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This Week in Personal Finance Blogging: Subtract Before You Add
As I was driving along the interstate on a recent weekend, the plastic undertray beneath my car bumper came loose for the fourth time in less than a month — causing an angry scraping sound that made me think that something was seriously wrong with my car.
Fixing the immediate problem turned out to be easy — a mechanic had already taken most of the undertray off the last time it had fallen down (“You don’t really need it,” he muttered unconvincingly as I watched him pull it off) — and so I just had to cut off the rest with heavy-duty scissors. However, as I crouched underneath my car in the hot sun and surveyed the damage, I was painfully reminded that my beloved nine-year-old Toyota is starting to fall apart.
I sincerely hope hoping that it still has a few years left before I have to buy a new car. However, I’ll definitely need a car loan when I do, which means that I’ll have to start proactively working on my credit score now if I want to get the best rates.
Starting next week, I’m going to begin working on my FICO score for the first time in my financial life and will document my attempts here. However, first, I’ll need to get organized and simplify before I start adding things on like an additional credit card to my already overstuffed to-do list.
With that in mind, I scoped this week’s blogs for tips on how to organize, simplify, and, as always, live better with less. Here are my favorite picks for the week:
1. The Digerati Life takes a hard look at the high cost of disorganization and provides solutions for the scatterbrained to help us save money – and our sanity – with a few simple organizing systems.
2. Len Penzo extols the crime-stopping virtues of the mighty paper shredder – another organizing essential for those of us who tend to keep papers for life.
3. MoneyBeagle reflects on the “I’m stressed, therefore I spend” trap that many of us fall into when we’re feeling drained.
5. Yes, I Am Cheap responds to a cash-strapped reader’s plea for help with some personally proven tips on how to simplify and add income rather than subtract it.
6. MoneyNing shares some tips for post-recessionistas on how to stay stylish without breaking the bank.
Study: Swiping for Snacks Causes You To Spend More
It turns out cashless payment options for vending machines are not only a relief to consumers who don’t have to dig for change or worry that a wrinkled dollar will stand between them and their cheese curls, they are also fattening up machine owners’ bottom lines.
A recent survey shows that consumers buying items from vending machines spent an average of a third more when they used a credit card, debit card or prepaid card to make a purchase than they did when they used coins or dollars.
USA Technologies, Inc., a provider of wireless, cashless payment and M2M solutions for small-price, self-serve retailing industries, analyzed data from its July survey of more than 10,000 vending machines that use its ePort cashless payment system.
It found that cashless purchases made up approximately 26 percent of all sales at these vending machines. That figure was up 73 percent from 15 percent usage in a similar study the company did three years ago.
In addition, for the month of July, the company processed a record 7.8 million transactions (up 82 percent from July 2010) representing $13.4 million in small-ticket transactions (up 72 percent compared to July 2010.)
Adding options and convenience may help the industry bounce back from economic turmoil in recent years. The recession and ballooning unemployment in 2009 resulted in the biggest one-year drop in vending sales to just less than $20 billion from $22 billion in 2008, according to Automatic Merchandiser’s 2010 State of the Vending Industry Report.
The findings of the USA Technologies survey are a further indication that cashless vending options are becoming more popular and businesses are signing up. Another survey earlier this year noted a similar trend. Apriva, a provider of end-to-end wireless transactions and secure information solutions, conducted a survey among 200 members of the National Automatic Vending Association on whether they planned to adopt cashless payment technologies.
According to the findings, 57 percent of all respondents expected to either integrate or expand the use of cashless technology in 2011. Only 8 percent of the respondents said that they do not foresee adding any cashless technology.
Of those vendors who said they intended to add cashless options in 2011, about 30 percent said that they would place cashless machines in university or school settings, while 12 percent cited hospitals and other institutions as their primary locations.
European Company Erply Joins the Mobile Payments Fray
Erply, a European software management company, is ready to take on competitors Square and Verifone with its new mobile credit card reader.
