Congratulations to our friends at WiseBread on the launch of their new book, “10,001 Ways To Live Large On a Small Budget.” The book is authored by a talented group of WiseBread writers (including Wesabe advisors JD Roth of Get Rich Slowly and Trent Hamm of The Simple Dollar) who believe: “the key to financial wellness isn’t a ramen-eating, vacation-skipping, fun-depriving life. Far from it. The best way to ensure that readers will stick to a budget, especially in tough economic times, is to help them create a lifestyle that is as much fun as it is practical.”
One mistake I see people make a lot is to think of their money as a way to get particular products or services they want. I want to buy this particular television because it has the cool new feature thingy and I just can’t live without it. A very common mistake — one I make all too often myself.
Why is this a mistake? Isn’t it great to have a particular goal and to work towards it?
It certainly is great to have a particular goal, and sometimes focusing on that goal with a specific picture or product in your mind can help get you there. For instance, (Wesabe advisor) J.D. Roth has a great story about saving for a Mini Cooper that shows how this can work — in his case, spectacularly. The very first big purchase I made as a kid (a Vectrex game machine, for the record) worked the same way for me — keeping that thing in mind kept me saving.
But in many other cases, fixating on a particular product can bring out all of your worst financial habits. This is, in fact, exactly what marketing and product catalogs and television ads and promotions are all designed to do: to get you to want to spend more because you believe it will bring you something special. I was flipping through the Design Within Reach catalog today and saw a pair of water hose spray nozzles for $70.00. Wow, I thought, “Within Reach” of whom? Why would I ever need to spend $70.00 on spray nozzles, no matter how well-designed? The catalog told a story about elegance and efficiency and clean design, and by absorbing that story, one might be tempted to spend $70.00 on a product that sells for $5.00 at the local hardware store. (For the record, I was not tempted — in this case, at least.)
Some of your needs or wants will always have a newer, better-seeming product available. Shaving products are hilarious this way: since shaving is a pain and many people hate it, every year a new product comes out with more and more blades or lubricants or whatever else they can think to add. (Check out How Many Razor Blades Do I Really Need? for exhaustive research on this topic.) Each one costs more, and maybe each is a little better than the last. Should you just upgrade every year, and spend more and more and more shaving as time goes by?
A great way to budget is to flip around your way of thinking. If you fixate on a product, the only financial question is how to get the best price for that product. If you fixate on the need, instead, you can ask, what are the range of products available to meet this need? Would a low-end or mid-range purchase meet my needs in this case? If so, great! You just saved money, probably a lot more than you could save by shopping for the best price on a high-end purchase.
I saved a ton of money with this way of thinking when I went to buy a grill for our back yard. I started out fixating on a high-end Weber gas grill I had seen at a friend’s house — available on Amazon for a mere $700.00 (gas not included). Think how quickly I could be grilling! How much space I would have to grill! Maybe I could find a really good used one for $500.00, if I spent a bunch of time and got lucky. But then I stepped back and thought, what do I really need, here? I want to be able to cook over an open fire in the back yard. Do I really need that much space, or that much speed? I wound up buying the classic Weber “One-Touch” charcoal grill for $70.00 — a 90% savings. (Given how durable they are, I probably could have gotten one on Craig’s List for nearly nothing.) It’s perfectly good enough for my needs — any time I want to grill, an extra half hour heating the grill while I prep the ingredients is no big deal.
Buying a high-end product can be fun and can be rewarding and a motivational goal. Sometimes it can be worth it. Just don’t tell yourself it’s anything else, and try to make lust for a particular product be the exception, not the rule. If you focus on the needs you want to fulfill with your money, you’ll find you have a much wider range of choices, and much greater opportunities to save.
Wow, it has been quite a week.
Over the past five days….
