a paradoxical key to money happiness

In this week’s final session of my summer workshop series, we took the 50,000 foot view and asked ourselves the big questions — what is money? What is value? Where is God in all of this? We even came up with a few answers, one of which is this: paradoxically, one of the best things you can do with your money is this: give it away. 

As it happens, there’s scientific backing for this one. Some oft-quoted research by Elizabeth Dunn and others at the University of British Columbia shows that giving money away increases one’s (self-rated) happiness level, while spending it on yourself generally doesn’t, or perhaps at least not for long enough to be measurable. Yes, Virginia, money can buy happiness. But why? Well, there are a few thoughts on that one.

Relationships, not material goods, are what make people truly happy. You might have all the stuff (or experiences) that money can buy, but with no one to share it with, how happy is that going to really make you? The scientists hypothesized that in giving money away, you’re spending money on relationships, which create a more long-lasting happiness.

Conversely, not sharing your money can be stressful. Another study by these scientists showed increased levels of reported shame (and measured stress hormone) in participants who did not share their money when given the opportunity. It seems that we’re physically hardwired to share, and when we let our fear or greed override that impulse, we suffer for it.

Finally, it’s about freedom. As we discussed in the workshop, all too often our money ends up controlling us, rather than the other way around. We don’t want to give our money away, though many of us can’t even articulate the deep, nameless fear that drives us. When we do share, however, we are breaking free of that fear and showing our willingness to rely more on each other.

And is so often the case, breaking free of fear — stepping out in faith — gives us a joy and peace that cannot be matched by anything (else) money can buy.

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my favorite budgeting programs, part 2: YNAB

“You Need A Budget”. No, I don’t mean you personally — that’s what YNAB stands for, and that’s what we’ll be talking about today. Got your attention? Good — let’s go.

The basics. In a sense, YNAB is more traditional than mint.com: rather than being free and online-only, it’s a standard, non-free piece of software that runs on your PC. Rather than feeding it your bank information, you have to regularly download your transactions yourself (though you can still teach it to auto-categorize and -rename your transactions). YNAB is very non-traditional, however, in its approach to budgeting itself.

“You haven’t budgeted like this.” That’s founder Jesse Mecham’s tagline for YNAB, and he’s not wrong. Rather than setting up a standard “monthly budget”, his program is built around the “Four Rules”, Rule One of which is “give every dollar a job”. That’s not “every dollar of average monthly income”; rather, it’s “every dollar you have, right now”. You don’t budget for an average month; you budget for this month, or until you get your next paycheck, whatever your situation calls for. People used to Quicken or mint.com often scratch their heads when first faced with this mindset, but once the lightbulb goes off, it can feel like Budgeting Done Right for the first time. (Among other things, this forces you to review your budget each month, which is vital to creating one that doesn’t break on contact with Real Life.)

Rule Two: Save For a Rainy Day. When you budget, your money goes into “buckets”, in a manner extremely reminiscent of the Envelope Method. And when next month rolls around, any money in a bucket that hasn’t been spent is still there. In this way, you can easily save for non-monthly expenses, like insurance, car repairs, or Christmas, and at a glance can tell exactly how much you have saved up — without having to open a separate account!

Rule Three: Roll With The Punches. On the flip side, if you spend more than what you have budgeted in every given category, YNAB handles it gracefully: the sum of all overspending is taken out of the money available for next month’s budget. So, effectively, instead of it all being taken away from that one category (“great, now I’m supposed to try and underspend on groceries by $100 next month?”), it’s spread out over all of your categories, making things much more manageable.

Rule Four: Live On Last Month’s Paycheck. This Rule is more of a goal than a law, but YNAB is built to guide you towards living on last month’s paycheck, which gives you a buffer for the inevitable hiccups that will occur in life.

