Personal finance: new market devices for the burnt-out consumer
June 8, 2009
Today, the Wall Street Journal opens the week with a special section on personal finance. The topic has been attracting my attention and blogging for the past months. Why? The foolish decisions on the part of consumers and savers have been a key contribution to the crisis. The question, then, is clear: how is it that people decide how much to save, buy, invest, etc?
This not just important but theoretically relevant. It goes at the heart of the “market materiality” literature: economic calculation can only take place with the requisite tools… be it calculating implied volatility with Black-Scholes or, as the case now suggests, budgeting the weekly veggies shopping. But the issue, at a personal finance level, has been largely unexplored by academics… as much as by over-indebted consumers themselves.
In an editorial piece, the Journal comments on this neglect, and on the existence of a host of new websites that facilitate this sort of planning:
Your personal finances used to be on automatic pilot. You can’t afford that anymore. You have to monitor your investments, think about how much you’re saving, keep tabs on your spending. Fortunately, it’s easier than ever to do all that.
In an excellent main article, the Journal discusses the different websites that have cropped up to assist in personal finance.
The first and perhaps most effective step to managing your money online is signing up for basic budgeting sites such as Mint.com, from Mint Software Inc. of Mountain View, Calif., Wesabe.com, from San Francisco-based Wesabe Inc., or Geezeo.com, from Geezeo of Hartford, Conn.
To help you avoid bank or credit-card fees, these sites can alert you via email or text message when a bank account is low or when a credit card is approaching its limit. And the sites can slice and dice the information to help you budget better. For instance, they will automatically show you how much you spend in any given category, such as restaurants or gas stations, and can compare your spending habits with those of other users, so you can identify areas where you might need to cut back.
Personally, I am particularly interested in mint.com (not available, I think, outside the US), and found it absolutely fascinating. For those non-Americans interested in understanding the site, I would recommend a visit to the competitors, or even a visit to the online forums of mint, where fanatical users rave about its capabilities.
I am one of them.