- We launched Wesabe for iPhone, our iPhone app, which allows you to edit and tag your financial transactions, see graphs, use the phone’s GPS to automatically locate where you just spent money for fast entry, and more. The reaction has been fantastic, as you can see from the early reviews on the App Store:
Incredibly cool! It’s been so awesome to hear people’s reactions and feedback: “This is so much better than anything else out there.” Thanks! Wait until you see the next version. 🙂
- We changed our tagging system, which — since tags run everywhere in Wesabe — is a major change, both in amount of work and the impact on the site. This one caused some confusion, partially because people were accustomed to the old system, and partially due to some bugs in the first launch of the new system. We’re working out those bugs, and then I’ll post a whole guide to tagging, which will explain what we did and why we did it. Until then, please be assured that all of the capabilities you had (including split and one-time tags) are still there — we simplified the interface and gave you more control, even if it may not seem like it yet.
- We redesigned every single page on our site. Most of the reactions have been completely fantastic:
Those have all been wonderful for us all to read, and we’re happy to have hit such a great level in the design. Some of the reactions, though, have been less happy:
Oof. We know that redesigns can be disorienting. Other people were unhappy about the lack of search and export, and others about the readability of text in the new design. Not to worry — to those who has expressed dismay at the changes or missing features, we have heard you, and we’ll fix those concerns. We may take a different approach than the old design did, but we’ll do it at least as well, if not much better. QIF import is already fixed, and the rest will follow shortly.
A few people have asked why we removed features during the redesign. Sometimes it was because they just hadn’t been updated to the new design yet, or had bugs that were too severe, we felt, to ship. In other cases, though, we wanted to get rid of or revise features we didn’t think were working well enough, and pare down to the essential parts, the ones we know are neeed and work well. Was this the right decision? I absolutely still think it was — for instance, we removed Goals and Tips — two whole tabs out of four — and haven’t gotten a single complaint about either of them being gone. We do believe reducing the site to its essential features makes it easier to use for everyone, and we’ll add back the features people are actually missing. We’ll be happy, though, to keep out or substantially revise the features people didn’t like or haven’t missed.
Overall, the reaction to the redesign has been completely incredible. So many people have said, “Now I can introduce this to my [less techinically savvy person]!” That’s what we were going for — getting Wesabe to more people without giving up any of the control or power we’ve always provided.
- Last but certainly not least, we announced our first Springboard customer, Delta Community Credit Union, the largest credit union in Georgia. We’re wonderfully happy to be working with them — they take helping their members extremely seriously, and have been excited about working with us, and we’re happy to be bring Wesabe services to a new group of people by working with them. We like working with people who share our values about helping consumers, and the credit union community, and Delta Community especially, line up perfectly with that.
So, yeah. That’s a lot for five days. Thanks so much for all the great feedback and response, and for those of you looking forward to a fix or addition, no worries, we’ve heard you and will respond quickly. Follow @WesabeUpdates to get up-to-the-minute detail on new fixes and additions, and we’ll announce the big ones here. Thanks again!
In November of 2006, we launched the Wesabe site after about two years of talking about it, figuring out what it was going to become, and then building it, one piece at a time. Wesabe was the first of what are now known as “Social Personal Finance” sites, and we didn’t have anything to guide us except the history of Quicken — from which we were explicitly trying to get away. Wesabe was new and the idea was new, and that meant we had to make it up as we went along.
We spent a lot of the year leading up to Wesabe’s launch sitting in our cramped, informal office (in the back of a clothing store owned by my co-founder, Jason, and his wife) sketching, arguing, trying things out, and getting the pieces to fit together. With the graphic and UI design of the site, much of that process took place between me and Jeff, the site’s original designer, sitting in front of the gigantic monitor in his office. We essentially “pair programmed” the design, which helped me enormously as the product engineer, even if it sometimes frustrated Jeff’s better aesthetic instincts.
Now that the Wesabe site has been live for almost two and a half years, we’ve taken a chance to go back to our initial design and redo it, incorporating what we’ve learned since launch, and letting Magera, our designer, have the lead. It has been a chance for us to clean up some of our mistakes, make the site easier to use all around, and introduce a new standard of design for our site. Where with the first design I was extremely controlling about every little piece, this time I told Magera, “Make something you would like” — and it turns out we all like what she likes. 🙂
Wesabe’s whole site has been completely redesigned — every page is different. Rather than having a developer-led UI, this is designer-led development, and we’re all extremely happy with the result. We hope you will be, too — and please do let us know what you think.
