Sunday, April 03, 2016

Why I Cancelled My Acorns Account


I very recently cancelled my +Acorns account. Despite the excellent app and overall product experience, it is not a fit for my needs. Two problems arise from my experience with Acorns. The first problem was the randomness, which could be fixed by not rounding up. The second problem is that they use modern portfolio theory (which money geeks call MPT). A third issue is not related to Acorns itself, but my own move towards simplification.

Randomness


The idea of taking spare change and investing it has an allure of simplicity. Surely, you would not miss a few cents here and there, right? Sure, until it adds up to real money. I think my highest 30 day contributions reached around $70. That's real money out of my monthly budget, not just change. While the occasional draft of $5+ from my checking account does not interfere with my spending, I realized that the $70 could be going towards my other accounts or goals. I didn't realize that spare change is real money.

Downside Protection


With regards to modern portfolio theory, I at one point thought it to be the best way to invest. As my financial journey leads me to better understanding of money, I have come to realize some of the shortcomings of MPT involve downside protection, which is nonexistent. There is no amount of asset reallocation that is going to help you when the overall market gets its ass handed back to it. A loss is a loss.

I cancelled my +Betterment account last year because they also rely on MPT. I do like the idea of robo advisors; but, find that they rely too much on MPT alone. I did find and sign up with robo advisor +Hedgeable to manage my money. As the name implies, Hedgeable hedges against losses by actively managing risk.

What this means in real terms is that if there is increased market risk, Hedgeable is not shy about cashing out and waiting for things to improve. They would take a loss like everybody else, although it would be a small loss.

Acorns does not offer downside protection. At best, the algorithms will rebalance your portfolio. There are benefits to rebalancing; but, they do not include making up for large losses.

Simplification


The third reason I mentioned was a personal move towards simplification, which has nothing to do with Acorns. I think they product is very well done and serves people who might not otherwise save money. However, for those who have some modicum of self-discipline and awareness about their finances, Acorns may not offer sufficient value. At the very least, Acorns is one more account to keep track of, one more app on your phone, one more demand of your time. For me, this is one too many at this point of my life.

Part of simplification also includes knowing precisely how much and when my deposits into my savings will occur. This way, there is no tiny nagging voice in my head telling me to be on the lookout for an automatic transaction.

I Am Still Favorable Towards Acorns


Despite my leaving Acorns, I still have positive regard for them. As mentioned earlier, Acorns provides an easy way for people to start putting money away for the future, which they may not have done on their own. Furthermore, if somebody with little financial sophistication is going to put money into the market, it is better to use modern portfolio theory than to buy individual equities.

In short, if somebody I know and care about asks about getting started in investing, Acorns might be one of my first suggestions so that they at least have a sense of getting started. Then, as their level of understanding increases, I might point them towards other products.

Friday, April 01, 2016

Simple.com Tax Preparation Lovefest

I am crushing on my +Simple account now that I am gathering my expenses for tax purposes. While Simple is not so useful this year, due to limited use in 2015, it is going to be awesome next year. Simple currently only offers personal accounts, although their Help section mentions that they are considering business accounts in future, which would be even better.

The one feature that will make my tax preparation less demanding next year is the ability to tag my expenses. By adding a #business tag to the appropriate income and expenses, I instantly create a filter for my searches. Next year, for example, I would simply search "2016 #business" to get a report listing all my business expenses and income. Then, it is as simple as exporting the list. Done.

Another excellent tax feature is the ability to upload invoices to the individual transactions. This is great in that I would have access to the actual invoice should I ever need to verify that the expense is business-related.

Finally, the ability to add memos to my transactions is extremely useful, not only for tax purposes. Sticking to taxes for now, a memo would allow me to document why an otherwise personal transaction is business-related. For example, I frequent Walmart to purchase groceries and other items. On occasion, I need to purchase a wireless router or a tool to finish a tech job. In a sea of Walmart transactions, it would be difficult to distinguish a business expense from an everyday expense. That is, it would be difficult unless I tag, attach the receipt to, and annotate the transaction.