The reader, which officially launched Tuesday, costs $50 with a 1.9 percent transaction fee – less than the fee charged by its biggest competitor in the U.S., Square, which charges 2.75 percent per swipe. However, Square’s software is free to merchants and Erply’s system starts at $70 per month.
It is available now for the iPad and will be available within three months for the iPhone.
One reason the system may be attractive to small businesses is that a single device can be used to do everything from checking on stock to completing sales.
The new reader connects to an iPad or iPhone’s charging port and transmits a customer’s encrypted credit card data to the Erply point of sale software to process payments. Because it’s encrypted, even the merchants do not have the credit card information, which lowers fraud risk. It also connects to Erply’s inventory management software, meaning that every purchase is instantly recorded, and the retailer knows what’s selling and what isn’t, even from multiple locations, as they ring up customers.
A sales person can be assisting a customer with information about a camera, for example, use the software to check on inventory, go to the storeroom and collect a particular model, and use the same iPad with the credit card reader to process the customer’s credit card on the sales floor. The customer is then sent an email or text message receipt, the company said in a news release.
Erply is an Estonia-based startup that specializes in business management software, helping companies deal with inventory control, bookkeeping, and other tasks. The company focuses on small businesses and appeals to them with cheaper fees. In December, the Wall Street Journal named it one of the top 10 European companies to watch.
Because a good chunk of the company’s customers are in the U.S., the reader is enabled for traditional credit card processing with a magnetic stripe as well as the new Near-Field Commiunication (NFC) payment options entering the market which will enable payments by waving a mobile phone. Google is working with this technology to develop its digital wallet and others are fighting for market share as well.
Players in this space have much to gain. ABI Research, in its market study “Next Generation Point of Sale Systems and Retail Technology,” projects that retail technology spending will grow to nearly $21 billion in 2014, from $14.8 billion in 2009.
“As technology changes, we are giving consumers the ability to pay for items the way they want to, whether it is with cash, credit cards or with NFC technologies in phones," said Erply CEO Kris Hiiemaa in a statement. "The Erply inventory management back end provides the foundation for our comprehensive POS solution, so retailers are ready for wherever the market may take us.”
This Week in Personal Finance Blogging: Back-to-School for Procrastinators
Today’s the first day of school here in Austin, TX, and in other parts of the country. However, not all schools are open yet, giving many procrastinating parents a few more days to do their last-minute school shopping.
A July survey from the market research group NDP found that most parents are pushing their shopping back later this year – which isn’t a bad idea if you’re willing to take the risk that your child’s favored lunchbox might be out of stock by the time you get to Target. At my local big box stores, some of the shelves look like they’ve been picked through by wild boars, but the remaining merchandise is still good and last-minute deals are everywhere.
Waiting for sales and forgoing trends in favor of what’s left is an especially good idea now, according to a recent Associated Press article, because prices for school clothes and other merchandise are significantly higher this year — forcing many parents to pay more than they expected.
If you’re willing to wait a few more weeks and recycle last year’s jeans and other supplies for awhile, you can get even steeper discounts. Only 5 percent of NDP survey respondents said they planned to hold back-to-school shopping until after Sept. 1. However, experts say that some of the best back-to-school sales occur right after Labor Day when stores are ready to start clearing merchandise from the shelves.
Even better, if you can convince your child that while last year’s pencils may have worn-down erasers,they’re still perfectly good — and there’s nothing wrong with carrying the same lunchbox year after year — then you may want to hold off on most of your school shopping altogether.
It’s easy to feel pressured by teachers’ long supply lists and by your child’s desire to have the latest trends and brand-new items. But looking through your desk and storage closet for what you already have is a good opportunity to teach your child to save more and waste less, says blogger Alison Bermack at Barista Kids. It can also be fun. “We had a blast rummaging, sorting and sharpening pencils together,” wrote Bermack about her own experience shopping her closet with her daughter. “And let me tell you. It’s truly remarkable what we found.”
With that in mind, here are several more blog posts from the last week on preparing for a new school year and calming back-to-school financial jitters.
