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?

Monday, January 25, 2016

Experiment in Self-Banking

In the past few months, I have been experimenting with self-banking. The idea is to have some money saved away, which I can borrow. After borrowing the money, I run it through a 1 year amortization, or longer. Then, I pay back the loan to my savings with interest. The idea is to progressively have a larger and larger savings after I pay off each loan to self.

I have been searching online for information from others who have created a similar system to save money and recapture the interest that would otherwise be paid out to banks. However, the search results usually come up with links to Infinite Banking Concept, which is similar to what I am doing, except that it involves whole life insurance as the source of capital. I think IBC has its merits; but, it takes years to build up and adds a "load" to the program from the life insurance. I would still do IBC because of the whole two birds, one stone business, in which one needs to be insured anyway, might as well turn it into a collateralized source of capital.

The other search result from self-banking is for ATM and online banking where you don't have to go into a bank branch. This has nothing to do with what I want to do.

The experiment was a struggle at first. The first challenge is having too little capital. If you start off with $500, then it doesn't take much borrowing to max out your "credit limit". But, with the magic of velocity of money, that $500 can build up to something more workable.

The experiment has a few defaults, as mentioned earlier. I charge myself 10% interest amortized over one year. The interest is static, so I don't bother with calculating average daily balances or early payments. Once amortized, I pay in increments spelled out in the amortization table. Some paydays I'll make one payment per loan, or several payments. The result is that my loans have been paid off withing 1 to 3 months.

The trouble I have found is that it is time consuming to track each loan and sit down to calculate how much to pay every week on pay day. I have discovered a way to save time, which involves using Goals in my account. Each loan becomes a Goal, which includes the principal and interest. Simple does the bookkeeping. I take whatever money I have accumulated in each Goal and send it to my "treasury" via ACH.

It seems like all this is a lot of bother. It was until I figured out last week that Simple could be used to track each loan. So, why bother?

Interest Expense Recapture

Instead of paying interest, I can keep the money and save it up. By paying a credit card, I would have lost the money, so it should not count towards my living expenses.

No Credit Check

If I need to borrow money, no credit check.

Flexible Repayment

The biggest problem with bank loans, credit cards, and other finance is that you are set on a strict payment schedule. If you have a tough month or somehow don't have enough for a complete payment, you get pounded with penalties and credit report dings. By borrowing from my own little "treasury", I can pay more, pay less, skip a month, or even "forgive" the loan if I choose. As long as the loan eventually gets paid back, I'm rather flexible with my payments to self.

Increasing Credit Limit

Every time I borrow and pay back, the treasury grows, which means I have more money to borrow.

Some drawbacks

Of course, not everything is roses. One of the drawbacks, which I have not yet hit, is that eventually the pile of money could become "too big" to keep in a deposit account. I'm going to have to do something with the excess so that it can be collateralized. The thought is to put the excess into a margin account so that I can borrow against equities. But, one step at a time.

Another drawback is that my paycheck is already spent every week. The same urgency one feels when having to repay a credit card is the same urgency when you are the lender. I have one single credit card with a $300 limit that I use for spending. I pay off that credit card every week, which involves a loan with interest, which I pay back from my paycheck.

I could cashflow my spending; but, once I started looking at time value of money, it seems that any expense should account for opportunity cost. Thus, I am perpetually in debt to myself. I guess if I'm going to be a slave to the bank, I should own the bank.

The biggest drawback is that I know that this fictional bank is, well fictional. I'm willing to put up with the shenanigans mainly because I would have been doing it if I were using outside financing. So, I'm all in with the fantasy, as it gives the whole savings process a narrative. I could simply pay my bills and save money in an account like everybody else, without wasting time with loans, interest, and perpetual debt to myself.

I'll report on my progress in the coming months.

Sunday, September 27, 2015

Evernote for Long-Term Document Storage Without the Clutter

Document cold storage is the long-term storage of files that you need to keep around; but, you don't exactly need cluttering up your day to day work. So, it's like having your files in a banker's box in a storage closet rather than the filing cabinet. Evernote is capable of doing cold storage as well, although they call it by a different name. They call it an unsynced Notebook.

Unsynced Notebooks in Evernote do not get backed up to the cloud. The notes in your unsynced Notebook stay on your computer hard drive where they remain accessible to your Evernote app on your computer; but, they remain unavailable to your other devices.

You may wonder, "Why would you do this? Why not sync everything?"

From personal experience, I can tell you that not all information is usable in my day to day work. I need not clutter my search results on mobile devices with unnecessary results. If I have to wade through 300 search results every time I am looking for something, it can be irritating.

Therefore, by putting your least used documents in an unsynced Notebook in Evernote, you still have all the wholesome goodness of Evernote without the mobile device clutter.

If you ever need access to a long-term note, you could simply move the note into a synced notebook or make a copy into a synced notebook from your computer. Afterwards, delete the note or move it back into the unsynced Notebook.

The downside to this is that you need to have access to the computer to move documents in and out of cold storage, or have somebody do it for you if you are out.

Another drawback is that without cloud backup, it is your responsibility to do your own backups of your local-only Notebooks on your computer.

One side benefit of using unsynced Notebooks in Evernote is that those notes do not count towards your account note limit, which is 100,000 notes. This is a big limit, I will grant you. But, if you keep that many notes, you could keep growing your stash by taking a chunk of your notes offline.

