Review: The End of Paper Bills?

Most people still elect to receive paper bills, even though almost every vendor is pushing paperless. Why? Personally, my e-mail inbox is so much more cluttered with crap compared to my post office mailbox. It’s very easy for me to forget about a short e-mail saying “you have a bill waiting” with 86 other unread e-mails shouting at me. But then again, I do end up paying the bills online, so perhaps there is a better way? This is where comes in.

Making Paperless Billing Better

All your bills are organized in one central place. You give Manilla your login information*, and they handle the rest. If you need to look up an old bill, you don’t need to open the filing cabinet or reset your password (again) to that archaic water department website designed in 1995. You can just view or print out the .PDF from Manilla. They promise to store your bills for free, forever. I do wish there was a way to download all your stored bills at once, perhaps in a .zip file.

You may find that Manilla may not list some of your local vendors, although you can suggest future account providers for them to add. I couldn’t find my local water utility. You can also add magazine subscriptions, frequent flier mileage programs, and hotel rewards programs.

Easy-to-manage bill reminders. You can request e-mail or text message reminders to 7 days, 3 days, and/or 1 day before the due date. I need these repeated reminders, and it’s nice that they turn off automatically after they see that the bill has been paid.
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Why Nobody Budgets

I was watching a Techcrunch interview about finance start-up Personal Capital (review) and was surprised by a comment about budgeting. The founder was Bill Harris, who was former CEO of Intuit and Paypal, and Product VP was Jim Del Favero, who was also a former Product Manager of Quicken. While guiding us through their new iPhone app, they shared:

Our #1 takeaway over the years was… nobody really uses budgeting. Everyone means to do it; Nobody really does it. The more important concept is cashflow. It doesn’t matter that you spent $200 on clothing this month or last month, what matters is at the end of the month, do you have more money than you spent.

So the guys in charge of the most popular budgeting software admit that… nobody budgets. Well, maybe not nobody but it’s probably safe to say that the great majority of people don’t track their spending monthly. This is an issue I’ve thought about many times. I often talk about budgeting, but I don’t really budget either.

Why is it so difficult? I point to recent books and research about willpower and how it is similar to a muscle. If we have to track every purchase, it causes us fatigue and sooner or later we give up because it becomes just too hard. Doing one push-up isn’t that hard. Doing a hundred push-ups in a row is another story.

The sheer number of choices we must make each day — what foods to eat, what products to buy, what information merits our attention, what tasks to prioritize — can be overwhelming. […] Put simply, the more conscious willpower we have to exert each day, the less energy we have left over to resist our brain’s primitive and powerful pull to instant gratification. According to one study, we spend at least one-quarter of each waking day just trying to resist our desires — often unsuccessfully.

Behavioral psychology has also found that happiness is earning $60,000 a year. As Del Favero suggests, perhaps it’s because all we really want is to spend comfortably and at the end of the month have something left in the bank account. That number just happens to be about $60k in the US.

So what should the personal finance “experts” be pushing instead of budgeting tools that nobody will use? Here’s one possible plan of attack.

  1. Determine a safe savings rate. What percentage of your salary do you need to save for retirement? The idea of a safe savings rate was introduced and researched by Wade Pfau, and varies based on the assumptions. 15% is a good minimum number to start with, although if you don’t want to work for 30 or 40 years you’ll have to save more.
  2. Automate that savings. Automatic 401(k) or 403(b) deferrals are great, as well as automated contributions to Roth/Traditional IRAs. It’s best to have the money taken away before you even see it, so there is no temptation to spend. Every automation means one less decision.
  3. Check your cashflow. Are you good? Then stop, and enjoy your life. Or do you still spend more than you earn, net of the automatic savings?
  4. Don’t think about the small things. Deciding not to get that coffee or not to order lunch with all your coworkers every day may exhaust more of your willpower than is worth it.
  5. Instead, try attacking one BIG thing. Housing and cars are the biggest expenses for most people. Moving into a smaller or cheaper apartment or house. Move closer to town, sell a car, and use public transportation. Switch to a economical car and drive it for 10 years. Look for something you can cut once, albeit painfully. You may not like it initially, but it’s much easier to get used to that than to rely on repeated displays of willpower.