The reason all of this is easier with Simple is because this can be done as you go. As soon as you purchase and have the receipt in your hand, you can tag, photograph the receipt, and add a memo. The entry is automatically made for you when you swipe your card. You no longer have to go home, sync your accounting software, hunt for receipts, and then match them to transactions. Part of what makes keeping records is the drudgery of batch work. However, if bookkeeping is as simple as posting a tweet or other social update, it simplifies tax season.

If Simple ever does come around to creating business accounts, you bet I'll sign up in a heartbeat. Imagine that your accounting software was also your bank. One login. No syncing. No manual entries. Instant updates with every transaction.

I'm actually excited about doing taxes next year because of Simple.

Friday, March 11, 2016

The Grid Beta Access: First impression

TheGrid.io has granted me Beta access to my account. You can see the account over at ShaineMata.com if you like. If you have never heard of The Grid, they are working to build a self-designing website that uses artificial intelligence. The idea is brilliant. I like the concept.

I think that when they iron out the bugs, The Grid should be excellent. I am not ready to make The Grid the home to any websites that are important to me quite yet. Here is why.

They are still in Beta


Obviously, being in Beta means that the service is not at full production capacity. There are things I expected would be available, which aren't. Watch the video to see more or less what I expected.
So, the first thing I expected was to be able to choose the website's purpose, which is not currently an option. Instead, there is a very rough posting process that allows me to share content from the web and to type up blog posts from the browser. At least, there is some control of the AI's design parameters.

Missing Content


When I publish some posts, for some reason the AI only publishes the photo and decides to not publish the text. To make things worse, making changes and reposting seems to have no effect. The best I could do is delete the post and try again, but even that is sketchy. I could not reliably edit posts and be sure that they will display properly, most especially when they have their own separate page.

One Page?


Posts default to a single page. You would have to infinitely scroll down to old posts if you ever built up a large repository of posts. There is no search feature. I would post to both the homepage and a separate page if the separate page weren't keen on deleting my content.

Inability to Change


I mentioned this before, but it needs emphasis. Making changes to a post, such as removing it from Navigation or making a Page from the post, seems to have no effect. Publishing the changes has no effect. Once an error is in place, it's permanent unless you delete the post and start over.

No RSS


At the very least, I thought I could use my Grid account as an aggregation site; but, I have not found an RSS feed anywhere.

I Won't Harp


I'm not going to harp too much on The Grid. They do warn users that it is in Beta. They are not running the meter on billing yet, so it's not like I'm paying for something I don't like. I look forward to improvements that they make to the back end to make publishing more intuitive and, quite frankly, effective. 

In the meantime, I will likely use my Grid site to point other content until I can reliably post to separate pages within The Grid. My experience demonstrates to me that they are putting all their effort into he AI and limited effort into user experience. I think this will improve over time. For now, I am content to use my account for experimental purposes. 

Friday, February 12, 2016

Lesson From Automatic Budgeting with Simple Goals

In the last couple of posts, I have written about how I am using Simple.com to manage my self-banking experiment. It turns out that one flaw in the process is me. It has become habitual to check balances, transfer money, schedule payments, and figure out strategies to ensure what needs to be paid gets paid. I maintained the habit knowing that Simple can mostly manage things.

Since switching my payroll direct deposit over to Simple, finally, much of my fussing over money is automated. It has been difficult for me to let go of the reins. At first, I was putting lump sums into Simple Goals in order to pay off self loans, as I have done since beginning the self banking experiment.

The problem with manually doing this is that Simple automatically allocates a daily amount into your goals. Therefore, your Safe-to-Spend quantity goes down every day as Simple allocates your daily rate.

For example, let's say that to meet my Goals, Simple needs to set aside $45.67 per day among the various Goals. This means that I would need to have enough money in Safe-to-Spend to set aside until next pay day. So, if I were paid every week, I would need $319.69 available to put towards my daily budgeting.

What I was doing instead was allocate money manually and make payments to my self loans without leaving that 7 day buffer. Therefore, my Safe-to-Spend balance would zero out and cause my Goals to pause their daily budgeting. Then, by the next paycheck, my Goals would grab a big chunk of my paycheck to catch up, in addition to the daily allocations from my already diminished paycheck.

