Review: Venmo

For those moments Ven Mo people owe you money than they should:

Say you need to pay your friend back for that Netsky concert ticket that she got you. How are you going to do it? Pay in cash? You don't have the exact amount so that's not going to fly¹. Check? What is this, the 9th century? Unfortunately these days, it seems like there's a tradeoff between being able to conveniently send your friends money and to do it without having to pay steep fees.

Enter Venmo. A popular web and mobile app (iPhone and Android) that allows you to send money to your friends. Since the selling point is pretty short (unlike in my SmartyPig post), let's get our pros and cons on.

Pros:

• Low fee structure. Don't just take it from me. See for yourself. For those of you allergic to link clicking, it's free if you pay using a Venmo balance, debit card or bank transfer and 3% if you pay with a credit card. So far these are the lowest fees I've found for companies that offer a similar service.
• Social network connectivity. Tired of texting your friends to get their account names for random apps² which they've inevitably forgotten immediately after signing up. Well you don't have to deal with that ruckus when you're using Venmo. Connect your account to Facebook or Twitter to quickly find your friends.
• Signing/Referral bonus. Sign up using this link and get $1 when you create a Venmo account.
• "Trusted friend" capability. Do your friends always forget to pay you back for things³? Have them join Venmo and make you a trusted friend. Then you can charge them for expenses instead of waiting for them to pay you.
• Bank grade security. More here.
• Easy to use mobile app. Always forget to pay people back for things. With Venmo's mobile apps you can do it on the spot.

Check out this smooth mobile interface.

That's quite the pro list. Even better, the cons are pretty minor.

Cons:

• Their slogan isn't Ven-Mo Money Mo Problems.
• Balance are not FDIC insured⁴. Your Venmo balance is not FDIC insured. If you're concerned about this, just cash out your any balance you may have to your checking account as soon as possible.
• Uncertainty over whether low rates are here to stay. Mind you, this is purely speculative because I don't work for Venmo and they haven't released information of this nature, but I believe it's possible their rates may increase in the future. Why? By offering some of their services for free they're operating at a loss. You may say that Venmo is trying to become profitable through their business partnerships. Here's an informative Quora post on whether Venmo will be viable in the long term⁵. For now though, know that you're getting the best rates out there.

Conclusion:
Whether you're frequently in debt to your friends or the other way around, Venmo is a great tool to transfer money conveniently. Use online, or on your phone to get some of the best rates available. Don't forget, sign up here to get a $1 bonus!

And yes, you guessed it, this sparkling review results in Venmo earning a green thumb of their own.

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1. Unless you're one of those people who just suggests the amount of money you have on you at that very moment even though you owe your friend more. Don't be that person.
2. I make it easy on my friends by always snagging "DoglvrXOXOXO".
3. If they do, download Venmo to make your life easier instead of say, flushing them down a toilet. Warning: Link has profanity.
4. Covered in user agreement.
5. Also speculative.

Critique: Giving Up Your Daily Coffee (The Latte Method of Saving)

A Latte. Courtesy of Nuchylee, FreeDigitalPhotos.net.

Giving up Your Daily Coffee (aka The Latte Method)
Some blogs will have you think that if you give up your daily coffee (or a soy half-caff cappuccino), you'll save far more money than you could ever imagine. This blog suggests savings of $200k in 25 years if both you and your spouse¹ give up your daily cup of premium joe. Sounds simple. Unfortunately, there are a lot of issues with this line of reasoning. This post seeks to bring some of those issues to light, and as a result, how to get the latte method to work for you. But first, some definitions. The latte method describes, more generally, any method of cutting back on small expenditures that you make often to save money. For this post I'm going to critique the conventionally used daily coffee example, however, you should be able to apply the reasoning to any area of spending that the latte method can be used.

Assumption #1.1 and #1.2: You get premium coffee from a coffeeshop every day (1.1), and that by no longer buying it you've cut it out completely or switched to a free alternative (1.2)
A lot of the savings numbers that are quoted online assume that you order coffee from a relatively expensive coffeeshop on the daily. They also assume that you've stopped drinking your daily coffee completely. I confess, I have a cup of coffee or two every day, and know that if I go without it I feel like this. A more reasonable course of action would be to cut down on the amount of coffee you buy from coffeeshops, perhaps by drinking less, making your own, or both. It won't lead to huge savings, but it will result in moderate savings with a minimal change in lifestyle. More generally, the latte method only works if you are indeed making these small expenditures regularly enough to make cutting down on them worth it.

