Ryan talks about how he founded Budgetable with his brother, how the software works and what he feels are the shortcomings of traditional budgeting methods.
Consumerism Commentary Podcast
Bank Transfer Day: S06E04 / 159
[00:00] Introduction from Tom Dziubek [00:36] Interview with Ryan Bales
– [00:48] The founding of Budgetable
– [04:06] Shortfalls of existing budget software
– [04:50] How Budgetable works
– [05:50] Budgetable’s user interaction
– [11:08] Failures with current budgeting methods
– [13:23] Using Budgetable
– [14:01] Smart phone app plans
– [14:21] The Financial Blogger Conference [16:56] End
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People frequently ask me to share the best piece of financial advice I’ve ever received. Most recently, this was a common theme at the Financial Blogger Conference in Chicago. One company in attendance, creditcards.com, filmed and edited a video of various personal finance bloggers sharing their best piece of financial advice. I think it’s important for people to share what has worked for them, and their inspiration, as they succeeded in improving their financial conditions.
I find it difficult to remember my attitude towards money as a teenager. I just didn’t think about it often. I understood the importance of earning an income, I had a bank account, and I had occasional jobs as I was an older teenager, but I never placed any emphasis on money management. I didn’t think about budgeting, investing, or looking for income opportunities because I was mostly concerned with my extra-curricular activities first and academics second. I don’t recall my parents ever making money a real issue, and I’m fine with that; if kids can be protected from the added stress of financial management until they’re older, they’ll do a better job of making the most of their adolescence.
But I did sail through college and my first few jobs without thinking about my financial condition, and I eventually paid for it. I had student loan debt, credit card debt, and thanks to some other mistakes, unpaid speeding tickets, a suspended driver’s license, an auto insurance surcharge, and many other expenses and debts I could have avoided.
I didn’t always get along with my boss, but he was a leader whose primary responsibility included motivating a group of 128 talented teenagers and young adults through monthly weekend rehearsals during the fall, two-week camps during the spring, and a seven-week tour across the country during the summer. It was a music program, but it also presented the group of students with the opportunity to improve themselves and their approaches to life, with lessons that would stick with them and inform how they live each day in the future.
The advice that has stuck with me the most, although it didn’t sink in until years later and I didn’t recognize it at the time, isn’t a piece of financial advice. It’s advice about life, attitudes, and philosophy that can be applied to personal finance. While I don’t remember his exact words, it boils down to this: Every moment is a choice.
There’s nothing unique about this idea. The concept has been used by motivational speakers, like Patch Adams and Wayne Dyer who focus on making conscious life choices, and by others who see this idea as a call to connect better with a supreme being of some sort. I am not a big fan of motivational speakers or preachers, so I carefully select concepts that have meaning to me, allowing myself to think independently. I dismissed the idea that sleeping through an alarm clock was a choice. I dismissed the idea that arriving at the office late due to a traffic jam was a choice. I didn’t even stop to consider that my financial condition, thousands of dollars in debt, was a choice.
It wasn’t until I was out of a job and had no place to live that I started to reconsider my approach to life. I’m forever grateful to my father, who helped me re-start my life from a better position with financial assistance, and to his long-term girlfriend, who allowed me to reside in her house while I changed the direction of my life. My time there gave me the opportunity to look at the choices I made, accept responsibility, and move forward with a new approach. I took the idea that every moment is a choice and applied that to my finances.
I started paying attention to my finances. There’s a moment in the film The Matrix where Neo, the main character, accepts that he is “The One” and finally sees the world around it for what it truly is. This is a powerful awakening. I saw that I was in control of my life, and in order for me to be in control of my finances, I needed to know where I stood and where I was going.
I made decisions that improved my financial condition. Recognizing that without a car, my options were limited, I found a job that was accessible by train. It wasn’t an ideal job, but I eventually made it my own. With income, I was able to save, and I moved out as soon as I could to avoid being a further burden on family.
I educated myself. I started reading more about managing money, particularly the Motley Fool discussion board that focused on living below your means. This eventually led to me creating Consumerism Commentary as a place to track my financial decisions — the choices I was making to improve my life.
When you don’t live as if every moment is a choice, you leave decision-making up to the world around you. You are subject to the whim of chance, and if the outcome isn’t what you’d like, there is always an excuse. There is always some way to blame your circumstances. Here are some of the excuses I’ve used to avert responsibility in the past:
“The road was closed due to a car accident.”
“I’m not feeling well today.”
“I didn’t know about this bill.”
“My car broke down.”