One last thing to keep in mind is that some of the other features of Evernote do not work if your notes are in an unsynced Notebook, such as sharing. In addition, Evernote requires you to sync images and documents to the cloud in order for their servers to make text within the images and documents searchable.

Keeping offline Notebooks in Evernote does have drawbacks; but, the effects would only apply to notes that you would use regularly. Therefore, the effects on documents you don't intend to use in the foreseeable future are moot.

One good example for using such a system is in a small business or law firm where paperless is the ideal. Your office administrator could maintain your document library on your computer with unsynced Notebooks in Evernote. Projects or cases could temporarily be synced to the cloud for access everywhere. Once the job is done, the notes can be taken offline again on the office computer.

As I write this, I want to point out that long term storage of documents is often confused with having a paperless office, both of which tend to go hand in hand. Going paperless refers to the process of gathering, processing, and sharing of information through an organization. Once the document has done its job, then you need a process for document storage. Your document has performed its duty and needs only stand by in case it needs to be recalled. However, it should not stand in the way of your working documents.

This document life cycle is what I have described for Evernote. Your working documents should remain active and synced across all your devices. Long-term documents, in contrast, can remain locally in an unsynced Notebook just in case you should need them. They can fulfill their obligation out of the way of your working documents.

Tuesday, August 18, 2015

The Amazon Echo For the Pomodoro Technique

This morning while working out my schedule, I thought that I would have to pull out all the stops on my productivity tricks so that I could stay on task.

Enter the Pomodoro Technique. The technique has been a great boost to staying focused in the past. There is something about working against the clock that keeps your priorities straight.

The Pomodoro Technique, if you've never heard of it, has you set a timer for 25 minutes. You ignore everything except your work during those 25 minutes.

Once the alarm sounds, you take a short 5 minute break. No cheating on this one. If you work through your break, you'll burn yourself out and then not complete the next 25 minute stretch.

You repeat the cycle 4 times and then take a longer break of 20 to 30 minutes.

The Pomodoro Technique is a named after a kitchen timer that looks like a tomato. In reality, you can use any timer, so long as it's not complicated to set up. Which brings me to the Amazon Echo.

If you are not familiar with the Amazon Echo, it is a handy voice activated device that functions muck like Siri on iOS, Google Now on Android, or Cortana for Windows Phone. It is a voice activated virtual assistant. In fact, you could very well use any of those to use the Pomodoro Technique too.

What sets the Echo apart, however, is that you do not need your computer or phone. It is a standalone device that is always listening for your commands. You just say, "Alexa, set timer for 25 minutes." That's it. "She" will sound an alarm when the 25 minutes are up.

I have found that using my phone to use the voice assistant is cumbersome. I have a passcode to protect my privacy, which also hinders quick reminders. Often, by the time I finish logging into my device, I forgot what I wanted to remember. I don't use Evernote for that reason too. Of course, the Echo is also capable of keeping your To Do list and shopping list. However, today we are focusing on the easy to use timer feature.

I am not suggesting that yo go out and buy an Echo solely for the timer feature. This is just an idea on how to use your Echo if you have one. Or, perhaps, if you have use for the Echo's other features, then the Echo with the Pomodoro Technique would be a great bonus.

Disclosure: The picture and link to the Echo page on Amazon are affiliate links.

Monday, August 10, 2015

Windows 10 Is Really Nice! Here is why I like it.

I am really liking Microsoft's new Windows 10. I updated a laptop at work yesterday to make sure that the drivers for our printers would continue to work. We didn't want to have flaky installations should our customers decide to upgrade. At least, that was my excuse.

The upgrade was painless. I quickly went through the settings and new features. I'm really going to like having Cortana on my desktop. Having dabbled with Cortana on a Windows phone last year, I thought Cortana was one of the best features.

Part of the reason why I am liking Widows 10 is because they brought back a more familiar Start menu, which still has elements of the Windows 8 Start menu. When Windows 8 came out, I didn't really like the modern UI; but, I grew accustomed to it and accepted that it was mainly meant to work with touch screen devices, which I lacked for the most part. Windows 8 was a little lame with no touch screen.

I think what really sells me on the whole experience is that I was able to upgrade Windows 8, Windows 7, and a 32 bit version of Windows 8 on my tablet. Finally, I have a common experience across all my desktops. The common desktop was my whole reason for going Google. I write this on a Chromebox, mind you. Having cloud interfaces made for a common workspace whether I was at a laptop, desktop, tablet, or phone.

Google has lost some of my enthusiasm as of late because Chrome is a memory hog. Furthermore, some of Google's products only work with Chrome, like Inbox. They are taking the fun out of Chrome by making it bloated and by making their apps picky about the browser.

This, of course, makes it so that having local apps is better than cloud apps. The added benefit is that it is not necessary to have Internet access. I can use Evernote very well without WiFi on my Windows devices. I just need to sync at least once a day.

Suffice it to say, I'm excited about Microsoft Windows for the first time since...Windows 95?

The tablet experience with Windows 10 is so much better than it was with Windows 8, at least in my limited experience thus far. It behaves like a tablet rather than as a PC shoehorned into a tablet.

I also appreciate that the operating system is smaller and faster than its predecessors. This gives new life to old devices, or extends it a little more.