(Note: As part of this launch, we’ve disabled or minimized some of our site’s features to get the simplest version out the door that we could. Some of the site’s graphs, export and search features, and side features like Wesabe Mail and Wesabe Cutback will be offline for a short while. They will be coming back very soon. Our Tips and Goals tabs are on the blocks for more major revisions — those will both return but in different forms. At the same time, Paul has completely revised the new User Manual, so we now have substantial and valuable online help for almost all of the site’s features. We’ve also added in some long-time requests from our community, such as spending target histories so you can go over your budget for months past, and a tag cloud that takes into account how much you spend on each tag.)
Wesabe’s advisory board includes three of the biggest names in personal finance. To help you get to know them better and to tap into their considerable smarts, we posed three questions to each of them:
1. A family member is graduating from college and you’ve decided to give him a book on money management as a gift. What would that book be?
2. Has the economic downturn changed your relationship with money?
3. What is the single best piece of financial advice you have ever been given?
A big thanks to our advisors:
– JD Roth of Get Rich Slowly;
– Ramit Sethi of I Will Teach You To Be Rich; and
– Trent Hamm of The Simple Dollar
for taking the time to send over such insightful answers.
A family member is graduating from college and you’ve decided to give a book on money management as a gift. What would that book be?
JD: When I speak to college students, I hand out a one-page guide to personal finance on which I recommend four books:
– The Money Book for the Young, Fabulous, and Broke by Suze Orman
– Debt is Slavery by Michael Mihalik
– Brazen Careerist by Penelope Trunk
– The Random Walk Guide to Investing by Burton Malkiel
Each of these books serves a different purpose, but contains great information. Many people have told me that Your Money or Your Life by Joe Dominguez and Vicki Robin helped them after college, and I know that it helped me later in life. Finally, my colleague Ramit Sethi just published a new book called I Will Teach You to Be Rich, and it’s perfect for young adults.
Trent: There are several good choices here depending on the person’s situation.
My default choice for a female college graduate would probably be “You’re So Money” by Farnoosh Torabi (my review). It’s written with the strong voice of a young female professional and deals with the social pressures that many young professional women face in terms of spending money on material goods. Along the way, it dishes out a lot of useful and relevant personal finance advice.
My default choice for a male college graduate would be Automatic Wealth for Grads by Michael Masterson (my review). This book does a great job of painting personal finance in a positive and exciting light by making it clear to the graduate that life really is full of possibilities as long as you put the foundation pieces in place.
However, there is one book that trumps either of these choices. If you know the student well and he/she strikes you as a person that’s particularly thoughtful and introspective, the best choice for that student is “Your Money or Your Life” by Joe Dominguez and Vicki Robin (my review). This is the single most powerful personal finance book I’ve ever read, but it requires a lot of introspection to really get a lot of value out of it. Instead of focusing on typical personal finance issues, the book is more of a guide to reflecting on money’s role in the larger life choices you make. A thoughtful college graduate can get a ton of valuable ideas from this book.
Wesabe for Ramit: Rather than let Ramit answer this question, we wanted to take the opportunity to mention his awesome new book, I Will Teach You To Be Rich. Targeting 20-to-35-year-olds, this New York Times bestseller (congrats, Ramit!) would make a great gift for a college grad.
Has the economic downturn changed your relationship with money?
Trent: I tend to behave like we’re constantly in an economic downturn, so the current economy really hasn’t affected me too much. I always strive to spend less than I earn, regardless of whether or not the economy is roaring or it’s tanking.
One thing I have done differently, however, is that I’ve been buying more stocks (in the form of index funds) than usual. That’s right, in an environment where the Dow is dropping below 7,000, I’m buying stocks. I look at it this way: I can buy the exact same stocks that I could buy a year and a half ago, except now they’re 55% off. Many people might shout about how we don’t know where the bottom of the market is, but I argue that you’re better off buying most of the way down and right through the bottom of the market until a recovery is clearly and strongly in place. That way, you’re sure to hit the bottom as well as a lot of “near bottoms” both before and after the real bottom.
