Movenblog

How Plastic Cards are Ruining Your Finances

Your plastic bank cards are ruining you.

Those small rectangles in your wallet might seem harmless, but, without even realizing it, your debit and credit cards have trained you to develop unhealthy behaviors.

How?

Cards put up a barrier between your money and your life. Spending (or saving) your money is an expression of your wants, desires, goals, fears, and needs. It changes based on life circumstances, experiences, and context.

A plastic card isn’t smart enough to understand that.

Here are the two big ways that plastic is destroying your financial health.

1. It’s Inconvenient

Humans have gone from bartering livestock, to trading gold, to using coins, to swiping plastic. And contrary to popular beliefs, plastic is actually extremely limiting.

In a world where there is always “an app for that”…plastic just doesn’t cut it anymore. It’s limiting. It cuts us off from our finances, and keeps us blissfully ignorant of our realities. Plastic cards are one of the last great barriers preventing us from living rich, connected lives.

Our smartphones have become part of us. Christine, a PR specialist, explains it perfectly: “To be honest, I don’t vividly remember the day I first got a smartphone — I only know that I find it hard to remember my life without it. It not only goes everywhere with me, it’s become central to my lifestyle.”

In just one year of offering mobile payments, the Starbucks mobile app accounted for a quarter of all Starbucks in-store transactions. Now, Juniper Research, a firm that analyzes the mobile market, is predicting that NFC sales will reach $50 billion in transactions worldwide by 2014.

Mobile payments aren’t just a new tech fad — they’re a product of our changing society where speed and information are king. Consumers have lost touch with their finances, and are now demanding control.

Having a mobile wallet is like carrying an entire bank and a personal financial coach in your back pocket, reinforcing positive behaviors, and steering you back on track when you veer off-course.

Your plastic cards? You might as well be talking to a brick wall.

Having 24/7 access to immediate, useful insights into your finances will help you bridge the gap between dollar figures, and your day-to-day life. Understanding this connection is the first step on your financial wellness journey.

2. It Encourages Bad Behavior

“My university roommate, Jen, got a line of credit to pay for school,” says Natalie.* “That money was supposed to be for tuition, books, and supplies. But whenever we would go shopping, she would take out her card and spend like a movie star, without even blinking! She thought of her line of credit as a well that was too big to run dry. She never looked at the balance, so she was blissfully unaware of her situation. Her monthly statements would send her into panicked tears. She tried to set goals, but they were hard to remember while browsing the racks. That’s the problem with being disconnected from your spending — you just don’t know enough to be smart.”

*names have been changed to protect privacy

Sound familiar?

Your plastic is powerless to correct unhealthy behaviors. It obediently dispenses money whenever you want, and remains voiceless when you shouldn’t be shelling out.

If Jen had paid using a mobile wallet, she would have gotten instant feedback after every purchase. This would have helped her make smarter decisions by reminding her of her goals, and showing her the steps she could take immediately to get back on track. Over time, Jen would build new habits and healthy behaviors would become her new normal.

Teresa Neal, an online faculty member from the University of Phoenix, explains that, even if we aren’t inclined to save, we can build those habits: “Learn. Enhance your financial knowledge. If one has developed savings habits and has learned how to spend and save wisely, those behavior patterns are more likely to be enduring.”

Knowledge is power. But knowledge on the go? That’s freedom.

Get Rid of Plastic and Go Mobile.
Three Things to Know:

1. Is it safe?
Absolutely! Mobile payments are equipped with all the security features of a card, along with added security elements that are unique to smartphones. Just like cards, mobile payments are password and PIN-protected, requiring you to authenticate yourself before making a purchase. However, the GPS capabilities of phones, as well as the ability to monitor your account activity anywhere and anytime, add an extra layer of security.

2. How does it work?
Mobile payments use NFC (near field communication) technology, which can be found in most phones, or in stickers placed on the back of your smartphone. These stickers transmit data via WiFi with an NFC-equipped terminal. (It’s kind of like an electronic swipe card for your building, except it allows two-way data sharing.) Another plus? It’s fast and fuss-free.

3. Where can I use it?
Within a couple of years, contactless payments will be pretty much standard. Already you can use a contactless card or your mobile phone to pay at places like Best Buy, Walmart, CVS, GAP, McDonalds, Walgreens, KFC, Starbucks, 7-Eleven, National Car Rental, AMC Movie Theatres, taxis in New York City and San Francisco, Nordstrom, and hundreds of thousands more locations.

