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Is all this Technology Good or Bad for my Finances?
Like most people these days, my wife and I carry cell phones everywhere we go, read news and blogs via laptops, check our bank accounts, brokerage accounts, and retirement accounts online, pay our bills online, and arrange automatic saving and investing online. I thought it might be interesting to take a minute to examine the effect all of this technology has on our finances?
Stuff costs money
First of all, money is required to purchase a lot of this technology which hurts our finances. Cell phones typically cost money upfront and on a monthly basis. There is always the pull to get a newer and fancier model with a more expensive monthly plan as well. I currently have a basic cell phone, but most phones nowadays enable the user to check new and even stock prices through them. In fact, Etrade recently released a mobile platform that you can access from a smart phone.
There are also costs associated with getting online to do all the tasks (and more) I listed above. Of course a computer is required and high-speed internet access (I couldn’t imagine going back to dial-up now). If you use a laptop, you’ll probably want a wireless router as well. All of this costs money…and the more money you are using to purchase new technology, the less you get to keep.
This technology provides convenience and knowledge
With that being said, there are still many tangible advantages that comes along with all this technology. If I am not sure what my checking account balance is at any hour of the day, I can check exactly how much the bank thinks I have in less than a minute (3 minutes if I have to boot-up the computer). If I forget to mail a check to pay a bill, I can log into my online banking account and have the bill paid more conveniently, in much less time, and with less risk (and less expensively) than filling out a check and dropping it into the mail. From a purely financial standpoint, a cost savings in envelopes and stamps is realized and that doesn’t even take into account the time savings which is typically much more significant.
Also, current technology provides many tools for managing your finances (yes, I know for some a pencil and calculator work just fine, but maybe others of us need a little more help) There are numerous net worth tracking tools available online to help you stay on top of your financial situation. Also, there are many budgeting software options to facilitate managing and tracking your income and expense. These are just but a few of the advantages that come along with these technological advances.
Investing is much easier though that is good and bad
It is also much easier to invest money in stocks, mutual funds, and options via online brokerage accounts and in US Bonds at TreasuryDirect.com. A wonderful byproduct of these advances are that online brokerages have driven the cost of investments down drastically. Whereas in the past you would have to call up your stock broker and pay who-knows-how-much to request a trade, you can now buy and sell stocks for $5 online (or even free in some cases). On top of this, the internet provides an amazing wealth of useful information on investing to educate you how to invest. As such, there is really no excuse for someone not to be able to invest in mutual funds and/or bonds for long-term growth.
On the other hand, the easy availability of this information and the ability to trade can be a negative as well. Sure, it is easy to invest in stocks, bonds, and mutual funds, but on the downside, it is easy to invest in stocks, bonds, and mutual funds! Making careless decisions because it is cheap and easy can lead to real difficulties down the road. I’m sure you’ve seen the ETrade television ads of the baby buying stock – maybe this is becoming a little too easy (and that spit-up one is nasty). This can lead to irresponsible day trading and the real possibility of losing a lot of money. It seems so easy to try to time the market and make a big score and it only costs $7.99 per trade! I personally think this might be too enticing.
Furthermore, not only is there a generous amount of information related to finances and investing on the web but there is also a wealth of bad information out there. There are numerous online investing newsletters available to help you under-perform the market. I’m sure a simple search would return plenty of websites eager to hawk penny stocks in an attempt to have you make them a bunch of money. Even from reputable sources like online magazines, too many of the articles are geared towards enticing you to stray from your long-term plan to try to time the market. Already I’ve seen an article for the best stocks to buy during the Obama presidency. You can always find articles on "the hottest six stocks for next month" and "where to put your money for 2009." The point is to be very cautious in the information you rely on.
Overall I feel technology has a beneficial effect on finances – if we use it responsibly
Of course, there are pitfalls, but when you look at the big picture, I think we are much better off due to the advances of banking, investing, and personal finances compared to a few decades ago. If you can resist the urge to drift from your long term investing plan, there is great convenience and cost savings to be had making use of the internet. I love my online banking and being able to access my Vanguard account online. Setting up automatic transfers from my checking account to a high-interest savings account at a different bank and to my Vanguard account makes it very easy to setup and stick to a savings and investing plan. Technology will always advance, so we might as well figure out what pitfalls to avoid and what advances to embrace to make it easier to realize our goals.
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