1. FrugalLivingNW shares a time-honored way to teach your kids to budget for back-to-school: Give them an allowance for back-to-school shopping, set a few guidelines and have them figure out what to buy and what to reuse themselves.
2. Wisebread lists four more tips for saving on back-to-school shopping, including scouring the aisles of your local Walgreens and using up your office supply store rewards.
3. Frugal Dad shares some thoughtful advice on the seemingly impossible: How to teach your kids to look forward to and love school.
4. Live Renewed lists three frugal back-to-school traditions that you can do with your children to “start the year off on the right foot.” Suggested ideas include whipping up bigger-than-usual special breakfasts each day for the first week of school and creating unique back-to-school time capsules that celebrate memories from the past summer.
5. Theidearoom shares five tips on establishing routines at the beginning of the school year that will save you time – and gray hairs – as the year goes on.
6. Moneyning takes a look at what steps younger high school students can take now to prepare for the hard and often time-consuming work of applying for college scholarships.
7. CheapScholar lists the different items that frugal college students can rent rather than buy, including textbooks, microfridges and even computers.
Last-minute Advice for College Kids: “Practice Safe Spend”
Parents of college kids everywhere this month are likely fumbling over some last words of advice with sentences that include “protection,” “waiting,” “impulses” and “responsibility.”
Parents know they have to give that talk, but what may not be as prominent on their radar is the talk about finances, which, in fact, could include some of those same words.
American Express, along with personal finance expert Jean Chatzky and parenting expert Stacy DeBroff, have launched a new initiative designed to help parents teach their kids how to “Practice Safe Spend” before they head back to school or start life on their own.
A survey developed by American Express and Chatzky found that parents are already talking to their kids about money, but they are looking for help with a game plan.
For instance, parents and teens in the survey agreed that the best way to learn how to manage money is to have a set budget (80 percent of parents strongly/somewhat agree; 73 percent of kids do).Yet only 39 percent of parents and slightly fewer kids (37 percent) say they currently have rules that must be followed in terms of budgeting. In fact, parents are more likely to have rules governing curfews (51 percent) and dating (41 percent) than budgets (39 percent). The random online survey polled 806 parents of kids ages 13 to 22 and 802 children ages 13 to 22.
So how should the talk go, specifically? There’s help with that in the form of a Twitter party at 3 p.m. Eastern Thursday (Aug. 18). Chatzky, author of “Not Your Parent’s Money Book: Making, Saving and Spending Your OWN Money,” and DeBroff, author and founder of Mom Central ( momcentral.com) – an online resource to help busy moms with household and parenting solutions will co-host an hourlong discussion where they will share tips and advice and answer questions from parents. To join in, follow @MomCentral and tweet using the hashtag #SafeSpend.
Or you can find more financial advice for college students from Chatzky and DeBroff at the American Express Financial Tools website.
Here’s an example of the advice they give on protecting yourself from a budget blowout:
Chatzky says: There are college expenses you plan for – food on the meal plan, books – and then there’s everything else. Laundry, late night pizza and other extras add up fast. Decide how much your teen will have for these variables, tell them to track all spending, then check back in a month to see how it’s working out.
Debroff adds: And encourage young adults to show off the organizational skills they’ll pick up at college with additional record-keeping measures. Introduce them to systems for filing and keeping track of monthly bank account, debit, charge and credit card statements, plus leverage the free online account management tools card companies and banks provide.
Smartphones Play Big Role in Back-to-School Shopping
The smartest back-to-school retailers this year will be those who cozy up to the smartphone and social network-savvy crowd, according to a new survey by Deloitte.
Even with the turbulent economy, 86 percent of shoppers are planning to spend about the same as last year, the survey shows, but they’re spending in ever-evolving ways.
Among those surveyed who own Web-enabled smartphones, 64 percent plan to use the phones for back-to-school shopping, while 61 percent will use them to get price information. More than two out of five (43 percent) will download discounts or coupons to their smartphones.