Tell us: What would you do with mobile payments? Send money to a friend, buy a coffee, pay your rent?

photo credit: Metamorphula

Love Don’t Pay the Bills

So, you’re engaged. Congratulations! You share a home, you share a life, and now you share a future.

Now how about sharing your wallet?

Handing yourself over, mind, body, and credit card to your partner doesn’t have to be scary — it can even make you stronger as a couple. After all, trust is a beautiful thing!

We’ve all heard the statistics about the role that money can play in marital conflict, but there is a way to strengthen your financial health so you both can be in great shape to weather whatever challenges life throws your way.

You don’t need to create a complicated financial plan. In fact, building your financial wellness is a lot like building a home together.

A Solid Foundation

First, lay a solid foundation. One that will not shake when the wind blows or leak during storms. The most important basis for your financial wellness are the dreams that you share for your life together.

Shared goals, whether short-term or long-term, unite and bring you closer in the pursuit of a common purpose. Whether it’s over pillow talk or a cup of coffee, you and your partner should daydream together about what kind of life you want to have.

What is the most important thing you two want to accomplish in the next year, three years, five years? Do you want to pay down your student debt, save for a house payment, buy a new refrigerator, visit Macchu Pichu?

Determine what you believe is important to both of you and prioritize accordingly. When you both know what you’re aiming for, you’re both much more likely to make it.

Making Plans

A house without walls is not much of a house at all! Now that you’ve laid the foundation, you need to build the structure that you think will best help you two manage the money you’ll both be bringing in and paying out.

Many couples struggle with the decision to combine their finances. It can be a particularly tough question, because it goes deeper than numbers and figures, touching on major emotional issues in relationships such as trust, independence, and commitment.

We often hear questions like “my husband and I both work. Do we use my income for certain things and his for others?”

Well, there is no right answer.

The best plans take into account your financial personalities and recognize the strengths and weaknesses of each.

An ‘Accountant’ may be more consistent at paying the bills and less impulsive than a ‘Rockstar’, but a Rockstar will be great at finding ways to enjoy the moment when you have some extra money to spend.

It’s all about knowing yourself, and knowing each other — and creating a system that plays to your strengths. (Psst — our quick quiz can help you identify your financial personality in minutes!)

Whether you combine your accounts, create a separate one for shared expenses, or keep it all separate, make sure you know how you will handle the following things (individually and joint):

- Current and future expenses
- Current and future debt
- Personal property and assets
- Inheritances and family assets

Don’t worry if you don’t have all the answers right away. It takes time for you to really understand each other’s personalities and how that affects your financial behavior as a family unit.

Keeping House

Homes need daily maintenance. Your finances are no different.

To keep a tidy ‘financial house’, you need to answer these three key questions:

1. What are essential expenses and how will you manage them?  

For most couples housing, transportation, medical, grocery and education expenses are the essentials. Determine the things that you and your partner think should always come first. And remember, that one dinner date a month or an annual beach vacation can become an “essential” expense if you both believe that it will be a critical part of maintaining your marital bliss.

2. How will you save to make your financial dreams come true?

If you’ve laid down a strong foundation, it’s now time to figure out how you’re going to make your dreams a reality. Whether you are doing financial repairs (building an emergency fund) or making improvements (saving for retirement), take the dreams that you both agree are most important to you right now, and identify how much in savings you need to make them happen.

Make a vow to work together towards fulfilling these goals by setting aside a set amount every month ($300 into a savings account or 5% into your 401(k)’s) and use the structures you’ve agreed upon to get it done!

3. How will you use discretionary funds?

Your discretionary funds is the money left over after bills are paid, and savings are built. Making a plan for those funds will help avoid surprises, keeping you both happy.

Does one of you prefer to splurge on designer clothing while the other is a foodie?  Do you prefer to travel while your partner would rather buy nice furniture?

Be ready to accept that your preferences will most likely be different. The trick is to be honest about your wants and needs, recognize the differences, and agree on some basic ground rules.

For example, how much financial room will each of you have to make individual decisions? Do you both agree that you both won’t spend beyond a certain amount without consulting the other?   How much of your discretionary spend will you set aside to use together?

Open Door Policy

Many of us are more open about our sex lives than our finances. It is a major cultural taboo, but tight lips when it comes to money can have serious consequences for your relationship.