Assumption #2.1 and #2.2: The money you save isn't spent elsewhere (2.1), and is immediately invested (2.2)
Another issue with the latte method is the assumption that whatever money you do save from switching to cheaper alternatives you don't end up spending elsewhere. The whole point of saving money in the first place is to use it for some other purpose which you value more, like a vacation with your family², buying a new set of speakers or buying gold, piling it up and in a fantastically garish display, and slaloming down it. Although sitting on those coffee funds for 25 years is possible, not only is it unlikely, it's pretty absurd. If you have effectively saved using the latte method, you should use those funds for something you care about instead of letting them sit in a bank account for an entire generation.

Say you've addressed assumptions 1.1, 2.1 and 2.2. Congratulations! But before you start counting the theoretical millions you'll have in 50 years, you need to ask yourself where you're saving the money. The $200k number provided above assumes that you're getting 8% returns annually for 25 years. In addition, it assumes that you're investing whatever savings you get as soon as you get them. Turns out the latter is actually doable with some personal finance savvy. Most savings and investment accounts allow you to set up recurring contributions. You pick a time interval and an amount, and presto transferro!, funds are moved from your checking account to these accounts automatically. I'd highly recommend this as a way of getting yourself to commit to saving. Calculate the amount you'll save from giving up coffee each month and have that amount automatically transferred.

Assumption #3: Cutting down on your daily coffee won't drive you insane
Okay, a bit sensationalist, I know, but let me convince you that I actually have a point here. There may be some areas in your life where you make lots of small expenditures and cutting down on them won't impact you adversely, but there are also areas in your life where cutting down will make you miserable. A question to ask yourself when thinking about an area where you can decrease spending is even worth it. That is, are the things that I can use the money I save for worth giving up whatever I'm giving up?

Conclusion, or, How I Learned to Stop Worrying and Love the Latte Method³
If you read my last post, you'll know that Cutting Edge is all about saving with purpose. To get the Latte Method to work for you, first identify what you're saving toward. Otherwise it can be difficult to motivate yourself to save. Then, go through your monthly expenditures (credit card bills are an excellent place to start) and identify areas where you make a lot of repeated small expenditures that you can cut down on without significantly decreasing your quality of life. Next, calculate how much you want to save and create a plan to do so by cutting out or minimizing spending in that category. Set up a recurring contribution to your savings or investment account for that amount. Last, wait until you've completed your goal, pop some reasonably priced bubbly or sparkling cider, and celebrate having achieved your savings goal!

Okay, you've finished this post, you're ready to make the Latte Method work for you, but you need a little inspiration. Never fear, Cutting Edge is here (and technically has been here this whole time...)! Check out this inspirational list of common areas where people make a lot of small expenditures that are easy to cut down on:

• Coffee. You've been paying attention this whole time, right?
• Eating(/Drinking) out. I'm incredibly guilty of being bad at this if it makes you feel any better.
• Entertainment. Wait for those romcoms you secretly love to be released for rental? Use the library instead of your e-reader⁴? Play a trippy screensaver with the lights off while listening to dance music in lieu of a concert⁵? Yes please.
• Clothing/Cosmetics. You look stunning right now, trust me. But actually, take the time you go between buying clothing or cosmetics and think about how much it'd change your quality of life if you doubled or tripled it.
• Any services you can easily do yourself. Iron your own clothes, clean your own place, pump your own gas⁶.

Got any areas to add? Intriguing successes or failures using the latte method? Please share in the comments!

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1. Thanks for reminding me I'm still single...jerk.
2. Now I've just reminded myself that I'm still single. Shoot.
3. I'm not just an art poser (see the links), I pretend to know about film as well.
4. Or you're reading the classics on your e-reader.
5. This is a joke. I totally haven't done this before. I swear. As a sidenote, I'm also an terrible liar.
6. Unless you're in New Jersey. New Jersey is weird.
?. There's an easter egg link on this page. Give yourself a pat on the back if you can find it.