“Price-conscious and/or time-constrained, consumers are navigating virtual and physical storefronts to get the information they want quickly and easily,” said Alison Paul, vice chairman, Deloitte LLP, in a press release. “Retailers need to respond with an integrated experience. In short, they must unite the store with their online and mobile channels to enable consumers to easily access product availability, promotions and information.”
Here’s how some retailers are expanding their smartphone markets:
- Best Buy rolled out the shopkick mobile app to all Best Buys and Best Buy Mobile stores this year. Shoppers collect “Kicks” and get discounts on their phones automatically when they step into the stores and a signal is picked up. Customers can also collect Kicks at other shopkick retail partners, including Macy’s, Target, American Eagle and Sports Authority.
- Target is offering up mobile coupon blasts. Shoppers can sign up to receive new mobile coupons every two weeks and can even check out with a Target.com account to avoid lines.
- J.C. Penney has scannable tags next to items that will give you more information about the product.
- Sears has a personal shopper app customers can download. You can take a picture of an item anywhere, send it to Sears and the store will try to locate the item for you.
The Deloitte survey found social networks will play a greater role in back-to-school shopping this year. More than one-third (35 percent) of parents plan to use social networking sites for school shopping, up from 29 percent last year. Among these shoppers, 69 percent plan to us them to find out about promotions. 44 percent plan to visit social networking sites to browse products.
The survey was conducted for Deloitte online by an independent research company between July 5 and 11. The survey polled 1,000 parents of school-age children in grades K-12, and has a margin of error of plus or minus three percentage points.
Retailers continue to race for a bigger share of the steadily climbing percentage of shoppers with smartphones.
According to Nielsen’s May survey of mobile consumers in the U.S., 38 percent now own smartphones. And 55 percent of those who purchased a new handset in the past three months reported buying a smartphone instead of a feature phone, up from 34 percent just a year ago.
Smart to make back-to-school shopping easier for these folks? You do the math.
Citi Finds Simplicity Can Be, Well, Complicated
As the political scene has taught us over the past few years, there are plenty of Americans who prefer their world served up in simple black and white—and complications like shades of grey need not apply.
So it would seem like a brilliant idea to launch a credit card harking back to more simple times—a card that doesn’t punish you if you pay your credit card bills late and doesn’t slap you with penalty rates for missing a payment or going over the credit limit. Add to those features a single, unified interest rate so that you don’t have to keep track of differing rates for purchases, balance transfers and cash advances, and, as credit cards go, you would seem to have a winner.
This is exactly what Citi’s new Simplicity credit card offers. A revamped version of a previous Citi card by the same name, the Simplicity card was created for cardholders with busy schedules who want to enjoy flexibility without surprises, Citi CEO Jud Linville tells the Associated Press.
However, what appears simple to Citi may not be so simple for consumers. As bloggers and industry experts were quick to point out, the new Simplicity card is, well, simply expensive. According to the Associated Press, the card targets consumers with credit scores of 720 and above. However, it comes with a not-so-simple interest rate of 16.99 percent.
That is 5 percent higher than the 11.99 purchase APR that Citi offers to consumers with excellent credit on some of its other credit cards, including the Citi Platinum Select card. It’s also higher than the market average of 14.40 percent, according to the most recent numbers by Bankrate.com. Add to this the lack of rewards, and it’s no surprise that many analysts found that the new Simplicity card may be one case in which less is indeed … less.
Still, for those busy consumers who occasionally miss a payment or frequently use their credit card for cash advances, the card may have appeal. The 16.99 percent cash advance APR compares favorably with the 25.24 percent cash advance APR cardholders pay on other Citi credit cards. And like several other Citi cards, the Simplicity card also offers a 0 percent introductory APR on balance transfers and purchases, currently for a full 21 months.
And, of course, if you never carry a balance on your credit cards, that 16.99 percent APR may not bother you one bit. However, cardholders who frequently carry a balance might bear in mind that paying a 5 percent interest premium on an average balance of, say, $3,600 would be the equivalent of paying a $15 late fee every single month. Which just goes to show that even simple can get, well, complicated indeed.