The most important commitment to make to each other is to communicate openly, frequently, and with compassion. You are now a team, and in order to be effective you have to feel comfortable being honest about your successes and your shortcomings. The important thing is to be constructive and use this feedback to revisit your goals, re-assess your plans, and get back on track.

It is not your decision to share accounts that defines the quality of your relationship, it’s your ability to openly discuss these important issues and create solutions that work for both of you.

But what if one partner out-earns the other?  Financial health is not about the dollar amount, but about the behaviors you two will be building together. One person does not call the shots (just ask the experts). You now have shared dreams, and both partners should feel comfortable holding each other accountable to those plans.

The ‘money talk’ is important — but it doesn’t have to be scary. It comes down to being able to dream, discover, listen and communicate effectively.

Pour yourselves a couple of glasses of wine, grab a spot on the couch, and discover each other in a brand-new way. There is nothing as intimate as sharing your hopes and dreams with the person you love.

Tools like MoneyPulse(TM), CREDscore ®, and Spend Assistant are a great launching point for those important conversations, and will help you set the course for a healthy financial future - together.

What is your #1 piece of financial advice for newlyweds?

There Is Always More To Learn About Your Financial Self

There are millions of places to learn about money. Newspapers, blogs, podcasts, and books - just to name a few. But these will never, ever be able to give you the full story.

Why is that? Because they are missing the most important determinant of financial health:

You.

The truth is financial health is not a dollar amount; it’s not how much money you have, what you own, where you live, or what clothes you wear.

Financial health is your ability to live the life you want, today and tomorrow. It is grounded in how much clarity you have about yourself and your dreams. And it’s how well prepared you are for all the surprises and challenges life has waiting for you along the way.

Don’t let yourself be defined by possessions and dollar figures—things that can change and fade over time. Instead, define yourself by your current wealth of self-knowledge, and how far along you are in pursuit of your own dreams.

Create a Life for You

Ask someone where they want to be in five, ten, or twenty years and they’ll most likely answer “rich”.

It’s an easy answer, but most often given by those who don’t yet know what they want from life. They assume that they’ll figure out what to do with the money once they get there.

But if being rich is your dream, you’ll always be worried that you’ll never get rich or be unhappy that it’s taking so long.  Even worse, if should you get “rich”, you will either find it unfulfilling or be dissatisfied and want more.

Steve Jobs once said “Being the richest man in the cemetery doesn’t matter to me. Going to bed at night saying we’ve done something wonderful - that’s what matters to me.” So what wonderful things do you want to do?  Do you want to have a big family, grow your own garden, hike the Andes, or retire early so you can spend time with your grandchildren?

Richness is self-defined and almost never a dollar amount. Money is only as valuable as what it empowers you to do. And knowing what you want it to do will make you far more aware of your financial health and what you need to do to make your dreams a reality.

The Power of Dreams

Contrary to what big banks tell you, dreaming is the key to your financial health.

Dreams turn into goals, and goals will keep you moving in the right direction on your journey of financial wellness.  You can dream big or dream small, but always dream rich.

Your dream could be to open your own recording studio, go on safari, or live debt-free. But don’t leave it at that.  Why people spend hours daydreaming about lunch!  So make your dream as rich and deep as what you really want.  Imagine yourself signing that lease, boarding that plane or paying off that student loan.

Fill in every detail of the experience and pretty soon you will find that your dreams have become your own internal compass, a money GPS steering you clear of 3 common financial hurdles:

1) Fear

Most fear comes from not knowing. Not knowing what happens after death, what happens in the dark or what really goes into a Big Mac (scary stuff).

Not knowing where you are financially is scary, too. Don’t sabotage your life goals by being too afraid to talk about money.

The sheer volume of information available at your fingertips can be overwhelming. Knowing what you want is the first step in cutting through the noise to find the information you need in order to make you dreams a reality.

2) Weakness

No one is as focused as someone on a mission. They are disciplined. They are determined to pinpoint and eliminate any weaknesses and distractions that might stand in their way.

Is it a bad idea for you to go grocery shopping on an empty stomach? Do you tend to throw caution to the wind when you’re out having drinks with friends?

Having a clear goal makes it easier to understand the real impacts of your actions. Without a dream, spending $20 for a new iPhone case is no biggie. But when you have a set goal, that $20 bill becomes far more meaningful, as it has the potential to help make your dreams come true.

It isn’t about depriving yourself, it’s about being able to prioritize and make choices.

