Stop Equating Monthly Payments with Affordability to Avoid Financial Trouble
Few of us can claim to not be guilty of at least a purchase or two where we said to ourselves "Only X per month? That's not bad at all!" Using the monthly payment to assess affordability, however, is a financial trap.
Photo by ell brown.
With the variety of ways people can acquire credit and spend money these days it's unsurprising that financial mistakes and misfortunes abound. Over at U.S. News & World Report they've put together a list of seven common financial mistakes. Among the mistakes they highlight is seeing the monthly bill as an indicator that something is in your budget.
Equating monthly payments with affordability: Far too many of us decide whether we can afford something based on whether we can manage the monthly payment. This is particularly true for homes, cars, and furniture. But just because we can handle a payment does not mean we can truly afford something. Monthly payments also ignore the true cost of ownership. A car, for example, costs a lot more than the monthly payment when you consider insurance, gas, repairs and maintenance. Instead of focusing on the monthly payment, separate needs from wants and evaluate how you might better use the money. If you still have consumer debt, for example, consider paying the debt off before buying something that will commit you to future monthly payments for potentially years to come.
Shifting your perspective away from "Do I have an extra $200 a month to spend on this thing?" to "Is spending $200 a month plus all the additional expenses on this thing the best use of my money?" will help you channel your money towards more productive uses. Check out the full list of money mistakes at the link below or share your best advice on easily corrected financial choices in the comments below.
Wesabe, one of the first personal finance management tools I wrote about when WalletPop was but a young blog, announced today that after July 31 it would no longer operate the accounts tab of the website. In an announcement posted to Wesabe.com Marc Hedlund, CEO of Wesabe, cited the inability to maintain customer support and security on a shoestring budget.
Hedlund, who was known to contact users directly from time to time to help solve support problems, was able to share one bit of good news; the Wesabe Groups section of the website will remain open indefinitely. The "Groups tab," Hedlund explains, is cheaper to host, and it is a great resource to users who have relied on the community to help them make big financial decisions and offer financial advice specific to their situation.
In addition to the "Groups" section of Wesabe, the website was best known for its Data Bill of Rights, which assured users that, "your data belongs to you" and offered the ability for users to upload transaction data from their bank without linking accounts directly to Wesabe. Part of the Data Bill of Rights at Wesabe was the fact that the company did not use a third party solution to manage accounts and security. Instead, Wesabe built its own tool, which likely played a part in the cost of keeping data secure.
What does the closure of Wesabe, which was free, mean for the personal finance management space as a whole? Will you still be able to manage your money online for free next year, in five years?
The good news is that yes, there will still be tools which don't charge users a monthly fee to manage their money, but expect to see a greater focus on ads and tie-in products in these offerings. Ultimately, the personal finance management space will fall into three categories; free with ads, set monthly fee, or at your bank.
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