DIY Financial Analysis

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Getting your finances under control isn’t as difficult as many people think but it does require some self-discipline and a desire to change things. Everyone’s journey will be different but the first step is always the hardest: recognizing that things need to change. 

Not that many years ago, keeping your finances under control was much easier. You got paid, often with cash, and the cash you received had to last until the next paycheck.  This is where you get the notion of envelope budgeting. Once paid you would put the right amount of money into different envelopes to pay the upcoming bills. After doing that whatever you had left had to last until the next pay day. 

    

Today it is a lot more difficult.  Anyone can get multiple credit cards and getting car and other loans is easy. 

Times are very different. 

Surviving from paycheck to paycheck without going further into debt is a start, it stops the downward spiral, but it doesn’t help you get ahead. What does help you get ahead is to learning to spend less than you earn. 

Easily said, but it isn’t as hard as you think. When you stop thoughtlessly spending money and think about what is really important in your life and what makes you happy, then suddenly you discover a lot of money you never realized you had. 

In Australia there is a woman who became very rich by getting people who were struggling with their finances to let her take control of their money.  

Each paycheck would get sent to her and then she would allocate money for all their bills and give them back a small allowance to spend on themselves. A little like the old days. 

Of course, she would keep an amount for herself, that is how she got rich.

Anything left over was used to pay off debt or added to savings. 

Think about that for a moment. People who were drowning in debt, who could see no way out of the mess they were in, actually had enough money to pay this woman thousands of dollars a year and still save enough to pay off their debt and begin saving for the things they always wanted. 

What is more amazing is even after people obviously had their finances under control, they continued to pay this woman to look after them.  

Her method provides discipline and forces them to stop thoughtless spending, but does it help them develop self-discipline?

Sooner or later you need to take responsibility for your own finances, it is much cheaper and you will learn so much more. 

During these uncertain times, MyMoneyPicture can help.

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  Unfortunately, right now, the entire world is facing a high degree of uncertainty.   Not only uncertainties with regards to health and the COVID-19 crisis and civil unrest, but also economic uncertainly, and even possibly diplomatic uncertainty.

   During times like these, our thoughts can be most productive by focusing on things we can control ourselves.

     One thing we can almost always do better is to eliminate thoughtless spending.   Thoughtless spending is when we get less value than we should from our hard-earned money.

   It could be the shoes we bought on impulse when we saw they were on sale, but after we bought them, we never actually wore them.  It could be buying food we don't have time to use before it goes bad and needs to be tossed.  It could be saving money on an inexpensive hotel and then spending more of our precious vacation time sitting in traffic. 

  There are many applications available to help someone budget.  Most of them automatically categorize transactions from your financial accounts to create pretty, but not very informative graphs.

   At MyMoneyPicture, we consider giving a third-party access to your financial accounts an unacceptable security risk, and that is why we never ask for access to your accounts.

  But more importantly, manually entering and categorizing transactions yourself, using categories you create, allows more meaningful analysis of the value you are getting from your money.  Entering a new transaction will take less than a minute, and provide more feedback than you could ever get from an automatic listing of all of your spending.  For example, if you shop at a grocery store, you could be buying groceries for a charity, to take to work, or for yourself.   At some major stores, you could be buying groceries, clothing, or even motor oil.  Automatic categorizations based on the establishment where you made the purchase could never have the accuracy of categories you create and assign yourself.  With MyMoneyPicture you can assess the value you receive from your spending in a way that is unique to you. 

  During this time of uncertainty, many of us want to make sure we are getting the maximum value for our money. 

   MyMoneyPicture is a simple online tool for tracking spending, developing a budget, projecting future cash flow, and analyzing our finances.   MyMoneyPicture is fast, free, secure and anonymous.


 

Focus on a Routine, Not Goals

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I recently received a newsletter from The Motley Fool where author Morgan House said he was done with financial goals, and focusing on systems instead.

