Personal finance became a lot simpler over the last five years.
Today, I manage my finances, in less than an hour a month at no cost. I couldn’t imagine a world where investing wasn’t automated or expenses were not aggregated.
Is there room for improvement?
Of course. I believe we’re on the brink of even greater financial innovations. Innovations that benefit us even more. Innovations that take into account our irrational behavior and lead us to a better financial future.
Here’s my wish list of things I want to see…
- Dan Ariely’s “self-control credit card” actually exists. The idea behind the self-control credit card is that users select beforehand how much they’re willing to spend in each spending category. If they exceed that limit, they’re penalized by a method they choose. For example, you choose to spend $100 on clothing a month. If by chance you exceed that limit, your purchase may be rejected or you pay an automatic tax that’s donated to a charity of your choice. Even worse, an automated email gets sent to your wife or mom.
- If the self-control credit card existed, imagine then if your savings account was linked to your credit card and that any excess budget went into a sub-savings account nicknamed “clothes”. Therefore, say you only spent $60 on clothes this month. This will allow you to spend $140 next month, without a penalty. However, after a certain number of months, say 3, any amount leftover in your sub-savings account gets put towards long-term savings in your investment account.
- Mobile phone payment, as in scanning your mobile phone instead of swiping a credit card, is mainstream. I don’t want to carry a wallet in the future.
- More financial companies offer paperless billing as the default choice.
Conclusions
Basically, I want to see credit card companies, banks, and investment companies work together.
Maybe it’s wishful thinking, but I believe that by working together all can benefit. People who aren’t able to use credit cards now, due to little self-control, can now benefit. The banks would benefit from the excess savings being automatically transferred instead of spent. The investment companies benefit because more people are investing a larger amount of money.
In many cases, the bank, credit card company, and the investment company are the same company. So it’s not too wishful thinking, after all.
In the comments, would love to hear your thoughts on the future of personal finance. What would you love to see changed?
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{ 10 comments… read them below or add one }
Nice thoughts, these certainly will help in managing your finances more efficiently. I want to improve my credit score, which certainly can help in getting more efficient with my Personal Finance.
I couldn’t agree more. First Dan Ariely is brilliant! I think in the next few months we’re going to witness a revolution in personal Finance technology making it easier – even fun to save and invest. Check out http://www.Betterment.com and http://www.perkstreet.com as just some examples. We’re working on the same challenges – just in a different way. But the point is: It’s coming! And sooner than we might think.
Again thanks for the great discussion!
Awesome Phil. I agree, that this is just beginning. I’m really looking forward as to what’s available in the future.
I don’t like the thought of scanning a mobile phone barcode instead of using a debit card- what if you’re out somewhere and run out of battery! You’d be cashless! Maybe if they start bringing in devices that run off power that’s generated differently (read an article about a touch screen that was powered by the pressure of the screen being touched, there’s a watch somewhere that runs off the wearer’s body energy), I’d think about it, but for now, no thanks.
As for improvements in the future, I’d like to see investing taught in schools in the UK. We actually got no financial advice at all and it would be good to get a basic financial education but even better to learn about investment options, saving for your future, etc.
I can’t agree more to what you said about teaching investment right from a young age itself. Instead of teaching about purely theoretical things, I think inculcating young people with the principles of money management will definitely help them in the future-if only I was told when I was young that there was a need for saving right from the start because later on you will be emerged with debts.
I’d also love to see the basics of personal finance taught in schools.
Perhaps if a company like Vanguard were willing to reach out to high school students with educational workshops, students would in turn save an invest in one of their ETFs.
It’d be a win-win situation!
Good point on the battery power.
I agree to some extent that PF should be taught in schools, I just don’t think it’s a game changer. Why? Because health is taught in schools and as a whole, we’re very unhealthy.
My dream is that the telecommunication do the bank function so it is easy to do the transaction — only need a cellphone for it.
I’d like to see basic personal finance taught in schools. I have no doubt technology will be there to act as a task manager and integrator, but that doesn’t change the fact that many people don’t understand that they should start saving for retirement in their 20′s.
I like the idea of that credit card your talking about, definitely would be helpful. The rollover option would be great!
On another note, I agree with Darren’s comment, I wish personal finance was apart of regular school curriculum starting at a young age.