Bottom line? If you’re committed to budgeting, I highly recommend YNAB. It’s clean, it’s functional, it does what a budgeting program is supposed to do. However, it’s going to take some work on your part — you can’t get away with not being mindful of your finances, the way you can with mint.com.

my favorite budgeting programs, part 1: mint.com

Speaking personally, I can’t imagine what budgeting was like in the Pre-Computing Dark Ages. As it is, though, we now have plenty of tools to help keep us on track (though how well we use them is another matter entirely). For this week and next, I’m going to talk about my two favorite budgeting programs: mint.com and YNAB. (Yes, I’m quite familiar with Quicken, but it didn’t make the cut. If I ever get a reason to upgrade to the latest version, I may do a review on it; in the meantime, though, I’ll take a pass.)

So, what’s this mint.com thing? Mint.com is a completely online, free budgeting program. You visit the site through your web browser, give it your bank and credit card access information, and it automatically sucks in your transactions and balance information and presents it all to you in a very pretty format. You can then use it to track your spending, set goals, and otherwise get a handle on your finances.

The key word with mint.com is “automatic”. It was designed from the ground up to make personal finance as easy as possible: it automatically keeps up-to-date with your spending, auto-categorizes transactions as best as it can, sends you e-mails if your spending in a certain category goes over a specified amount, etc. etc. If you hate with a fiery passion the busywork of dealing with personal finances, you’re mint.com’s target audience.

It’s pretty awesome. The aforementioned good design and automation can make personal finance almost enjoyable; when I first got started with mint.com, I would pull it up just to look at the pretties. Automatically downloading transactions makes it less of a chore to actually track your spending, and the automated warnings you can set up can go a long way towards keeping you on your chosen path.

That said, every rose has its thorns. Automation comes with a price: the lack of mindfulness can keep you from really paying attention to where your money is going. All of your bank account information is stored on mint.com’s servers; while mint.com is extremely secure (like, a hacker would have to pull off a Mission Impossible or Sneakers-style break-in to get access), I understand if it makes you nervous for someone else to have that sort of info. Finally, mint.com is (now) owned by Intuit, makers of Quicken; this can be good or bad, depending on your opinion of Intuit, but the general consensus (and my personal experience) is that customer service isn’t quite at the level it was before the acquisition. So if a transaction goes missing or something else goes wrong…good luck. (That said, they’ve got tons of experience in dealing with extremely sensitive data, so there’s that.)

Bottom line? It’s a great program, especially if you’re in a good place financially and just want a program to do the dirty work of monitoring things. Plus, it’s free! However, if you need or want to pay closer attention to where your money goes, and are willing to be a bit more type-A about it, I’ll be talking about another program next week called YNAB (You Need A Budget).

How about you? Have you used mint.com, and if so, what has your experience been with it?

ooma, or how to stop paying for your landline phone

Like arcades and paper books, landline phones are becoming an outdated artifact of the 20th century; many families have opted to cut their landline service entirely, in favor of their cell phones. For those of us that, for whatever reason, refuse to give it up, there’s another option besides suffering the $30-and-up bill that our telecom provider socks us with: Ooma.

What exactly is Ooma? Ooma is a VOIP service, one that provides you the equivalent of landline service, but through your internet connection. It does this through a sleek black box that is placed between your modem and your router; plug your home phone into this box, and voila! Dial tone.

How much does it cost? The box: $200. The ongoing service: whatever your local/government taxes are, say around $3/month. You can also get Ooma Premier, which gets you some nifty features for $10/month.

Can I keep my current home phone number? Yes, for an additional $40 you can port your number to the Ooma service.

How well does it work? Well, obviously it’s not going to work well with anything slower than a broadband internet connection. If you put it between your modem and your router (or between your modem and your PC, if you don’t have a router), it works great — it uses “QoS” (“quality of service”) to make sure that your phone gets the bandwidth it needs. However, if for whatever reason you can’t put your Ooma upstream of your router, you are probably going to experience a loss of quality if you try to make a phone call while e.g. watching Netflix Streaming; you may hear the other person just fine, but they’ll probably hear your voice cutting in and out occasionally.