All of the above may have been true when I said it, but they are results of choices I made — the choice not to anticipate road closures or live closer to the destination, the choice to keep myself healthy, the choice to manage my finances and organize my bills, the choice to take care of my vehicle properly. Yes, sometimes there are forces beyond one’s control, but for the most part, the choices we make can make those external forces less relevant.
With this article, I have a choice. I could use my advice to deliver a direct motivational call for readers to take an active role in their lives my looking at every moment as a choice, or I could present the idea of every moment being a choice as a concept that worked well for me, and leaving the choice of whether to accept this approach up to the reader. I’m not a fan of motivational speakers, so I choose the latter.
This idea isn’t just about finances, it’s a philosophy that helps anyone become more involved in their life. Life is short, and taking ownership and responsibility adds to the reward you feel with each success and the drive to improve after every failure. It’s a life philosophy but it ties so well into personal finance. I wish I had come to this conclusion earlier in my life, but if my past experiences were to be any different than they are, I’d be a different person in some unknowable way today.
What’s the best financial advice you’ve ever received?
For the last few days, I’ve been testing the new version of Quicken Home and Business. While most people who track their finances have moved to online services like Mint.com, some of us are holding out until the online software offers the same advanced features as the desktop Quicken software. I enjoy my ability to track my investments, create and customize reports, export information into Excel, and look into the future with planning tools.
Quicken 2012 is set to be released on October 10, 2011 and offers several new features, particularly in that last category. The programmers at Intuit have refreshed and improved the Budget Planner and the Debt Reduction Planner, available in all flavors of Quicken 2012.
Quicken 2012 Budget Planner
The new Budget Planner is a combination of the budget planner from previous versions of Quicken and the spending planner. When creating a new budget, you have two choices. The “Automatic Budget” looks at your recent spending to determine the five most important categories for budgeting. Quicken estimates the amount for each category on a monthly basis and presents its suggestions to the users for customization. The “Advanced Budget” invites the user to select the categories to be used in the spending and income plan.
Each line on the budget is configurable by period. You could, for example, assign a budget of $300 a month for Food and Dining (overall, which includes specific categories like Groceries and Restaurants) and set a budget of $10,000 per year for Property Taxes. If your annual salary is $60,000, you can enter this. Automatically, Quicken will assign the average monthly budget in this category to $5,000, but if you are paid bi-weekly, you don’t receive the same amount of income each month. You can edit the individual months if you like.
One drawback to Quicken’s budgeting tool is that it does not include a rollover feature. For example, if you budget for an expense of $200 in groceries each month, but you only spent $150, the extra $50 is lost. In real life, and in other budgeting software, that $50 would be available to add to the following month’s spending on groceries, but Quicken does not automatically handle surpluses. Rather than focus on these details, you could change the budget view in Quicken from monthly to quarterly to get a better overview of how you spend when expenses cross months. This is also helpful for those infrequent expenses that are often forgotten when you look at a budget on a monthly level.
Each Quicken file can contain multiple budgets, so you and your spouse could maintain separate measurements of spending, even including the same accounts.
If you’re just getting started with budgeting, consider these resources:
The new Debt Reduction Planner in Quicken 2012 has been completely redesigned. The focus here is on credit card repayment, but the planner can be easily configured to include student loans, a mortgage, and any other debt that is destined for elimination.
If your credit card issuers support it, Quicken downloads the interest rate and minimum payment information directly through the internet. If all the information isn’t available for automatic download, users will need to enter it manually from the latest statement or by accessing the account online. The interest rates and minimum payment amounts are important because Quicken needs this information to calculate the payoff plan.
Quicken’s programmers have decided that the Debt Avalanche method of paying off debt is the most appropriate philosophy for prioritizing debt. This means that the Debt Reduction Planner advises users to pay minimum payments to all debts, and any left over cash available for debt repayment should be directed to the one loan or credit card with the highest interest rate.
This is the fastest, cheapest, and most efficient way to pay of debt. The Debt Reduction Planner creates a chart and reminders to keep borrowers focused on paying the correct amounts to the appropriate debts.
Although Quicken defaults to prioritizing debt by interest rate, any user who prefers to follow the Debt Snowball approach, where debt is prioritized by size to payoff the smallest debt first, taking advantage of the psychological “quick win,” can apply this philosophy with one click. Furthermore, if there is a reason to customize the order of debt accounts due to some other reason, such as the desire to eliminate a low-interest loan from a family member before tackling an otherwise important credit card debt, users can easily manipulate the list.