Ramit: First of all, I’ve been saddened at how many friends are instinctively pulling their money out of the market without thinking twice — they’re reacting out of fear, not logic. The other thing I’ve noticed is a manic sense to “cut costs anywhere,” which is driving people crazy. You can’t save money on 50 things at once! It just makes people nuts. I’ve re-doubled my efforts to save money on two problem areas (eating out and going out). If I can save 20% on those over a period of six months by setting smaller goals, that saves me hundreds of dollars each month.
JD: All around me, my friends and family members are struggling during this economic crisis. They’re having to cut back on their way of life. My wife and I are fortunate that we haven’t had to make any sacrifices yet. Why not? Because we’ve spent the last three years trimming our budget; we’ve already cut back. One benefit of routinely practicing smart financial habits — in good times and in bad — is that when things get rough, you’re prepared. You have a buffer to protect yourself from economic storms. I haven’t always been this prepared, but I’m glad to feel safe in 2009.
What is the single best piece of financial advice you have ever been given?
Ramit: You don’t have to be the smartest person in the room — you just have to get started. Even in this economy, if you get started saving and investing, that makes far more of a difference in your overall returns than having a PhD in finance or being a fancy investment banker. Consistent, long-term saving and investing is the key, not reacting to news of the day.
JD: The best piece of financial advice I ever received is simply this: “Nobody cares more about your finances than you do. If you don’t take care of them, nobody’s going to take care of them for you.” It was only when I realized this that I was able to turn things around, get out of debt, and begin building wealth. I wish I could remember where I first heard this — Dave Ramsey? Warren Buffett? — because this principle helped me to take control of my finances.
Trent: Spend less than you earn. I first picked up on the idea from “Your Money or Your Life,” but it was most succinctly stated in the excellent unheralded personal finance book “Debt is Slavery” by Michael Mihalik (my review).
It seems so simple, but it’s actually much more complicated than it sounds. Each month, I make it a goal to spend less than I earn that month. I usually make it more specific than that – for example, I intend to spend only 70% of what I earn most months – but even an 80% or a 90% goal is fine.
This serves dual purposes. First, it pushes me to actually spend less. If I find a clever way to save money, then it becomes easier for me to reach that 70% goal – or even beat it. Second, it pushes me to earn more. If I can put more cash in my pocket by working harder or more effectively, then I have more money to save (in that 30% bucket) and more to spend (in that 70% bucket).
Over time, actually, I’ve been lowering my monthly target. Lately, I’ve been shooting to spend only 55% of what I bring in per month. Doing that over the long haul will put me in GREAT financial shape.
When we first launched Wesabe back in 2006, we heard from strategists at nearly every large bank, all of whom were excited by what we were doing and talked about how long they’d been thinking of similar features for their sites. We quickly realized that many of the people calling us were looking at us as an experiment for things they’d long wanted to do — an experiment they perhaps wanted to observe from a safe distance in case it didn’t work.
Fast forward to this fall. As the economic downturn and mortgage crisis developed, we started hearing from more financial institutions. The tone of the calls completely changed –- no longer were these fact-finding missions, but senior-level executives were telling us that they had watched our success and the growth of our space for the past couple of years, and now needed to help their members during these tough economic times. They saw how Wesabe was helping people with their money, how incredibly strong the Wesabe community is, and they wanted to know how they could work with us to bring those strengths to their sites — not as a long-term goal but as an immediate need. Even though the banks and credit unions who were getting in touch weren’t involved in the subprime mess, they were worried about being painted with the same broad brush as the failing institutions dominating headlines. Clearly, it was now a priority to shore up their existing customer relationships and attract some of the consumers who had seen their brand-name banks collapse overnight.
And so in January, we started testing Wesabe Springboard, a web-services-based version of Wesabe for financial institutions. The response so far has been very positive and encouraging — again and again we’ve heard, “This is exactly what we need to make our site into what our customers need right now.”