For example, a prospective college student with limited financial resources can choose to go to in-state university instead of private, as opposed to worrying about the price of every textbook and having to constantly choose between studying, socializing, or working at one of three part-time jobs on the side.

US Government Budget Breakdown: 50 Years Ago vs. Today

Below is a chart of the breakdown of government spending from 50 years ago, 25 years ago, and today. There are many differences between the political and economic environments of 1962 vs. 1987 vs. 2012, but I still think it’s still very interesting. Image credit to Lam Thuy Vo of NPR Planet Money, using data from the Office of Management and Budget. Click on chart to view original post and additional commentary.

Hedging Gas Prices Revisited: Gasoline ETF UGA vs. Retail Gas Prices

Summer is coming, and that often mean rising gas prices. A comment from reader Thadf reminded me of an old post from late 2008 about hedging gas prices using ETFs. He points out that looking back, using the United States Gasoline ETF (UGA) was a much better hedge than using alternative ETFs like the United States Oil ETF (USO) and iPath S&P GSCI Crude Oil TR Index ETN (OIL) which tracked crude oil futures instead of unleaded gasoline.

All of these ETFs use futures to try and match the price movements of a commodity, but they don’t actually hold the commodity itself as storage and transaction costs would be cost-prohibitive. The concern back then was that UGA only started trading in February 2008 and was thinly traded so the bid/ask spreads could be wide and NAV premiums could be high. Today, UGA still has significantly net assets than OIL or USO.

Here’s a chart of the past 3-year performance of USO vs. OIL vs. UGA, via Google Finance:

Here’s a chart comparing the past 3-year price change of UGA vs. gasoline prices at the pump. UGA daily closing prices from Yahoo Finance, national average gas prices from the US Energy Information Administration.

The tracking looks better than expected, considering the concerns I’ve read about contango and hedge fund manipulations. UGA’s expense ratio is 0.80%. I wonder how much trouble it would be to trade gasoline (RBOB) futures directly on the NYMEX.

Is hedging gas prices worth the effort for the average consumer? Probably not. Unless you are especially sensitive to a price spike for some reason, any money is better invested for the long run. But if that’s your goal, your better option would appear to be UGA.

Compare Your Budget With Americans 50 & 100 Years Ago

Last week I mentioned comparing your budget with other people around the world. This time, how about comparing your budget to someone living 50 or 100 years ago?

A new article in The Atlantic dissects the information in a new government BLS report 100 Years of U.S. Consumer Spending, focusing on the the differences in spending in 1900, 1950, and 2003.

Source: The Atlantic magazine, Bureau of Labor Statistics

In 1900, nearly 60% of income went towards food and clothing. In 2003, food and clothing are now less than 20% of expenditures. Instead, more than half of income is spent on housing and transportation (included in Other). The percentage of healthcare costs is again deceiving, as today most healthcare expenses are not paid directly by consumers but instead by employer insurance premiums and programs like Medicare.

I don’t wish I lived in the 1900s, as I’m quite accustomed to high quality healthcare and flushing toilets. But we should realize that things are in constant change. Are we properly taking advantage of our mass-produced cheap clothing and agricultural advances? Or are we spending the difference on things we don’t need just to fill the gap? What will things look like in 2050?

First Baby New Expenses? One Family’s Experience

The following is a guest post is from Elle at Couple Money. They live on one income, and have fun with the second!

When I read MMB’s questions about baby expenses, I shared a bit of our own experience with him. We are just a year ahead of him last summer we had our first baby, a little girl. It has been a wonderfully fun ride so far, with everyday bringing new milestones and challenges.

During the pregnancy my husband and I decided to track the baby expenses on Couple Money as we’re going through this process. We’re not the first parents to have questions about the finances of raising children, so I share our expenses and have asked others to give their input. Some wonderful bloggers have decided to join in the fun and share their own stories, tips, and advice on what works, what doesn’t, and what’s not worth stressing over.

Are Kids Really That Expensive?