Once users and the software agree on priorities, Quicken uses a visual approach to illustrating the debt payoff plan. This slider can be moved back and forth to represent the total cash available to pay off debt. While moving the slider, Quicken updates the target date for complete debt repayment and the total amount of interest paid over time.
The screen also includes a monthly chart to show the payment amounts that should be directed to each debt to stay on track. I’ve included a video capturing how the new Debt Reduction Planner feature in Quicken 2012 works, in action.
Quicken 2012 bugs
Since upgrading to Quicken Home & Business 2012 from the 2011 version, I’ve noticed that the “One Step Update” frequently doesn’t complete without causing the application to become unresponsive. This was an occasional problem with all prior versions of the software, and forcing the application to close and restarting the program usually solved the problem despite the inconvenience. With Quicken 2012, more often restarting the program does not fix the problem.
I can avoid this problem by avoiding the One Step Update function and downloading transactions for each account separately. I’ve always liked the convenience of downloading transactions across all accounts at once, so I would like to see this fixed in one of the many patches Intuit is sure to release.
If you discover any additional problems with Quicken 2012, such as calculations that don’t seem correct, let me know by leaving your comments below.
Other questions
In addition to the above, Intuit has been busy adding more financial institutions to the “Direct Connect” or “Express Web Connection” features, so transaction information can be downloaded directly into the software with as little manual entry as possible. With Quicken 2012, I’ve found that the software much more intelligently assigns categories to new transactions.
Quicken 2012 offers a new feature, good for users with high-definition screens. A toggle allows users to switch to a larger font, making the information much more legible. This follows the design trend leading towards larger text on the web. You may find the large text more appealing. Also, the account bar now features new icons, supplementing the familiar red flag. The new icons help to identify whether there are downloaded transactions to accept into the register, upcoming reminders or bills, or any other issue needing attention.
The latest development of Quicken is available only for computers running the Windows operating system. Apple users with the Mac OS will need to continue using Quicken Essentials for Mac for the near term, or use the Windows version in a virtualization.
Seventeen years ago I was nervous about what was about to transpire. At this time, although I had been away from home for extended periods of time, I was about to leave for college. Honestly, I thought I might not have been able to handle the responsibilities and the new social environment. Rather than living at home and attending a local college like a number of my high school classmates, I was preparing to live on the campus of a major university in another state.
I should have known that I had little to worry about. But there are a few things I wish I had known — or at least thought about — before entering college.
Pay attention to your expenses. For me, my expenses were fairly controlled. On campus, I had a meal plan. My breakfasts, lunches and dinners were paid for in advance and rolled into my tuition and board expenses. In order to eat in one of the many dining halls, all I had to do was flash my student identification card. This meal plan entitled me to a certain number of meals per week in addition to an allotment of “points” which could be used to purchase snacks at other times.
The meals and points expired at the end of each semester, and the college reminded students that “it is [their] responsibility to budget [their] points over the course of the semester/session.” I don’t recall doing any budgeting. I may have known at the time how many meals and points were available to me, but I didn’t do any planning. I ate when I felt like it and bought snacks and other things at the university’s shops when I desired. There was an option to add points to the account, and I’m sure I did this as needed.
Who is paying for college? My undergraduate education was paid for by my parents, a partial scholarship, and loans in my name. While you should not waste your time by failing any courses, this is even more important if your parents or other parties are paying for your education. Wasting your money is a problem, but wasting other people’s money is disrespectful. If you fail a class required for your degree, you will have to take that class again, paying for it twice. It’s not worth it, particularly since it’s usually difficult to outright fail a class. Paying for college yourself supposedly gives you ownership of your academic decisions while in school, but if you’re in a situation where you don’t have to worry about affording your own tuition, then consider yourself lucky.
Work shouldn’t interfere with studies. I am quite grateful I didn’t have to pay for most of my undergraduate education. It allowed me to focus on my education and extracurricular resume-building activities in my field rather than focusing on earning income to afford tuition. I did find a few jobs, however. I stayed on campus for winter and summer sessions to take more classes, but with a lighter load during these in-between semesters, I worked in the department library to earn some extra money. I also served as a web consultant in my department, designing their first departmental web site and teaching professors how to publish their own sites for a measly ten dollars an hour.
These jobs provided me with a little extra cash. I probably spent it just as fast as I was earning it, however.