Here is an excerpt:

In place of goals, a lot of successful people have systems. What's the difference? A goal is a target with an end date. A system is a way of doing things all the time. Scott Adams, the genius behind the Dilbert comic, writes in his book How to Fail at Almost Everything and Still Win Big:

A system is something you do on a regular basis that increases your odds of happiness in the long run. If you do something every day, it's a system. If you're waiting to achieve it someday in the future, it's a goal.

He gives a few examples:

The system-versus-goals model can be applied to most human endeavors. In the world of dieting, losing twenty pounds is a goal, but eating right is a system. In the exercise realm, running a marathon in under four hours is a goal, but exercising daily is a system. In business, making a million dollars is a goal, but being a serial entrepreneur is a system.

Turns out there are many great articles on the web about this.   Just a few that come up with a quick Google search:

• How Goals and Good Intentions Hold Us Back, by Christian Jarrett, at 99u
• Want to succeed? You need systems not goals, by Oliver Burkeman at The Guardian
• Forget Setting Goals. Focus on This Instead by Daniel Rose

Oliver makes an especially good point, while also referencing Scott Adams' book:

As anyone whose employer foists “performance targets” upon them already knows, a fixation with goal-setting has many downsides. But Adams adds one more: when you approach life as a sequence of milestones to be achieved, you exist “in a state of near-continuous failure”. Almost all the time, by definition, you’re not at the place you’ve defined as embodying accomplishment or success. And should you get there, you’ll find you’ve lost the very thing that gave you a sense of purpose – so you’ll formulate a new goal and start again.

And, even Harvard Business School argues that the beneficial effects of goal setting have been overstated and that the systematic harm caused by goal setting has been largely ignored.

MyMoneyPicture is a system that helps us maximize our prosperity and financial independence.   The simple daily routine of entering expenses makes us more aware, and less likely to engage in thoughtless spending.

MyMoneyPicture makes this even more potent by also providing valuable feedback.   Experts agree, the best systems incorporate a feedback loop.  Feedback is essential to maximizing progress.

Click through the slideshow below to see some of the feedback features we've incorporated into MyMoneyPicture.

Task-Oriented Coping to Avoid Emotional Spending.

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Modifying how you cope with stress could improve your finances!

I am reading a book by Josie Spinardi entitled How to Have Your Cake and Your Skinny Jeans Too . The book advises to eat when you are hungry and stop eating when you are satisfied.  Pretty simple huh?  However the book explains how restrictive diets can trigger binge eating, and also how some people use food to cope with stress.

I am most intrigued by the stress-induced emotional eating, because many people also often emotionally spend. They don't call it "Retail Therapy" for nothing. After a hard day or week, we may reward ourselves with a shopping trip to help us forget our troubles. She describes this as "Emotion-Oriented Avoidant Coping Behavior" (we avoid the problem causing the stress and focus on a distraction like shopping or eating to feel better).

However, she writes that studies show people who use a Task-Oriented Coping Strategy (focusing on the problem and how to solve it) "enjoyed higher life satisfaction, attained more personal success, had more satisfying relationships and suffered from far fewer mental and physical illnesses."

Many of us, myself included, often try to counteract the feelings caused by stressful situations, rather than try to correct the actual problem or situation causing the stress. We may do this because we believe we have no power to improve the situation causing the stress, but is that true? And of course, after the thrill of shopping or eating has worn off, the stressful situation is still there, and possibly even worse.

Next time I am stressed, before I punch Macy's into my GPS, I will do a "Root Cause Analysis" (another term used in the book) to determine if there might be a "Task Oriented" way to cope directly and proactively with the issue causing me stress.

Recreational Spending --- Or Shopping to Relieve Boredom.

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As I have mentioned in another post, I am reading a book by Josie Spinardi entitled How to Have Your Cake and Your Skinny Jeans Too.  In this book she mentions that the same psychological issues can manifest in different people as over-eating, over-spending, or other habits like drug and alcohol abuse, or even gambling.