A New Way to Shop Online — With Your Webcam
[Guest post by Marcia Frellick]
A new technology rolled out this week aims to make online shopping easier and safer by turning any webcam into a secure credit card reader.
It’s called Netswipe, developed by startup Jumio, and it’s supposed to make online shopping as easy as taking a picture. It works this way: When you’re ready to check out, instead of typing in all kinds of numbers and personal information, you hold your credit card briefly in front of your webcam and then enter your 3-digit CVN security number. Through secure videostreaming, the system immediately verifies whether the card is made of plastic, whether the numbers are embossed and even if the hologram is real. It finishes the transaction in seconds.
The technology is getting a big boost from no less than the co-founder of Facebook, Eduardo Saverin, who is lead investor for Netswipe and a Jumio board member. Among other board members are former Google executive Zain Khan, and Mark Britto, a former Amazon executive.
“I’m usually a critical person, but the last time I have seen such a disruptive idea was actually Facebook,” Saverin said in a statement.
No image of the card is taken and no data is stored on the computer used for the payment. Your info is accessible only to you via the password-protected login portal.
And it’s free on the consumer side. Business owners who buy into the system pay a fixed percentage per transaction — just 2.75 percent per swipe for small transactions.
So what’s in it for businesses? They get more assurance that the card being used is legitimate so they can cut down on fraud costs, and they get more happy consumers who get all the way through the purchasing process instead of throwing up their hands in the middle.
Company research early this year found that more customers completed the online transactions when they used the new technology, Jumio says. Without Netswipe, 48 percent completed payment. With the technology, 79 percent did. Consumers saved an average 2.3 minutes by scanning their cards via webcam.
If it sounds familiar, it’s because capturing card information with a camera is not completely new. AisleBuyer and Card.io, for example, do that with mobile phone payments. Netswipe goes a step further in using a sophisticated vision to authenticate the card.
Jumio is the latest player going after Web-based retail sales that Forrester Research predicts will reach nearly $250 billion in 2014, up from $155 billion in 2009.
Next up for the company: entering the mobile market. A Netswipe mobile app will be available later this year, the company says.
How Debt Will Change Americans’ Spending Habits
[Guest post by Aaron Crowe]
At the height of the economic boom in the third quarter of 2007, U.S. households had borrowed the equivalent of 127 percent of their annual incomes to buy homes, cars and other goods, according to a recent Wall Street Journal story. We were buying more stuff than we had the income to cover.
That number is now down to 112 percent, thanks in part to banks writing off some debt as uncollectible. However, Americans are still relying too much on credit cards for everyday purchases. Not being able to pay for such things as groceries and gas with cash is a sure sign that you’re living beyond your means. Back in the 1990s, when the economy was better, American households had lower debt-to-income ratios — 84 percent — showing that it’s possible to live comfortably without overspending.
Some Americans are just starting to realize that. Consumer borrowing is dropping, and experts say it reflects a shift in thinking that’s going to continue for the next several years as more Americans come to terms with how we got into debt in the first place.
Being frugal was in vogue when the recession started, and now it looks like getting out of credit card debt will be the next big thing. As more people realize they can save a lot more money by paying off their credit card bills than by pinching a few pennies at home, they will begin to rethink how they spend.
Since I became a victim of the recession in 2008, I’ve seen first-hand how my family and others have cut expenses and lived a more frugal lifestyle to save pennies that we hoped would add up to dollars. We’ve cut back on vacations, buying a new car, birthday celebrations and new clothes, all in the hope of stretching a dollar.
But it doesn’t seem to be enough. Being frugal may be the “in” thing to do, but it won’t make your financial troubles disappear. Getting out of debt is the best way to unburden your financial woes.
I learned this at a young age. For a few years after college, I rung up a huge credit card bill because I wasn’t earning much money and didn’t have the cash for what I wanted to buy. I was living beyond my means. After I realized I wasn’t making headway on the debt, I cut expenses here and there, but I soon saw that putting more effort toward eliminating that debt and not using my credit card for daily expenses was the best way to end my financial nightmare. It took me about a year, but when I got there, my finances were in better shape.
