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.
Monthly Net Worth Check Point: November (still dropping)
Scares! Shrieks! Is it Halloween, you ask? No, it’s time to check all our account balances and update our net worth for the month. Check out this page if you want to see the spreadsheet I use to track it and a video tutorial on how to create and update it . If you don’t like spreadsheets (who doesn’t like spreadsheets?!), I also have a post on some online tools for tracking your net worth .
Over at One Caveman’s Financial Journey, recently there was a post on why your net worth isn’t the best gauge of financial health . It’s an interesting post with some valid points. I agree that the usefulness of your net worth as an indicator of financial health is clouded by external forces such as the stock market. That is actually the main reason I created my net worth spreadsheet in such a way as to provide a information on different account categories. For instance, it might not be very illuminating to simply see that our net worth decreased 4.5% this month (OUCH!) but being able to see how our liquid savings did separately from our accounts with stock market exposure is still useful, I believe.
Our assets dropped 2%
Just like last month, I expected our assets to drop more than they did. Every account with stock market exposure dropped significantly. For instance, our taxable investments dropped 12%, our retirement accounts dropped 7.5%, our 529 plan dropped 5.7%, and my stock options dropped a whopping 49.5% in value! My options have been hammered lately, dropping 48%, 33%, and 49% over the last three months. That means compared to their value in August, my stock options are down more than 82%! (Luckily, I guess, they weren’t worth that much money to begin with)
All of this was buffeted by the fact that our liquid assets increased 9.9% this month. So, for the past two months while all of our accounts exposed to the market have been tanking, our liquid assets have balanced this out somewhat as they have grown 25%. So, I feel that looking at our increase or decrease in liquid savings is probably the best measure to see how we’re doing financially in this current environment.
Our liabilities decreased by 0.49%
Another very important financial metric to me is our level of liabilities (seeing that level go down to be specific). Our mortgage drops a similar amount each month and our lone remaining debt (my wife’s contractual obligation if she stops working) drops a set amount. As long as this keeps decreasing, I’m happy. I do not have any plans to accelerate our mortgage repayment in the near future, but it is an idea with which I am toying.
Our net worth decreased approximately 4.5%.
All of this adds up (subtracts up?) to a 4.5% loss in net worth this month. At least the downward decline is decelerating compared to our 8% drop last month. Again, the most important measures to me are the direction of our liquid savings and our liabilities. As long as our liquid savings are going up and our debts are going down, then I feel like we’ve been successful for another month.
I am still not overly concerned about the stock market
I am not super excited about the drop in our stock market accounts…well, in a strange way, I am actually somewhat happy about it (in a very selfish way, I admit). I am in a position that I do not need to draw on my retirement savings for decades and hopefully our emergency fund will prevent us from having to cash out any mutual funds or stock options in the near future. In that respect, the lower prices for stocks are actually helpful as we continue to purchase more every month. In fact, I recently increased my 401k contribution 4%.
I know it’s not pretty looking at the current numbers; instead I try to focus on how many more shares I am purchasing each month compared to the number I was buying last year at this time. If I stay focused and calm and continue to dollar cost average each month, it has the potential to pay off in the long term when the market recovers. (that assumes, of course, that the new president-elect and democrat controlled congress will attempt to stabilize the economy instead of causing it crash and burn so they can switch us over to socialism)
Politics: An Historic Result
It’s finally over! Well, that is the best part about the election, I guess. I’m not so thrilled about the outcome, but that being said, we have elected our first African-American president and I think that’s a good thing (I probably would have preferred a different first African-American president but that’s not important any longer). I just wonder how long the honeymoon will last. It seems that some people have some pretty unrealistic ideas about what he’s going to do for them like this lady who was probably just caught up in the emotion of the moment but now will be immortalized via this very popular clip (by people like me).
Apparently the Obama campaign has already started planning how to temper some of the enthusiasm that was generated before a backlash begins ("You mean I have to do all that stuff I said I would do?")
