Ever since I was in the 4th grade, I’ve had this mild obsession with staying in shape. There was this girl I liked in gym class that I so wanted to impress, but I already had a gut as a nine year old! So imagine my dread when it was swim season and I had to sit down next to her in only my trunks. I couldn’t wait for the teacher to blow her whistle so I could jump into the pool and exhale. I was always so envious of the bony kids who didn’t have to suck in their guts.
I never did get the girl. I blamed genetics and my lack of courage to say, “Wanna get an ice cream sandwich during recess?” All throughout secondary school I decided to get into better shape because I knew I couldn’t be poor and out of shape at the same time. That would be a disaster.
Nowadays, I no longer care as much about being in good shape because I’ve usually got my clothes on. Women don’t seem to care for hunky dory guys anymore. A nice smile, an engaging personality, a job, a car, a stack of Benjies, and a two bedroom condo with a view of jumping dolphins in the horizon will do. Can you really blame single 40-year old guys who are still having the time of their lives?
“Even if I don’t need him to take care of me, I’d like to know he can provide the life I want to lead,” mentioned a couple female friends who are 8’s, but settled for 6’s.
If we men can’t stay fit, then we must be able to at least generate enough wealth to provide. Being unfit in wallet and in wealth leads to loneliness. This is our curse from society, which I’ll discuss more in an upcoming podcast.
“No money, no honey,” as the saying goes.
BE MORE MINDFUL
Losing weight and saving money are perhaps the two most difficult things to consistently do. But we try because we believe one or both of these activities will provide us with greater happiness.
I recently got back from a three day trip to New York City to cover a couple events held by Personal Capital. The main event was the revealing of a study conducted by Yaron Levi, a Finance PhD at UCLA and Shlomo Benartzi, Co-Chair of the Behavioral Decision-Making Group who found that spending decreased by 15.7% on average for those who download and use the Personal Capital financial app.
To put 15.7% into context, a household making $50,000 a year will end up saving an extra $150,000 in a 20 year time frame. Given the overall 401k average balance as of January 2014 is roughly $101,650 and $150,000 for those 55 and over, average 401k balances could theoretically double over the next generation if everybody adopted a financial app to help manage their money.
Let me address the skeptics head on by saying it shouldn’t come as a surprise that an event hosted by Personal Capital should have a positive finding about Personal Capital’s financial app. Furthermore, I’m a consultant of theirs. But it makes sense that a financial app can help curb spending and increase investing.
As soon as I started typing out my budget in Excel and creating pro forma calculations of my net worth circa 2007, I became much more sensitive about my spending habits. I didn’t want to see a negative number in next month’s spreadsheet, so I did everything possible to save. Before then, I didn’t know exactly how much I accumulated by age 30.
By publicly highlighting my passive income activity annually, I feel more pressure to not mess things up because I know many are expecting some progress in my next update. Part of my desire to buy another property was so that I could boost my passive income by renting out my previous residence of 10 years. Hopefully the move doesn’t bring me financial disaster. But at least I know I’m $50,000 closer to my $200,000 annual passive income target because of it.
A financial app helps me visualize where I want my net worth to go if I continue to invest X amount of my income and achieve Y returns. It’s addicting and fun if you’ve never tried. And you don’t have to use Personal Capital’s app either. There’s Mint, Quicken and several other free financial tools out there. The internet has eradicated all excuses as to why someone can’t better manage their money.
A PORTABLE FINANCIAL SCALE
The analogy Dr. Benartzi used for describing why he believes a financial app helps people spend less is that of a portable scale. If your ideal weight is 160 lbs, but your portable scale is blinking 185 lbs right before you eat, there’s a good chance you won’t stuff your face as much. You might skip the cheeseburger and order a salad with a glass of lemon water instead. I know I would. (Related: The Ideal Weight Pisses Me Off)
A portable financial scale helps modify behavior in a similar manner. If your net worth is going down or hasn’t changed much for months, then you might be better motivated to save more money. It’s good to be aware of the pain!
Every time I log on to check my net worth, I’m more motivated to pay down debt. It feels great updating the figure with a smaller and smaller number. On the flip side, if the financial app is saying my net worth is skyrocketing, then perhaps I’ll be a little more adventurous and get some new shoes.
Now imagine if a financial app could show a broke old you in the future if you continued with your existing financial habits. That’s exactly what Personal Capital’s app does with its Investment Checkup feature. Surely, your behavior will change for the better at the margin.
Finally, if you really want to save money don’t live in New York City. It’s the greatest city in America for six months a year, but the city will bleed you dry. Even the most standard hotel rooms costs over $400 a night during the week. Let’s not mention the $66 dollar cab or Uber ride into the city, ubiquitous $12 cocktails, the daily $25 lunches, the $2,000/sqft condo prices, or the $50,000 a year private school tuition either.
I’m glad to be back in affordable San Francisco!
Readers, do you believe technology can help us get in better shape physically and financially? What if an app told you, you’d be broke and doomed to begging on the streets if you kept up your habits. Would you be more motivated to change?