Review: SmartyPig

Sure, it's widely reported that pigs are highly intelligent animals, but unless they're also savvy financial advisers (scientific study pending), it's unclear how exactly they're going to help you with your personal finances. Luckily for you, the website SmartyPig®, a clever play on piggy banks, has your back.

How's it work?

SmartyPig is elegantly simple. They've realized that most people don't like to save money for the sake of it, people do so to achieve different goals. Instead of creating a plain vanilla savings account with a generic name like "Day-to-Day Savings", you get to create any number of savings accounts named after your goals. I don't know about you, but "Putting the 'Fun' in Fund" blows "Day-to-Day Savings" out of the water. Whether you're saving for a well deserved vacation, your education or a rainy day¹, you get to customize the account to suit your goals.

If you complete a goal, kudos to you. You get a congratulatory message and can close that goal, which sends money back to the bank account you used to fund the goal². You can also leave your money there and accrue and compound interest as usual with a "100%+ Goal Completed" to remind you how awesome you are. If you need your money before you've completed your goal, you can still close the goal, enjoy the bitter taste of failure, and withdraw your funds with any interest you've accrued. Right now, it probably sounds like a regular savings account that you get to name for a specific purpose. Not that exciting. There is a catch though.

If you decide to withdraw your funds at any point, you must withdraw all of them. By doing this, SmartyPig protects you from yourself. Here's a quick example: Say you want to buy a new pair of shoes, but don't have any money in your checking account. You can transfer some money from your boring savings account scot-free. I mean, how much will that impact your "day-to-day" life anyways. However, say you've been saving to take a trip to Paris for a few months so you can hang out with those people I posted about above. You should be more reluctant to close that goal and transfer all of those funds to your checking account just to buy a pair of new kicks.

Nifty idea. Is that it though?

Nope. That's just the tip of the iceberg. Since people are more reluctant to withdraw from their savings goals until after they've finished them, SmartyPig can offer you higher interest rates. Why this is the case is a little complicated, and I may explore it in more depth in a future post. The basic idea though is that when banks³ have deposits for longer periods of time, there's more they can do with those deposits.

SmartyPig offers a 1.00% Annual Percentage Yield as of 8/15/13 on accounts of $25 and up, which is the minimum. To give you an idea of how good that is comparatively, it's better than most medium-term (12 months or less) Certificate of Deposit⁴ rates, savings accounts and of course checking accounts.

Here's a quick rundown for people who only want to read the bare minimum:

Pros:

• 1.00% Annual Percentage Yield. Better than most checking and savings accounts and medium-term certificates of deposit.
• Funds have Federal Deposit Insurance. This means the US government will back your deposits if the bank where your funds are deposited goes insolvent.
• Goals can be personalized and set up to help you achieve them. Because "Forget the club – I'd Rather Count a Million Bucks Savings Fund"⁵ is way more exciting than "Ultimate Savings".
• Interest accrues daily so you can see how much you're earning. This may sound like the tiniest of perks, but it's surprisingly motivating to see your funds grow on a daily basis, even if by only a little bit.
• You can set up your goals to take public contributions. Don't think you can afford that vacation yourself? Share your goal with friends and family to have them help pitch in.
• Redeem your goal for a gift card at select retailers and you can get an additional bonus. This is a great strategy for big purchases. Say you're saving up for a new wardrobe from Banana Republic. If you save $200 in your goal, you'll get $220 (a 10% bonus!) in gift cards to spend there.
• Sign up for a Cash Rewards Debit Card for 1% cash back. SmartyPig offers a Cash Rewards Debit Card that you can load from your SmartyPig account. Get 1% back on all purchases that you can deposit back onto your card or into a goal. This is great for people who need some extra encouragement to save.
• If you refer a friend and they set up an account and deposit money, you get $10. Only relevant if you're super popular, something I don't really have to worry about.

The cons are few and far between. Most of them are specific to the great features that SmartyPig has, but I wish were implemented differently in some small way.