Have the right bank accounts. It’s essential to establish bank accounts in your name. Free student checking accounts can help you access your money whether at home or at school, and an account that has branches nearby to both locations is one way to ensure your parents can add to your account easily if they are willing to do so. College is a great opportunity to get into positive financial habits early, like moving extra money from your checking account to a high-yield online savings account at regular intervals. This is a great destination for any extra cash you earn from odd jobs, though in college there will always be the temptation to spend money on enhancing the social aspect of the college experience.
Open a Roth IRA. I wish I had known about Roth IRAs when I started college. It would have been impossible for me to do so without a crystal ball or some other form of premonition. These retirement accounts were brought into existence while I was enrolled in the university, but I did not hear of it until a few years after I had graduated. If I had known that I could put money away for retirement in a tax-advantaged account while I was in such a low tax bracket, I might have taken advantage of the opportunity. Then again, I might not have. It’s hard to imagine retirement before you’ve officially begun a career, but it’s harder to argue with long-term investing in the stock market. If I had invested $1,000 in the S&P 500 index on October 11, 1996, it would be worth $1,825 now (not including reinvested dividends) and much more by the time I retire.
Like many, I played the “stock market game” in elementary school, learning how investing works in some respects by using fake accounts to trade. Of course, trading was a different worls when I was young, in which stock market information like prices were only available in newspaper listings. By the time I entered college, I probably knew only a little more about investing, but my interests lay elsewhere. I did not concern myself with the idea of having a secure financial future.
Avoid credit cards. The credit card companies are vultures on college campuses. I remember when I first arrived on campus as a freshman for orientation, one week before the upperclassmen. The companies set tables outside the dorms with applications and free tee-shirts, enticing subfashionable freshmen like myself to sign up. Although I escaped relatively unscathed, having a credit card without a job is asking for trouble. The Credit CARD Act limits card issuers’ abilities to market to students, but the sharks are still out there.
One particularly sneaky aspect of college-geared credit cards is the introductory offer. The 0% APR on purchases deal sounds great, but what they don’t explain is that you must pay off your entire balance on the card before the promotional period ends, otherwise you could owe back interest as if the 0% APR promotion never existed. It’s always explained in the fine print, but if you have an appointment for orientation, chances are you just want to sign the form and grab the tee-shirt.
Forbes offers these thirteen financial tips for students entering college for the first time.
Use credit cards sparingly
Pay all credit card balances in full
Get the best deal on a checking account
Start saving
Keep track of your spending
Set a limit on entertainment
Shop at second-hand stores
Keep an eye out for free money
Get a part-time job with tips
Walk or ride a bike — don’t drive
Avoid the tax on stupidity
Look for student discounts
Don’t eat out all the time
Tavis Smiley has a number of similar suggestions. He suggests making a budget, shopping smart, and learning to cook.
Had I known what I know now about compounding interest and the tendency for the stock market to increase over time, not just theoretically but from experience, I’d be in a better financial position right now. And it’s not about having more money, it’s about having more options for doing the things I like to do.
From a psychological standpoint, it’s unlikely that college students, even after receiving information about making healthy financial choices, will change behavior. That’s just a nature of age. When I was entering college, while I felt like an adult, perhaps subconsciously I knew that I had a few years remaining before I needed to concern myself with adult issues. I wasn’t concerned with retirement because I figured there would be enough time after earning my degree to worry about the future. In many respects, this is true. In college, it’s good to hang on to the last few years of childhood and limited responsibilities. While my finances would have been in better shape earlier on, it’s hard to look back at my life and wish I had taken a different approach.
After all, my financial failings in and after college led to my interest in personal finance, and not much later, the start of this website.
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The school year within the United States public education system lasts about ten months, so some teachers face an interesting budgeting issue that most American workers do not. The first issue is handling a below-average paycheck. Compensation for public school teachers varies wildly depending on years of experience and location, but for the most part ... Continue reading this article…
Money Magazine featured a story about Rick and Amy Mendez, a couple in their early forties with two children, earning an income of $225,000. They have a healthy retirement plan balance, and they needed to borrow from their 401(k) to pay for an emergency. Here is a family of four earning $225,000 a year, with ... Continue reading this article…
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[00:00] Introduction from Tom Dziubek
Work shouldn’t interfere with studies. I am quite grateful I didn’t have to pay for most of my undergraduate education. It allowed me to focus on my education and extracurricular resume-building activities in my field rather than focusing on earning income to afford tuition. I did find a few jobs, however. I stayed on campus for winter and summer sessions to take more classes, but with a lighter load during these in-between semesters, I worked in the department library to earn some extra money. I also served as a web consultant in my department, designing their first departmental web site and teaching professors how to publish their own sites for a measly ten dollars an hour.
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