For us, most of the expenses are just small bumps in our monthly budget. I think the main reason is that we made some financial decisions before we became parents that lent itself to reducing baby bills. For one thing, when we first were married we made it a family goal to keep all necessary expenses on 1 income. That allowed us to use the second income to pay down debts, save for goals, and invest for later.

Health Insurance and Doctor Visits
During the first trimester I was dehydrated enough that I needed to go to the ER to replenish; that was about $150 out of pocket. For the most part, though, my pregnancy had been uneventful. The health insurance policy we had when I was pregnant had a $2,500 deductible, so we saved a bit in our general funds to cover the deductible when our baby girl was delivered. Saving up to pay the bill in full allowed us to also get a 15% discount with the hospital.

Once our daughter arrived we quickly added her to my husband’s health insurance policy. That’s been the biggest change to our family budget – our premiums went up about $200/month for the family option.

No change in our housing bills. We bought our townhouse before we had our daughter. It had 3 bedrooms, so we converted the guest room into her nursery. We don’t have any plans on changing our location, right now we’re focusing on paying down the mortgage.

I know that for many parents daycare is a huge expense. From what I saw last year it was about $1,200/month for an infant. Right now I work from home and our daughter stays with me. While it has cut back on the hours I work, the savings from not having her in daycare offsets it.

Since we’re breastfeeding our food bill has increased just a bit to accommodate the extra calories I need to keep up. Since becoming pregnant, we changed our eating habits a bit. We’re focusing on making more meals at home and we a part of a CSA program with weekly deliveries during the part of the year. It’s been helping to keep groceries manageable and we’ve also discovered new recipes and dishes. Our daughter has baby food and some of what we’re eating in addition to breast milk.

Even before we found out we were going to have a baby my husband and I were saving up for the vehicle as we’re trying to avoiding taking out a car loan. However we saving up a bit more to purchase a family sized sedan, like a Sonata. Our budget is $10k for the next car. We have the money saved and we’re currently searching for a deal. It’s not an immediate need (tight fit in my Jetta, but fine), so we’re going to make sure we look around a bit before securing the next car.

Clothing/Baby Gear
The first 2 months our bills were higher than normal as we bought a few items we didn’t receive from the baby registry. We waited until our daughter arrived to see if we really needed them or if they were nice to have items. Fortunately most of the necessary stuff was already bought. After the first 8 weeks, our expenses have smoothed out.

We have received gifts from family and friends – both new stuff and gently used. We didn’t have to buy a baby swing, since a buddy’s son didn’t seem to like it. It was practically new and our daughter loved it.

Right now diapers are about $20/month give or take through Amazon Mom and they are delivered right to our door. We get her wipes through Costco where a huge box costs about $20 as well (lasts a couple of months). Any clothes that she needs we pick at Target, Old Navy, or the consignment store around the corner. That’s about $30/month.

Thoughts on Having Kids

This is just a snapshot of our family’s baby expenses. As our little one gets older we know things will change. I’d like to hear from you – what expenses to you have to cover for your little one? What has been the biggest unexpected expense? What’s been the best surprise?

Compare Your Budget With Other US Consumers and the World

The NYT Economix blog and a new BLS report had some nice graphics comparing how the average consumer spends their money in the US, Canada, United Kingdom, and Japan. The data is from 2009.



Compared with the other countries, Americans spent more of their budgets on housing and health care, and less on recreation and entertainment. The Japanese spent the largest share on food, with a higher percentage spent on food than even housing. This is somewhat surprising, given the stereotype of small living spaces in Japan and large living spaces in the US. But remember, these are percentages and not absolute numbers.

You might think that out-of-pocket healthcare costs are lower in the other countries due to government-subsidized universal health care, but the Economix article points out that the total healthcare expenditures per capita in the US are also much higher (around double) those of other countries. I can’t believe they spend more on clothing than healthcare! Of course, my wardrobe turnover rate has been described as “glacial”.

Our spending breakdown still has a much, much bigger slice going towards housing, and a much smaller slice going towards transportation and food. We are lucky to have nice employer-sponsored health insurance.

Poll: Do You Use AutoPay To Pay Bills Automatically?