The result is that I kept "running out of money", which is preposterous because I earn sufficiently to cover all my expenses.

Whereas I manually budgeted in lump sums per paycheck on my own, Simple budgets smaller daily quantities automatically.

I have to learn to let go and allow Simple to do its magic so that I can go about enjoying some extra free time.

To remedy my problem, I've had to borrow from myself to ensure that there is enough cash in the account to smooth out the roller coaster budgeting that my interference has caused.

My take-home lesson is that once I automate a process, I should step back and let it run. My interference caused something meant to uncomplicate my life do the total opposite.

Wednesday, February 10, 2016

Self banking is easier with Simple

In my last blog post, I wrote about my self banking experiment and a transition to +Simple as my main bank account. Previously, I had my paycheck deposited into a local bank. The money would then pay bills and pay down my loans to myself. This method required a lot of time in tracking accounts, bills, and loan balances. Transitioning to Simple has freed up so much time.

Self Banking Recap


Let me recap the self-banking idea. I have a savings account where I accumulate a percentage of my income. Whenever I need to purchase something other than a living expense, a WiFi router for example, I use money from savings. That instantly becomes a loan with tacked on interest that is paid back over one year or less. In this way, the savings account has a means to grow other than the meager interest rate the bank offers. In this way I avoid using outside credit and recapture the interest I would have paid out.

Self-banking is a fun mental game to play with my finances. Whenever I purchase something in this way, the loan has a name, it has a payment schedule, and it has an interest rate. There is a greater mental urgency to budget my paycheck to pay off these loans than there is to only save a fixed percent of my income.

Imagine borrowing $120 from savings and then still making payments on it after six months. It is a bit ridiculous to take twelve months to pay down $132 (loan + interest). Yes, I could make $11 payments every month, or I could pay off the entire loan in a lump sum. The point is that having a "Router Loan" hanging over my head ensures that I will pay down the loan in addition to my regular savings contribution. Thus, by financing purchases in this way, I am effectively increasing my savings rate every paycheck. The game ensures that I budget loan payments like I would a utility bill. This could get exciting if I ever got to the level of loaning myself money for a car.

Simple Makes Administration . . . uh, simple


One drawback to this mental finance game is that there is some administration necessary to make it work. The old way required creating a note, creating an amortization schedule, keeping track of payments, calculating balances, and budgeting my paycheck to figure out how much of the loan to pay back. By switching to Simple and using their Goals feature, all of that goes away.

I originally started the administration with note cards for each loan. Then I moved to tracking via Evernote. I would also do the budgeting on paper every paycheck.

Now when I borrow from Savings, I tack on the interest and make it a Goal in Simple. Simple automatically siphons money into the Goal every day. If I want to pay down the loan faster, I can move lump sums into a Goal until it is paid off.

By using Simple, my Self Banking game is easy to do from my phone. The only "work" is that I need to add 10% to the loan, which might require a calculator. Beyond that, Simple handles tracking payments, tracking balances, and a large part of the budgeting.

Why It Works


I have given some thought to why Simple is so effective for making my Self Banking game work. It comes down to Accounting. Prior to considering Simple to track my self loans, I was seriously trying to design an accounting system to help me manage the loan accounts. I was about to shell out money for ledger paper so that I could create a general journal, a ledger, and loan accounts. It would basically do what my note cards were doing, except more formalized. I was even considering Quicken or Quickbooks.

Simple works because it breaks your main account into sub accounts when you create Goals. Simple also works because it does not separate your bank account from your accounting. It's all in one. No reconciling required.

A Goal in your Simple account can be used as a sinking fund, for tracking loans, for budgeting monthly bills, to create as many "savings accounts" as needed, and probably some other uses I have not imagined. In short, rather than have a checking account and a separate accounting system, Simple combines both into one product, which is a time-saver.

With Simple, I can track expenses, allocate money, transfer from one account to another, and many of the things that we can do with a formal accounting system. The only thing missing is that transactions between your cash and Goals, or between Goals, are not recorded. You lose those details. However, since this is my personal financial game, not a business, there is no need to leave breadcrumbs for auditing.

Now the question is, what can I do with all the time I have freed?