I have to admit that, at times, over the years, it has been difficult to talk to young people about fiscal responsibility, particularly about avoiding or minimizing debt as much as possible. A frequent response is: But the federal government is in trillions of dollars of debt; state governments, like New York, are deeply in debt; and so many corporations are also in debt — so isn’t debt OK and just a part of our modern world?"
What I start with is that those entities all have others to pass their debt on to. The governments have us, the taxpayers, to pay their interest costs, and perhaps, someday, even some of the debt. The same with a profitable business, since if it couldn’t pass on at least its interest and debt service costs to its customers in the price of the service or product it sells, it couldn’t remain profitable. But then I tell the “debt is ok” crowd, that, as a consumer, no matter how much money you make, you don’t have anyone to pass your debt service costs on to. As a result, by paying that interest, you are simply paying more for everything you buy or do. Basically, you are just cannibalizing you wealth. Then they get at least the logic of avoiding or minimizing debt.
That being said, preaching “fiscal responsibility” to young and old may be an even bigger task going forward, because the federal government, partly because of tax reform, is headed, in the short run, for trillion-dollar annual deficits and the largest national debt in history. According to a recent report in USA Today, the national debt could exceed $29 trillion in ten years (2028).
On the one hand, that reinforces the “debt is ok” mentality, but, on the other hand, it makes it easier to explain why young people have to save more for their future. If you are a regular reader, you have heard me talk about the less generous Social Security and increased health care costs that they will likely face in the future, which alone should motivate them to save more. But, then, there is that NATIONAL DEBT. Let’s face it, I tell them, at some point we are going to have to pay more taxes to get it under control, notwithstanding any hoped for economic growth, and the “WE” is you.
In a the last column I mentioned that several middle school students told me about an allowance app, that facilitates parents and children being interactive with each other when dealing with allowances. Then, recently, more and more people have been telling me about their or their children’s experiences with smartphone apps that can help you with your personal finances. So, I ecided to do some superficial research to learn a little bit about some of them. I say superficial because I looked into them, but I did not download and/or work interactively with any of them. I am much too technologically challenged for that.
Let me say right off: My view is that I am all for ANYTHING that will help you to manage your money better, save more and avoid or minimize debt. So effective apps, books, articles, TV or radio programs, they are all good. That being said, I am not endorsing any particular app here, and there are pros and cons of each, including possible costs, so if you want to use one or more, do your own research, look at the reviews, talk to friends and family who have experience with them, and try them in
order to see which ones work with your needs and circumstances.
One category of apps that I really like are those that round up the purchases you make on your credit or debit cards to the next dollar, and then automatically transfer that “digital change” into a savings or investment account.
Qapital will move that change into an FDIC insured checking account, and also provides other options when money can be automatically transferred. For this option, savings rates may make you want to shop around, and don’t forget that “cash is still king,” and if you are carrying a balance on your credit card accounts and paying interest, you need to be paying those down also.
Acorn will automatically transfer that “digital change” into a portfolio of low-cost exchange traded funds that you pre-selected based on your investment risk preferences. For this option, fees can make a difference, so you can shop around and look at apps like Wealthfront and Wealthsimple.
Digit is a savings app that takes a different approach. By looking at your income and spending habits and history, it automatically transfers money from your checking to a savings account multiple times a week. As with all of these apps, there are devils in the details, but this one and others are worth considering if you need this kind of help and accountability.
Then there are a number of budget apps, like PocketGuard, which can help you sync all of your bank accounts, credit cards, loans, investments and savings, and then build a budget for you based upon your spending habits. Spendee is another budgeting app option, as is Personal Capital, which can also help you stay on top of your investments, stocks, retirement savings and other bank accounts. One additional one is Mint, which can also show you your upcoming bills. Wallet is a budget app that can help you keep track of and get a handle on your spending.
Finally, here is one that you might want to look at, and that I like for its claims. YNAB (You Need a Budget) says that it can help you stop living paycheck to paycheck, and pay down debt. It claims that it forces you to live within your actual income, and helps you see what you need to do differently to balance your budget.
This is by no means an exhaustive review, and there are new apps coming out all of the time, but you get the idea, especially if you are a tech savvy person, especially a millennial.
April is Financial Literacy Month and final income taxes month, so in the next column I want to start discussing some things that you can ask yourself when using April, the perfect time, to review your finances.
John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous weekly columns at http://www.mpnnow.com/search?text=Ninfo or at http://www.monroecopost.com/search?text=Ninfo