3) Surprise

Life is a rollercoaster. Some periods will see you soar high and glide effortlessly through life. But somewhere around the corner there is a temporary dip that will make your stomach turn.

Don’t let the dip get in the way of your dreams. Your rainy day fund should have at least 3 months worth of living expenses set aside. Not credit—actual cash. Having a goal in mind is a powerful way to motivate yourself to save, so that nothing will get in the way of your dreams.

We know the power of dreams. And that sometimes you need tools to make your dreams a reality - that’s why we created financial wellness tools that you can use.   So remember to dream; dream small or dream big, but always dream rich!

Have you set a financial goal for 2013? We’d love to hear it!

Behaviors That Destroy Your Financial Health

If you received a raise tomorrow, what would you do with the extra money?

Most people would celebrate—maybe with a nice dinner out or a great bottle of wine, which you deserve. However, earning more should not always change your current or long-term spending habits.

The problem is that our minds have the tendency to think we can (and should) spend it.  This can quickly create a loss of context, consistency and control. These behavioral tendencies are often seen in clinical disorders, and can affect your financial health. They’re also far more common than many realize.

Financial wellness is not about having so many dollars in your bank account, but about being someone who behaves in a financially healthy way by spending, saving, and living better. But what about those unhealthy financial behaviors that sneak up on us? How do we face them, head on, instead of sweeping them under the rug?

You may be shocked to learn that basic elements of common behaviors often seen in personality disorders can trickle into the lives of even the healthiest of individuals and affect their day-to-day financial behavior.

Let’s explore three of the most common behaviors plaguing our country.

1. A Loss of Perspective

The first behavioral challenge we all face is a loss of perspective.

Remember your first paycheck? While we all savored that initial euphoria of the world being our oyster, that feeling dissipated quickly once you discovered the limits of your own largesse and factored in unavoidable expenses such as rent, car payments or student loans. By not falling into that same mental trap today and assuming you have more money than you actually have, you’ll avoid the sticker shock you get when you open up your credit card statement each month.

You don’t need to experience euphoria to feel wealthier than you actually are. But you’re damaging your financial health by not looking at your numbers or balancing how much you’re spending with how much you’re earning.  

“When people are manic, they have an inflated self-esteem and view of themselves—their sex appeal, their resources—and they have the inability to process the consequences of their actions, which leads to staggering indiscretions,” says Dr. Igor Galynker, a psychiatrist and the director of the Family Center for Bipolar at Beth Israel Medical Center in New York City.

How can you avoid this? One simple approach is to come up with your “Daily Spend” so you never lose focus. What is your Daily Spend? It’s your take home pay, minus all of your required living expenses divided by 30. When you go out shopping, you’ll have a whole new perspective when you realize that the nice shirt you’re looking at is seven days worth of your Daily Spend.

2. An Addictive Personality

We’ve all heard it. A lot of us have said it. “I have an addictive personality.” But in most cases, we’re referring to an innocent attachment to something we can’t live without: a daily habit. Our trusted Starbucks latte fix. An after-work glass of wine. Eating out for lunch every day!

While neither of these simple pleasures would classify us as an addict, have you stopped to think about how these daily purchases are affecting your financial health? How much are they costing you in the grand scheme of things? And could you live without them? In many cases of alcohol, drug or gambling addiction, these behaviors started out just like anyone else—innocent and sparse—but spiralled as the daily fix lost its luster.

“No one knows what causes addictive behaviors, like shopping, alcoholism, drug abuse, and gambling,” says Ruth Engs, a professor from the applied health science department at Indiana University. “Some of the new evidence suggests that some people, maybe 10%-15%, may have a genetic predisposition to an addictive behavior, coupled with an environment in which the particular behavior is triggered, but no one really knows why.”

While you aren’t likely to go broke from frequent trips to Starbucks, if you can’t afford the habit, it could still damage your financial health. This is especially true when the cost of your habit is greater than just a coffee. A bottle of wine a day or a pack or two of cigarettes will add up significantly.

Create a snapshot of how much you spend on your daily habits over the course of a month. Sometimes just seeing the total cost will be enough to curb your addiction. If not, maybe it’s time to budget for it. Take a look at your Daily Spend and factor in your habits into your expenses. This will create a more realistic look at how much you do have to spend every day—already taking into account that glass of wine or latte.