The sun did come up again Wednesday morning for conservatives
There is no doubt that the GOP has moved away from the ideals that gave them control of congress and then the white house over the past decade or so. We now have a bigger and less fiscally prudent federal government than eight years ago which is pretty much the opposite of what most conservative voters originally wanted.
The bright side?
In a strange way, I think Tuesday’s result will energize conservatives. My wife has been more involved in this election than ever before – I have never seen her so interested in the process nor have I been either. Another friend I spoke to Wednesday morning is really feeling the pull to get more involved with politics at some level as well.
And there can be no doubt that Republicans were routed by the Democrats this time around. I don’t necessarily think this means we are now a left-wing country. I feel that this election was more about discontent with the current leaders than an embrace of the far left. So, at the party level, I think you’ll see a change in leadership and a return to the ideals of the GOP – smaller government, lower taxes, fiscal responsibility, etc.
Who did we really elect as our President?
Most conservatives are very concerned about the next few years. Where we head in the near future depends on who we really elected to be our president.
Did we elect the Obama of his past and the democratic primary – a man who is liberal in all areas, embraces big government, redistributing the wealth, is big on social justice, abortions for all, etc.
Or did we elect the Obama of the presidential campaign – a man who will really cut taxes for 95% of working Americans and go through the government with a fine tooth comb to eliminate programs that aren’t working?
That is quite a dichotomy and it will be interesting (and maybe frightening) to see what actually comes to pass. The answer will greatly influence what this country looks like in four years.
The optimistic view
At my most optimistic, I think that he really cares a lot about being popular and well-liked and that would portend following through on some of the moderate/centrist promises he made.
The not-so-optimistic view
On the flip-side, I would guess that if he does veer sharply back to the left, he will not be granted a 2nd term as president. Remember, this is still a center-right country and I don’t think it will tolerate a liberal president and a liberal congress pushing us to the far left.
It is one of the great weaknesses of reasonable men and women that they imagine that projects which fly in the face of commonsense are not serious or being seriously undertaken. — Margaret Thatcher
I feel that a lot of people hear these far, far left-wing ideas (banning all guns, creating a civilian defense force for who knows what purpose, reviving the fairness doctrine, redistributing the wealth, encouraging the courts to enact social justice) and just can’t believe that a reasonable person would really want to do any of them (it must be a product of those mean-spirited attacks by John McCain). If some or most of these things actually come to pass, I think a great number of Americans will be absolutely shocked and Obama and a bunch of liberal congress members will be gone over the next few election cycles (even if they do promise to pay your mortgage and fill up your car with gas)
Ok – that’s it – no more politics! Back to personal finance next week
I could go on and on about this stuff but I will get back to PF. I think I need to find a friend with a political blog to do an occasional guest post and spare you from it! After all this stress and concern surrounding the election, here’s a little reminder for you…
Now I, Nebuchadnezzar, praise and exalt and glorify the King of heaven, because everything he does is right and all his ways are just. And those who walk in pride he is able to humble. Daniel 4:37
Have a great weekend and God Bless America…
It’s your Right and your Duty – Vote!
Tomorrow (Tuesday) is a big day. Wednesday is even bigger for me personally – it’s the day I finally get some relief from the incessant chatter about the election. Since this will be an historic election no matter which side wins, I feel like I need to comment on the election and urge people to get out tomorrow and vote. As such, this won’t strictly be a personal finance post, but since this election will affect our finances I feel like I have leeway to create the post (besides, it’s my blog!)
Can these guys just say anything they want?
I have paid much more attention to both candidates this time around as compared to prior years and honestly, I have not liked what I have seen. My wife has been very interested in the process this time around and has pulled me into it (albeit kicking and screaming to some extent). I get the feeling that they are just making stuff up as they go along. I especially felt this way while watching the debates. Most questions that were asked were greeted by a new program that was to be created or more spending. Obama did this throughout the entire debate (McCain pointed it out later in the debate) but McCain did it as well to a lesser extent. And of course, all of this new spending while cutting taxes, eh? Let me put it this way – I’m not holding my breath for my tax cut.
