Wednesday, October 1, 2014

New Tools, Old Habits

Smart phones should be empowering, as the Internet was, initially.  What happened?

In my last posting, I mentioned that I had talked with someone who had a new smart phone - and yet didn't monitor their credit card account more than once a month.  They had the power in their hand to balance their accounts daily, yet chose not to do so.

They were desperate to tell me that they bought a new iPhone 6 - mentioning it no less than five times.  When I didn't react, they kind of got frustrated.  Wasn't I impressed with their purchase of a consumer item?

Well, no.  It takes no "talent" to go to a store and buy a product.  Sorry.

But what got me thinking was how these devices should empower people, yet they tend to enslave them.

For example, it would not be hard to build an "app" that would compare prices at different stores and if you went shopping, you could scan the bar code of an item, and have your smart phone tell you what the prices other stores in the area are charging for that item.

But such an app really doesn't exist for the simple reason that there is no economic incentive for anyone to provide one.  Stores don't want you to cross-shop on prices, so they would not participate in such a scheme, nor would they pay to support such a scheme.  The phone users would likely not pay (or pay very much) for such an "app".  And the person developing such an app would need to constantly update prices or allow some sort of wiki to add pricing data (which could be readily spoofed).

So my great idea for an app fails miserably.

Instead, we have a lot of faux financing apps.  Mostly, these are apps designed to get you to consume, and consume badly.   Things like "open table" will make reservations for you - at restaurants that subscribe to the service.   Of course, which restaurants need to subscribe to such a service?  The ones that need customers.  The great restaurant that has a line out the door and doesn't accept credit cards (because it doesn't have to - the food is that good) isn't going to be listed on your "app".

And so on down the line.  A device which should provide financial empowerment ends up as a conduit for spending and dissipating wealth instead.  And the Internet in general seems to be falling into the same pattern.   Initially, it seemed like the Internet was a great way to find obscure items and bargains at obscenely low prices.   Brick-and-mortar stores would be replaced by online shopping, which would cut costs and thus lower prices for consumers.   But what we are seeing instead is the retailers just cutting costs and pocketing the profits.

For example, a year or so back, I went online to buy a pair of sneakers.  I had liked my Merrill sneakers, and since I knew what size I needed and the brand and model, I could shop online and get a good price, right?

Wrong.  Every outlet online had the same price - $90 or $89.99 or $89.91.   It was scary how similar the pricing was.  And the local shoe store wasn't that much more, either.   Rather than scoring a great deal, I merely scored an OK one.

Banks and other financial institutions regularly push faux financial planning on their websites.  For example, Bank of America ran a cutsy-wootsy little cartoon on its site, ostensibly about financial planning.  However, the entire thing was a sell-job for a debt-consolidation loan.  If you are in debt, a debt consolidation loan isn't really going to solve anything - it will just take short-term debts and make then into long-term ones.  Basically you are mortgaging your life.  A better approach is to cut back on spending (rather than budgeting for designer coffee drinks, as the cartoon suggests).

Websites and discussion groups abound that talk about faux financial acumen as if it was a real way to get ahead.  Clip those coupons!  Get those frequent flyer miles!  Chase those cash-back deals!  12 months same as cash!   You will get ahead, if only you go after the best bargain the debt-mongers dangle in front of you!

But as I noted in another posting, no one ever got rich clipping coupons.  If they did, they'd own yachts. And coupon-clippers are notoriously yacht-free.

And then there are the financial investment sites.  Our friends at Motley Fool routinely hype this or that investment, as if you could stock-pick your way to riches.   Have you ever heard about anyone who invested with Motley Fool and got fabulously wealthy?  I mean, other than the founders of the company that is.

I rag on the fools at Motley Fool a lot, but at least they are a "legitimate" investment advice site (not that I endorse their advice!  Far from it!).  There are a host of other, shadowy sites out there that hype penny stocks or gold or other fringe investments which are often fraudulent or just really, really poor advice.   And yet they flourish.  Each one promises to tell you the "secrets to wealth" if you just send them some money for their book or brochure.  The easy money system can be yours for only six payments of $19.95!!!

Sadly, the Internet is sorely lacking in information on how to really accumulate wealth.   Sure, there are lots of come-on websites that promise this.  But none of them deliver.

And the secret is no secret:  Spend a penny less than you earn.  

That's it. No magic trick or formula.   You just have to save money, stop spending on crap, and stop borrowing.

But the Internet - and now smart phones - promote the opposite.  Spend more by shopping smartly!  Borrow more by borrowing smartly!  With all your coupons and cash-back bonuses, you'll come out ahead!

But of course, you cannot spend your way to wealth, just as you can't eat your way to slimness.    If you want to accumulate wealth or lose weight, you have to do hard things and make sacrifices.

And no, it ain't easy.  There is no "easy trick to the tiny belly" just as there is no "easy trick to wealth!"   Both are hard to do and take a lot of willpower and resolve.

And we all fail, at least some of the time, at this.

The sad thing is, today we have all these wonderful tools at our disposal, which we can use to really cut our expenses, monitor our spending, and save money.   We can go online and pay our bills and monitor where the money is going, down to the cent.  There is no excuse to ever bounce a check or be late with a payment.  There is no need to pay high interest rates, when lower rates are available.   You can go online and find the best prices for things, or hard-to-find repair parts, with the click of a mouse.

And such tools were not available, just a few years ago.   When I was a kid, if you wanted to buy something, you went to a local merchant, and if they had it, you could buy it - at a price they set.   There were a few catalogs here and there, but not much.   Yet oddly enough, back then, people were more careful with their spending and saved more.  Maybe the fact that it was so much harder was an incentive to save.

The power to control your life is in the palm of your hands - perhaps quite literally, if you have a smart phone or even a laptop computer.   You can go online and check your bank balances every day, and never, ever bounce a check again.   Yet even today, I hear people complain about how "unfair" check bounce fees are.   And these complaints come attached with "sent from my iPhone" tags.

We live in a brave new world of online communication and commerce.   We bank electronically and can spend with the click of a mouse - and soon with the swipe of a smart phone.  These are powerful tools and if used properly, could save you money and help track your spending and saving.  If used improperly, they could just fuel your mountain of debt and feed your spending and borrowing habits.

And sadly, I think most people seem to be inclined to do the latter....