3. A Loss of Control

Are you an oniomaniac? Maybe you’ve heard this more colloquially described as being a “shopaholic.” While it may sound cute and out of a chick-lit novel, in its worst form, such behaviors can destroy relationships, and at best, hinder your ability to be financially healthy. To know if you have it, just ask yourself the following:

1) How much of your time is spent buying things or thinking about buying things?
2) How often do you feel guilt, depression or shame because of your discretionary purchases?
3) How often do your discretionary purchases impair your ability to pay for basic necessities?

If your answer is “often” to any two of these, or “always” to even just one, then it’s time to speak to a licensed therapist about how you can find a happier, more sustainable lifestyle.  

If you’re most people, however, your answers will most likely be “sometimes” or “rarely.”  But those “sometimes” can be the difference between being financially healthy and financially ill.

Take a moment to examine your own behaviors. Accept those that you now have, and use these tools to make a change. Your financial health depends on it.

Let us know: What are your financial demons and how have you overcome them?

No More Broken Promises

There has been a lot of talk around the Movenbank water cooler lately about AIG’s potential lawsuit against Uncle Sam for the infamous 2008 financial sector bailout.

And, quite frankly - we’ve had enough.

• We’re tired of the fact that mismanagement continues to be rewarded in the financial sector. 
• We’re tired of seeing our fellow Americans hurting. 
• We’re tired of the same old tune.
• We’re tired of all the broken promises to you.
  
  

The Story So Far

In the wake of the 2008 financial crisis, Washington came to the rescue of the financial sector and bailed out insurance giant American International Group (AIG) to the tune of $182 billion. For comparison that is one and half times our annual federal spending on education.

Now, after nearly four years of selling off shares in order to repay these funds, AIG is considering a bold and controversial move - joining ex-CEO Hank Greenberg’s lawsuit suing the American government.

This is the very same CEO ousted in 2005 because of ongoing criminal investigations by the NY State Attorney General and who has (so far) paid $15 million in fines for accounting fraud.  Mr. Greenberg accuses Washington of using the funds as a ‘backdoor’ bailout for Wall Street giants like Goldman Sachs, and shortchanging investors in the process by forcing AIG to accept unfavorable terms.

Come again?

How Did They Get in This Mess?

Let’s revisit exactly what happened. AIG promised other financial institutions that if certain things happened (like foreclosure rates rising) they would pay them money. In exchange AIG was paid lots of money by these companies and reported record earnings for years. Meanwhile AIG never actually made sure that it could fulfill on these promises.

So when faced with a bankruptcy that would have wiped out their shareholders and thrown the financial services industry in turmoil, the US Government decided to step in and offer AIG a lifeline.  In exchange for taxpayers risking huge sums of money to save AIG, the US government got 80% of the company, making it one of the largest company buyouts in the history of buyouts. 

And this was for a failing company - not a highly sought-after profitable enterprise.

Now the patient who almost died because they crashed while driving drunk and without a seatbelt is suing the doctor for providing emergency care and sending them the bill. In fact, they want taxpayers pay for the ‘privilege’ of saving them from their greed-fueled disaster.

A company that couldn’t keep promises to its own customers is now going back on the promises it made to America. 

Our Promise to You

This is beyond ridiculous. 

Banks expect accountability from you, but you are due just as much accountability from them. 

How can institutions like AIG ever regain the people’s trust and respect when they cannot take responsibility for their own actions?  How can they keep asking for more and yet think Americans should expect less and less?

That’s just not right.  In fact, you should expect more.  Much more.

We have taken an oath to support your financial health that informs every single aspect of our business.   And we believe that you have every right to hold us accountable - because we know that the most important thing you have entrusted to us is not your money, but your future. And that is not a responsibility that we will ever take lightly. 

We keep our promises so you can keep yours.

It’s time for better, America. It’s time to expect more. 

What do you think?

Sources

• http://www.forbes.com/sites/steveschaefer/2013/01/08/aig-thank-you-america-but-we-may-sue-you/
• http://dealbook.nytimes.com/2013/01/08/examining-the-terms-of-a-i-g-s-bailout/
• http://dealbook.nytimes.com/2013/01/07/rescued-by-a-bailout-a-i-g-may-sue-its-savior/ 
• http://www.latimes.com/business/money/la-fi-mo-aig-suit-bailout-greenberg-20130108,0,4871507.story
• http://dealbook.nytimes.com/2013/01/08/lawmakers-warn-a-i-g-not-to-join-lawsuit-against-u-s/?src=twr&smid=tw-nytimes
• http://www.hashtags.org/analytics/AiG/?font-size=larger