Research on drug, alcohol, and food challenges shows that the number one predictor of relapse is the balance between obligation and pleasure in a person's life - the Have To's and the Want To's.  People whose lives were more evenly split between fun things they genuinely wanted to do, and tasks that were hassles to perform, were far less likely to relapse.  They were more successful in changing their undesired behavior.

In my own life, I often travel for work and spend weekends alone in strange cities.  The temptation is to spend my downtime strolling through a mall or going to restaurants.   This is eating and spending to relieve boredom.  I am often tired from the work week and I want to do something for me, but I am not sure what that should be, so I opt for the easy option of shopping or eating out.

My business partner Brett does not have issues with recreational spending or eating, and I wonder if this is because he is an avid sailor.   Also, like many Australians, he values having a full and balanced life and doesn't believe it is healthy to live a life of all work and no play.

I have worked with people who play golf, basketball or baseball on their weekends.  The rocker Alice Copper has said that he was only able to give up alcohol after replacing drinking with golfing.   I also know people who sew, scrap book, show dogs, ice skate, have cook outs with their families, or read for pleasure.   For me, taking a book or magazine to the beach or even the hotel pool would be a much better option than strolling through the local mall.  On one contract, a coworker and I would go hiking on weekends or walk around downtown after work to talk and get exercise.

Many leisure activities are quite inexpensive.   A book or DVD can even be free if you get it from the local library.  Alternatively, you could volunteer your time for a cause you believe in, for example walk dogs at the local animal shelter or learn construction skills with Habitat for Humanity.  Engaging in pleasurable activities will keep you from spending out of boredom.

In the book, Josie Spinardi says the solution to recreational eating or spending is to sprinkle activities you genuinely can't wait to do throughout your day, week and year.   She says giving ourselves permission to enjoy these things, and seeing the value in balancing pleasure and pursuit is key.    And the benefit is more than just smaller sized clothing or reduced credit card debt, it is having a full and enjoyable life.

Android App Replaced by Add to Home Screen Function

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We developed an Android app to allow people to quickly access MyMoneyPicture from their phone's home screen.  This app opened the MyMoneyPicture Login page in a internet web-view.

The app accessed the same code as using MyMoneyPicture from any web browser on a phone, but it eliminated the need to type in the website address each time you wanted to enter a transaction.

Now it is very easy to simply add a web page to your phone's home screen, and this app is no longer providing added value.  So in the interest of simplification, we are discontinuing the app.

Interestingly, the MyMoneyPicture Android app only required access to the internet and no other permissions.   If you ever pay attention to the permissions needed for many apps, you might wonder why so many need to access the phone's contacts, files, camera or microphone. 

Now that it is so easy to add a page to my home screen, I have deleted many apps that I used to have, and I only access these sites via a web-browser.  This provides an added level of security.

To add a site to your Home screen from a Chrome browser, for example, simply click on the menu icon (the three vertical dots in the upper right of the screen) and click "Add to Home Screen".

We recommend doing this from the login page, so when you click on the icon on your phone's home screen, you will be taken directly to the login page.

New -- Cash Flow Projector!!

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We have a new feature in MyMoneyPicture which will allow you to predict your future financial position.

MyMoneyPicture has always been a terrific way to record and track your spending, as well as analyze spending patterns.   This enlightenment often leads to knowing which behaviors to modify to best reach your goals.

However, recording spending and discovering patterns takes time, and also is looking at the past.   We still feel this is the most effective way to reach your financial goals, but we wanted something that would give immediate feedback, as well as look forward.   This look forward can be very motivating.

Please look at the slideshow below to see how it works.   Click anywhere on slideshow to advance to the next slide.

The Cash Flow Projector fits in perfectly with the rest of MyMoneyPicture, and we think you will love being able to peek into your possible future.