What gotchas or fine print should I know about? There are a few, some of which I’ve already touched on:

  • The big one I’ve seen complaints about is that there is an ongoing charge, if a small one: you still have to pay your government taxes, and a lot of people who sign up for Ooma aren’t aware of that (though it’s clearly spelled out in several places).
  • As I mentioned above, you may be sacrificing quality depending on your network speed and architecture. Ooma has a 30-day return policy, though, giving you plenty of time to evaluate it.
  • True landlines are traditionally more reliable than internet connections, though the gap between them is very small these days.
  • You will no longer be able to use your home phone jacks; you must plug your phone directly into your Ooma. (Please don’t try plugging your Ooma into your home jack; the fifty volts could fry it.) If you need phones throughout your house, you can easily purchase a multiple-handset cordless phone system like this one, if you haven’t already.

The Financial Geekery household currently uses an Ooma, so if you have any other questions, feel free to fire away in the comments!

Edit: Really weird — between writing this post and publishing it, I got an e-mail from Ooma about a special referral deal which lowers the price from $200 to $150. Now, as I’ve said before, I don’t accept referral money, but I don’t want you to miss out on a good deal, either, so: if you’re interested, send me an e-mail, and I’ll send you the code and my referral bonus (a $20 amazon.com gift card). The deal expires 7/31. Happy Ooma-ing!

personal finance in the internet age

Next week is the beginning of my second Summer Personal Finance Workshop Series, so I’d like to take some time in this post to talk about why I bother doing any of this. It’s a short story with a surprise (at least, it was a surprise to me), so it’s worth reading.

Set the WABAC machine to 2008. That year, I was beginning to learn the ropes of personal finance — mostly investing at the time, but also some insurance and other topics. So I did what any child of the Internet would do: I Googled until I found a particularly promising corner of the Web, and I took the information there as gospel truth.

This was the wrong approach.

Now, had I been looking for something relatively straightforward, like a piece of obscure movie trivia or a particular cat picture, this would have been the right approach. But I failed to consider that personal finance is very similar to religion and politics: many people believe they have the One True Answer, but there are many One True Answers out there. So if you confine yourself to one group, there may be other ideas out there that you may never even know exist.

Luckily, I eat personal finance books and articles like candy (nerd? yes.) and the more I learned, the more I found that while that first little corner of the Internet got a lot of it right, there was a lot that they put forth that was suspect, or at least not Ironclad Truth. So I looked elsewhere, kept learning, and have since tried to incorporate everything I’ve come across.

And this is what you’ll find today at financialgeekery.com, in my workshops, and in my one-on-one sessions. On my website, as I recognize that you guys are smart enough to handle it, I’ll often put conflicting (or seemingly conflicting) viewpoints out there. I talk about the advantages of going cash-only and the wonders of credit cards. I discuss the two very different investing styles of the businessman and the academic. (Yes, I do have my own opinions — I can’t pretend to be totally unbiased — but I want to make sure you’re aware of what else is out there.) In my workshops, I recognize that different tools and methods work better for different people, and tailor my content accordingly. (In fact, this year I’ve changed much of my budgeting content to reflect what I’ve learned from clients — as it turns out, not everyone thinks the same way I do. Who knew?) And in my one-on-one sessions, you’ll find that I do as much listening as talking, and if I’m not the right expert for you, I’ll point you in the direction of someone who is.

I also recognize how valuable trust is these days. As such, I don’t accept money from anyone who isn’t a direct client. No affiliate links, no commissions, no referral fees, none of that. If I recommend a product or company, it’s because I like them for who they are and what they do. While I have no problems with the aforementioned tools in general, I personally don’t want there to be any doubt as to where my interests lie.

So if you like this, if you think this approach to personal finance is valuable, then, well, Like it. Spread the word. Click the “share” button at the bottom of this post, or simply Like its link on my facebook page. Share a link to the workshop that’s starting next week.

You never know whose life you might change.