One common recommendation for new parents is to save time wherever you can. So tonight, for the very first time, I have signed up for the AutoPay feature for my most heavily-used American Express card to have it pay the credit card bill in full each month by withdrawing money from my bank account automatically. I don’t have to do anything.

Usually, I don’t like giving any vendors the right to suck money (“pull”) from my checking account. It feel invasive, somehow. I prefer to use my bank’s online BillPay feature to send (“push”) money after I get my paper bill and verify all the charges are legit. I also like to see my electric bill to monitor our power usage, and the water bill to make sure there aren’t any leaks, etc.

However, with a newborn I can potentially imagine forgetting to pay a bill, so maybe automation is a good idea. I have never had any problem disputing a wrong charge with AmEx, and I have an checking to savings overdraft buffer at Ally Bank so I won’t be dinged with overdraft fees. If it works out, after looking around it appears that almost every bill that I have can be set to AutoPay. What you do think?

Do you use the AutoPay feature to pay any bills?

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Quicken Mac 2007 OS X Lion Compatible Version Released

I know that there was some noise when the Mac OS X 10.7 Lion was released and Quicken 2007 for Mac was reported by Intuit to be incompatible with any computer running the new operation system. Next, they release Quicken Essentials for Mac which was a neutered version of Quicken which quickly angered long-time customers even more. So they promised they would rewrite it to work on OS X Lion. Well, it has finally arrived. Cost is $15. Thanks to reader Paul for the tip.

Data migration. According to their FAQ, users can import data from Quicken 2005, 2006 or 2007 for Mac, as well as from Quicken Essentials for Mac. File conversion is not possible for Quicken 2004 for Mac and prior versions.

So now you can pay more to use their 5-year old software, hurray! I still think it’s pretty clear that Intuit isn’t going to spend too much more effort improving Quicken, instead they are spending more money on which is online and free to users (ad-supported). Has anyone tried it out yet?

How To Reduce Housing Expenses – Brainstorming / Request Ideas

One of my overall goals for 2012 is to make this site more of a permanent resource for information. As part of this, I want to create an “Expense Reduction Guide” that will provide an organized way to find ways to maximize personal value and make your spending efficient.

I would like this to be similar to my Favorite Posts on Investing page and Our First-Time Homebuying Experience guides (which also need to be cleaned up…).

Expense #1 – Housing

I am going to go through all the major categories, but let’s start with the biggest expense – housing. I’m keeping this part to ways to reduce either rent or mortgage PITI (principal, interest, taxes, and insurance). Things like reducing heating bills or furniture costs will be kept separate for later.

Move to a different city/state/location
Ideas for relocation: Roundup of Top 10 Lists
What cities are people actually moving to?
– international living (working or retired)

– Rent comparison sites
– rent vs buy calculators
– buying a house for psychological benefit vs. financial

Move to a different house
live in a smaller house
– neighborhood, location
– shared living, multigenerational living
– multiple units

Buying a house
– Getting a mortgage loan
– Credit scores, income, points, etc

Refinancing mortgages
– Rate comparison
– Mortgage types (fixed, ARM, length)
– Maximizing home appraisal

Homeowners Insurance
– Shopping for homeowner’s insurance
– Deductibles, options
– Renter’s insurance

Property Taxes
– Appealing assessment value
– Special rules in certain states

I’m just starting out and I know I’ll need to write several new posts to fill in the gaps. However, I want to make this an open brainstorming post so that you the reader can make sure I don’t forget anything. Got something to add? Please leave a comment with a tip, a link, or an idea to explore further.

November Spending Survey Results and Follow-Up

Last month, I challenged readers to predict their spending for the month of November, track it, and then come back and see how well their predictions went. Over 60 people completed my online Google spreadsheet survey, and an unknown amount of people did it manually via paper. It’s all anonymous so hopefully that makes it easy to be honest.

Well, I finally went back and recategorized my own expenses in Mint, and here are the results that I can share. The first two columns are the average and median of all the online responses. This is just for kicks, it really doesn’t show much valuable data. The third and fourth columns are my own household predictions and final spending tallies.