The great thing about a campaign (the great thing for the candidates, certainly not for you and me) is there is no accountability. You can promise whatever you want and after you get elected, if anyone even remembers all the promises you made, you can just blame the previous president for you not being able to follow through.
My take on Obama’s campgaign
I feel that, for the most part, Obama ran a very good campaign strategically. He always had a big lead so it wasn’t necessary for him to take too many risks. Of course, the fawning major media coverage and huge disparity in money to spend certainly didn’t hurt. The best thing the Obama campaign did was to effectively associate McCain with President Bush (let me say that must drive McCain crazy – most of the base republicans don’t really like McCain since he differs so much from some of the traditional republican positions and he is here being linked so closely with Bush!)
My take on McCain’s campaign
I feel that McCain’s campaign, in contrast to Obama’s, has not been run very well. I feel that his messages have been too disjointed – it seems that they send out differing messages from one week to the next. I also think that they seemed to get distracted with the whole Bill Ayers as terrorist thing and are only now focusing on more effective strategies like pointing out how liberal Obama is. That being said, in light of our current situation with the economy, Bush, the money disparity, etc, this should not even be a race. Obama should win in a landslide so it is somewhat astounding that this race is still going on. Now, maybe it still will be a huge win for Obama but there is some uncertainty still.
What is the deal with the polls?
How can there be so many different polls with so many different results. Let’s go back to one of my favorite quotes:
"There are three kinds of lies: lies, damned lies, and statistics." Mark Twain (attributed to Benjamin Disraeli)
With the huge disparity among the various polls, It is certainly starting to make me wonder if these polls are being manipulated purposefully.
My advice?
Ignore the meaningless campaign promises (how can you cut taxes and spend $800B more at the same time?), rhetoric, and name calling. Look at how the candidate has acted in the past and use that as your measuring stick. If they have consistently voted for something that you support, they will most likely continue to support that in the future. Similarly, if they have never voted for a tax cut in the past, do you really think they will turn into a tax-cutter tomorrow? The best advice I can give is to turn off the TV and look into each of these men’s political records and decide which one matches up with your values. Vote for characters and values and not for campaign promises.
Who am I voting for?
Well, I’m done prattling on about this and frankly, I’m fed up with the entire process. I keep thinking about all the hundreds of millions of dollars being spent campaigning and wishing that money could be put to better use – so wasteful!
As for me, I’ll be voting for McCain for a number of reasons. I like his experience. If you want to foster cooperation across the aisle, I feel that he has a track record of doing just that compared to one of the most liberal senators in office.
I do not agree with Obama that scapegoating the wealthy is the best way forward. I do not think that burdening people who work hard and are successful is the best way help out those less fortunate or less motivated (especially when the government is involved in the redistribution). I’m not really tickled by Obama calling me selfish for not wanting to pay higher taxes. Frankly, I’d much rather give my money to charity than the government as I feel it will get put to much better use. [By the way, what was up with Joe Biden telling us that it was "fair" for the wealthy to pay more taxes. Whether you agree with that philosophy or not, isn't making a certain group of people pay a higher percentage than others actually the definition of unfair ? Besides, even at a flat tax rate the wealthy would pay more money in taxes.]
I don’t like Obama’s record on social issues and I feel this topic is being unfortunately overshadowed by the poor economy. On top of that, some of Obama’s actions in relation the media (especially the few outlets that have the audacity to not fawn all over him) are extremely troubling to me. And honestly, I just don’t trust him.
So, there you have it – my reasons for voting for John McCain. I could go on and on about this stuff, but since is a PF blog, I’ll just stop there!
Now, you go out and vote! (but only once please)
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