Today, we’re officially launching Springboard, and hope that through partnerships with credit unions and banks, more and more people will be able to get more value for their money. This revenue model will let us continue to keep the existing Wesabe site free to all our members. And because Wesabe learns from every single person who joins –- be it how they tag or rate a merchant, what Cutbacks they choose or don’t choose, or how often they return to that new restaurant down the street –- we believe that expanding Wesabe’s reach will only serve to improve our community and our ability to help people achieve their financial goals.
Marc Hedlund will be talking about what it means to be good with money at the It’s Your Money conference in San Francisco tomorrow afternoon.
It’s Your Money is a hands-on educational event for college graduates and soon-to-be grads to learn real world personal finance skills. Participants at the afternoon event will:
- Learn surprisingly simple ways to build a personal financial safety net
- Develop a step-by-step, practical budget with room for fun without the guilt
- Learn how to avoid common, costly mistakes
- Benefit from lessons learned by other recent grads who have dramatically increased and protected their savings
- Understand how simple decisions have a big impact on their ability to spend and save
- Gain real-world skills and long-term strategies for building a retirement “nest egg”
The conference is only $18 (to cover the venue). If you’re graduating soon, or have been out in the “real world” for awhile, this event will take the mystery out of building a secure financial future that matches your own strengths and needs.
If you happen to come to the conference, please drop by and say hello!
“This isn’t your grandma’s house and I’m not going to bake cookies and coddle you. A lot of your financial problems are caused by one person: you. Instead of blaming the economy and “corporate America” for your financial situation, you need to focus on what you can change yourself.” — Ramit Sethi
Ramit fans, rejoice! The straight-talking creator of the I Will Teach You To Be Rich blog has authored a soon-to-be released book, also titled I Will Teach You To Be Rich.
And because Ramit is a Wesabe advisor, we scored an absolutely free and absolutely awesome perk for our members – an advance peek at his book, including the first three full chapters in PDF format. Just click here and enter your email address. We’ll send a link to the first chapter this Thursday and the next two over the next couple weeks. NOTE: This is, as the folks on TV like to say, a limited time offer – you need to sign up by 7 p.m. Pacific time tomorrow (Wednesday, March 11) to get the chapters.
While the book targets 20-to-35-year-olds, it has practical, get-off-your-butt advice for people of any age. It includes a six-week program showing how to optimize your credit cards, eliminate late/overdraft fees, spend consciously and invest sensibly. Read this book, and you will save money.
I Will Teach You To Be Rich will be available starting March 29 at Amazon.com. Congratulations, Ramit, and thanks so much giving our members an advance look.
If there’s anything to be said of Wesabeans, it’s that they’re vocal. This is great since they ask questions, let us know what they want, and write their own documentation. What? Really? Incredible!
Often we can’t (or don’t) write fast enough for the official documentation to cover everyone’s questions and needs. Enter Wesabepedia — user created and maintained documentation. Not only is it user created and maintained, it wasn’t even our idea — Wesabe users dreamt it up and put it together for the benefit of the community.
Our new user manual should answer most questions about how we envision people using Wesabe, but Wesabepedia lets Wesabeans share “how to” notes on using the site in ways we never imagined — many of them far better than what we had planned. It’s for the users, by the users, on the topics the users want, and we couldn’t be happier.
In appreciation for Wesabepedia and the people behind it, we’ve started linking to it in our “Community Resources” section under help. Explore and enjoy!
Often a Wesabean writes Wesabe support saying, “I couldn’t find this in the help, I hope I’m doing the right thing writing in here”. Sometimes the Wesabean is a bit more direct, saying, “So, this should be in the FAQ, but I couldn’t find it”. The answer to both of those (up until now) has been a sad, “Yes, you’re right, our documentation has gaps bigger than the Grand Canyon. Don’t feel bad — it’s not you, it’s us”.
No longer! Paul and I have written, compiled, edited, organized, and perfected Wesabe’s official documentation. Ok, strike that last one, I just found a typo. As I was saying, it’s quite good and should have an answer or some advice for almost any question or problem. Check out the new Wesabe user manual, found under Wesabe help.
Also, if you do find a problem like incorrect information, missing information, or just plain confusing information, could you let us know at firstname.lastname@example.org? We want our documentation to grow up right, and good ol’ fashioned feedback can only help.