  Average Median MMB Predict MMB Actual
Housing $1,436 $1,237 $3,100 $3,100
Food $523 $500 $600 $656
Transport $305 $200 $200 $191
Debt $370 $50 $0 $0
Utilities $240 $200 $300 $317
Personal $395 $220 $100 $311
Total $3,279 $3,000 $6,000 $6,402

The real goal of this post was to motivate some of you readers to track your spending and see if you found any surprises. Budgeting every month is hard, but just tracking your spending for a single month can point out problem areas to target. If you missed it last month, you can just download the PDF version and do it this month or any time. Some thoughts on our own spending:

  • Predicting housing costs is probably not very useful, as for most people this doesn’t change much from month-to-month.
  • Food continues to be our weak spot, both groceries and dining out, although for the most part we spend a lot on food and we choose to do so. We’re trying to buy more fresh vegetables and such, and need to work on planning ahead of time so we don’t buy stuff at “retail” prices at the supermarket for our recipes.
  • Gas is another area that probably stays relatively constant from month-to-month, it’s hard to separate the noise from actual gas-saving efforts like driving less or with less vigor. We actually usually spend less than this in most months. We have no car payments.
  • I broke down Personal as “health insurance, medical expenses, clothing, personal care, entertainment, etc.” Our health insurance premiums are covered by work, but we’ve had several visits recently where the copays have been adding up as well as other things. We also bought more clothes than usual this month.
  • Regarding the total number, another factor here is that we bought most of our holiday gifts in November. I read somewhere that the average household spends about $1,000 during the holidays in general, with $700 going towards gifts. We’re pretty close to that, and our rough budget was $1,000 towards gifts for the family and friends.

In the end, I think when it comes to overall spending, it’s best to concentrate on the recurring big stuff – housing, food, transportation. This takes preplanning and structural changes such as getting a roommate, moving closer to work and getting rid of a car, or downsizing the living space. However, in month-to-month budgets, it’s often those forgotten and occasional expenses and sneak up and bite us. Things like holiday gifts, doctor’s bills, car repairs, birthdays and weddings for other people, and so on.

How’d you do?

Reader Experiment: How Well Do You Know Your Own Spending?

Even though I’m really into personal finance, I hardly ever do a monthly budget. However, I do think a common problem out there is that folks spend more than they think they do. Often this is just in one “problem area” such as groceries, dining out, clothes shopping, or online purchases. Therefore, I propose an experiment where everyone tracks their budgets for just one month. (If you already track your spending religiously, skip this post.) It’s October 31st, so how about November?

I’m doing this myself for November, and I hope you’ll join me. The experiment is quite simple. Here is the overall picture, followed by details.

  1. Before the start of the month, write down what you think you will spend that month.
  2. During the month, track your spending.
  3. At the end of the month, compare your prediction and actual spending results. What was different? Why?

Start of the Month

Without checking any other sources, just use your gut and write down how much you think you’ll spend for the month. Break it down into categories like housing, food, debt, transportation, utilities, and so on. If you’d like to participate in a group project, I’ve created this simple Google Docs form that you can fill out your predictions, and I can report on overall numbers later one. Unfortunately, the form won’t e-mail you a copy of your inputs, but you can record your prediction by printing out this PDF version or use this text file and save it on your computer.

During the Month

If you do the majority of your spending via online billpay, debit cards, and credit cards, then the easiest way to track your spending is with a online money management site like (owned by Intuit) or one of the many flavors of Yodlee out there (Fidelity FullView, Bank of America MyPortfolio, etc). You just enter your login information, and it pulls all your transactions for you. Categorization gets better the more you use it.

Alternatively, you can keep track using pencil and paper, enter expenses into a smartphone app, or use desktop software like Intuit Quicken or iBank for Mac. You could also just wait until the end of the month and tally up your statements, but then this task might become a bit daunting. It’s probably best to keep up with it at least weekly. I plan on using Mint because it’s already learned most of my categories, and it also has a mobile app that lets you enter cash transactions.

End of the Month

The moment of truth arrives. In what areas did you overspend? I’m hoping to get at least 100 readers to fill out this predicted spending survey and then follow-up with an actual spending survey to see how it went. I’ve already entered my numbers and don’t worry, it’s all anonymous. How well do you really know your own spending?