not a ‘best time to buy’ guide for everything, there are certain categories of goods and services that regularly go on sale during specific times of the year.

We found a list on Yahoo! that breaks down items like used cars, holiday airfare and mattresses. Keep ‘best time to buy’ sales in mind when planning ahead for a special purchase, whether it is a new purchase or a replacement, and look forward to save as much as 75% off original prices.

Click here to view When Is the Best Time to Buy…? on Yahoo!.

Financial Symmetry is dedicated to helping you get a handle of your financial picture.  We think it’s important to remember that investments should be evaluated on their merit, not personal emotions that can cloud your judgment and lead you to act in ways that are counterproductive to your financial success. Below are some examples of common emotions that can lead to poor decision making.

Feeling Left Out

The media can make it seem like everyone else is getting rich.  You can also hear tips from a friend, neighbor, relative, co-worker or even a stranger that can make you feel like you are the only one that is not making loads of money on a great new thing.

Greed

It’s an intense desire to acquire or possess.  Feeling that it is possible to get something for nothing is one of the strongest triggers for greed. There is an almost irresistible tendency for people to think they have “lucked out” and stumbled into an opportunity of a lifetime.  While this might be the case, most of the time it is not.

Desperation

It’s a state of hopelessness leading to rashness. This feeling can set in when people have made unfortunate financial mistakes or have just been impacted by a bad economy. Some people try to bounce back by assuming an unsafe amount of risk.  This approach rarely works as higher risk can lead to even greater losses.

Fear

It can immobilize people into stagnant patterns.  Fearful investors avoid getting involved in the market because it lacks certain security from losses.  However, the inability to accept some risk due to fear can greatly diminish your investment returns.

Attachment

This refers to a personal allegiance or loyalty to an investment without proper analysis.  This attachment can impair your ability to construct a well-diversified portfolio. Beware if you find yourself saying “I’ll never sell that because…

• My great grandfather bought that stock in 1912
• I worked a long time for this company and I owe them
• I have used this product for years

Investments should be evaluated on their merit.

Pride

Pride and investing are the equivalent of oil and water. This emotion can stop you from being able to admit when you are wrong and correct your mistake.  No one buys investments expecting them to under perform, however some of the time it is inevitable.  Capital Research Management, the research firm for the American Funds, states “We are very careful when making changes because we expect to be wrong 1/3 of the time.”  With an expectation of being wrong 1/3 of the time and an excellent performance record, it is clear that a certain amount of humble detachment is appropriate and necessary for successful investing.  It is also important to recognize when it is appropriate to seek assistance from experts

Fairness

This is something not easily measured. People like to feel as though they are being treated fairly and that desire extends to their investments. However, investments can be beneficial to you as an individual and seem like the treatment was not equal to all.  Investments are not a zero-sum game where someone has to be a winner and a loser.  People generally make mistakes when they are unwilling to accept the fact that the world is not fair.  Individuals should not base their decisions on forcing the issue of fairness when it is in conflict with what is best for them.

Supporting Viewpoint

We found an article on FiLife.com that also helps to explain emotional investing.  Tom Adams explains in  Emotional Investing Hurts Returns how  emotions can effect your investments.

Warren Buffett is lending his voice to a new cartoon series that aims to teach valuable financial lessons to kids through entertainment.  He recently spoke to CNBC about the project and his investment philosophy.  To watch his interview and the premiere of “Secret Millionaire’s Club,” click here: Secret Millionaire’s Club.

Article published on FiLife.com by Financial Symmetry’s Allison Berger, CFP ®.

Finding the motivation to save can be just as difficult as motivating yourself to diet and exercise. In both cases you know the outcome will be worthwhile — financial security and better health. However, taking the steps to get there is easier said than done.

If you have ever watched the show “The Biggest Loser,” you have probably heard the trainers say that being fit is not about dieting, but about making lifestyle changes that you can stick with over time. As the contestants participate in the challenge, their health gradually improves and their motivation to continue a healthy lifestyle typically increases. The hardest part is usually getting started.

The same is true with saving. While difficult at first, adopting a scheduled savings strategy and making budgeting part of your routine will increase your odds of achieving your financial goals. Identifying those goals is the first step to finding that motivation, so spend some time thinking about what you want your money to do for you. Maybe you are saving for a family vacation, your children’s education, retirement, or all of the above. Make a list prioritizing each goal and put time frames on them.

Next, work on identifying those triggers that keep you from saving money. Just as having chips and cookies in the house can derail your healthy lifestyle, so can mail order catalogs on your coffee table or even a clear view of your neighbor’s new BMW. Toss those catalogues in the recycle bin, put a limit on your Amazon or eBay habit, and start planning a savings strategy.

One of the best ways to stick to your financially fit goals is to make savings automatic. Hopefully you are already deferring money from every paycheck to your 401k. Think about increasing your deferral to put more toward your retirement goal. Then find other savings you can make automatic. Maybe you can set up a monthly transfer into your savings account, Roth IRA, or your child’s 529 plan. This strategy takes some of the work out of saving and automatically curbs spending, as your checking account appears less flush each month.

Lastly, remember that you are not alone. You probably have friends and neighbors who are also trying to stick to a financially fit lifestyle. Work together on finding low cost activities to do, and exchange tips and tricks along the way. You may also want to consider using a professional. A financial planner can help you develop a strategy specific to your needs in the same way a personal trainer can recommend the best exercises for your health and fitness goals. You can seek out a fee-only financial planner at napfa.org.