Unfortunately, just to get back to the good old days of the 1990s, when debt-to-income ratios were 84 percent, American households would need to either pay down $3.3 trillion of debt, or have their incomes rise by $3.9 trillion, according to the Wall Street Journal article. That’s equal to about nine years’ worth of income growth in normal times.
Meanwhile, banks are lowering credit lines, making it difficult to rely on credit cards for everyday purchases. That leaves spending cuts as the way most families will be able to afford daily living expenses.
We’ll continue cooking at home more often and buying fewer lattes. But, in the end, the best way to manage our household budget will be to chip away at any debt hanging over us. The pennies of cutting expenses will always add up, but eliminating dollars of debt on credit cards will get rid of the pain a lot faster. It’s either that or hope for healthy raises at work for the next nine years.
This Week in Personal Finance Blogging: The Power of Tomorrow
I’ve got a borrowed copy of Eckhart Tolle’s “The Power of Now” audio book in my car right now, and every once in a while, I flip it on while stuck in wrenching traffic, take a half-dozen deep-belly yoga breaths and try my best to appreciate the present moment – nevermind that I’m stuck in a freeway parking lot and will probably be late to wherever I’m going … again.
Tolle says that if you don’t focus your attention on the here and now, you are missing out on life. “Time is an illusion,” he says. Every minute that you spend focusing on the past or future, you are wasting a precious moment you won’t get back.
I can see his point, but I rarely follow through on his advice. Most days, if I don’t actively remind myself to turn my thoughts to the present moment, my mind inevitably wanders to the future. I’m a compulsive planner by nature and have practically made a hobby out of creating, erasing and revising my long-term plans. I enjoy daydreaming about future possibilities, and I feel unsettled if I don’t have a Plan A, Plan B and Plan C for nearly every situation.
According to Tolle, I could be sacrificing power-of-now ecstasy for the illusion of long-term security. But personal finance experts will often tell you that early planning and reflection is a key building block to a successful financial future. (Take that, Eckhart Tolle!)
So when I came across The Simple Dollar’s passionate defense of living with the long-term future in mind the other day, I felt vindicated. Sure, your circumstances may change on a dime, notes Simple Dollar blogger Trent, making it hard to really plan, but if you start out with a list of flexible goals that you revise as you go, you’ll be better off in the long-run.
The Simple Dollar’s words of wisdom: “It doesn’t matter where your path leads you. Eventually, you will grow old … Unlike many long-term goals, aging will happen and it’s worth your while to be prepared for it.”
With that mind, here are eight more of my favorite posts from the past week that celebrate reflection and long-term thinking.
1. Moneyning takes a look at “alternative investments” for the financially adventurous and offers solid advice for those who want to take the financial road less traveled by. (Offbeat investment ideas originally supplied by CNN Money include: Ostriches, chicken feces, Christmas tree farms and beauty school.)
3. Bargaineering warns young professionals not to over-leverage their lifestyles in their first years out of college and makes a solid point about human psychology: Once your income starts to pick up and you can finally throw out that last packet of Ramen, it’s tempting to want to upgrade your lifestyle to match your salary. But don’t do it!
4. WiseBread challenges readers to buckle down, stop procrastinating and start working on these eight “personal finance basics” as soon as possible. (Some of the basics include clipping coupons, planning for retirement and strengthening relationships.)
6. Budgets are $exy takes it a step further and blogs about a beginner’s budget trick from Money magazine called the “bucket” budget. (If you follow this method, get ready for multiple banking accounts.)
7. Frugal Dad extols the virtues of hanging on to a paid-for car until it dies. You might spend more upfront for a quality car, Frugal Dad blogger Laurel Gray notes, but you could save a fortune in the long-run if you refrain from trading it in after a few years.
8. The Lean Times ponders the wisdom of “breaking the frugal rules” when you know you need a vacation and decides that sometimes it’s worth it to (temporarily) sacrifice your finances for the sake of a little R and R .
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