Cons:

• Referral system done by e-mail and money you can make from it is capped. You're only allowed to invite people by e-mail and you get a hundred invites. If you use all your invites and all your friends sign up for accounts and deposit money you'd make a whopping $1000! However, the odds of all your friends following through like that are pretty low. If a friend ignores an invite, you can't get it back. However, a PR representative for the company informed me that they will be adding the ability to share unique links with your friends for referrals in the future. This is definitely something to look forward to.
• Cash Rewards Debit Card has a $9.95 initial fee, $1.95 domestic ATM fee etc. Even if you incur no additional fees, you'd have to spend $995 until you make back your initial fee. Here's a link detailing all the fees associated with the card. Personally I think there are better alternatives.

Conclusion:
SmartyPig has a long list of pros and few cons. If you're in the market for a high-yielding savings account that helps you achieve your financial goals, I'd highly recommend signing up. Better yet, help me out and let me refer you. E-mail me at cuttingedgepersonalfinance |at| gmail.com or direct message me on Twitter (@CuttingEdgePF) with your e-mail address for an invite. I'll do my best to refer you within 24 hours. For your convenience, the eligibility requirements have been placed at the bottom of this post.

Because of its various merits, SmartyPig will earn the highest, and only, of Cutting Edge Personal Finance accolades: a green, cartoony thumbs up. I'd take a few minutes out of your busy day if I were you to revel in its splendor.

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1. Those Parisians were hella prepared for that rainy day. We should strive to be more like them, you know, financially speaking.

2. Or other fun things. Keep reading to find out what they are.

3. Although you may think SmartyPig handles your deposits themselves, any funds you have on SmartyPig are deposited with a bank they've partnered with, BBVA Compass.

4. Also known as CDs. I'll explain what these are in the future if people are interested. The takeaway here is that for most CDs, you cannot access the funds you deposit until specific dates. Some CD issuers let you access the funds early, but if you do access them early you are penalized (bankspeak for "charged a fee" or "loss of accrued interest"). Not only does SmartyPig not penalize you for withdrawing whenever you do, you get a better rate of return on your savings.

5. For those of you who didn't get the reference here's a Cutting Edge CliffsNote.

Eligibility for SmartyPig Accounts: In order to establish a SmartyPig account, you must be a U.S citizen or U.S. permanent resident alien with a green card and social security number and U.S. residence address. If you are under the age of 18, please have your parent or legal guardian open a SmartyPig account first. Once the account has been created, your parent or legal guardian will be able to add you as a Limited Access User and give you view-only access to the account.

Introduction: Why Personal Finance?

I know what you’re thinking: Riddle me this anonymous blog author, Why is personal finance even important? Because let’s be honest, it’s up there with ironing pants, returning library books and going to the DMV as one of the least sexy things ever. Fair question reader, fair question. From a personal standpoint, I work hard for my money, so I'm all for simple and effective ways of ensuring I have more and not less of it. More generally though, I have certain life goals that I want to achieve, and I want to make sure I'm capable of achieving the ones that require money. If you're astute you've probably realized that I haven't actually proven that personal finance is sexy. If it's really that important to you then you can read this blog in your underpants for all I care...as long as you keep doing the reading part.

I'm going to keep this introduction short because nobody reads introductions. There are a few things I hope to do in this blog, and a few things I hope not to do. I detailed them out below not only for you to see, but to also make me more accountable to them. Let's hope that strategy works.

What this blog hopes to do:

• Provide original, high-impact personal finance advice. The first part is pretty simple. If I wrote stuff here that you've read elsewhere, it wouldn't be very useful to you. So what constitutes high-impact advice? Some personal finance blogs fall into the trap of posting about every possible savings opportunity possible. While saving money is great, a lot of the advice, when implemented, results in relatively small savings. I don't play that game here. Although not all my posts will be relevant to all my readers, rest assured I'll try my best to make sure that my recommendations are useful for a good number of people.
• Review innovative personal finance products. There are a lot of new products that have sprung up recently to help people track their finances, find savings and maximize returns. Although there is some coverage of these on other blogs and newspapers, many of these reviews have some serious flaws. Some reviewers have not tried the product they're reviewing. Others explain how it works without actually assessing its usefulness. Here at Cutting Edge, I plan to review products that I have used personally, and if I don't use them myself, be upfront about it and say why. Additionally, I promise to roll up my sleeves, crunch a few numbers and actually show how useful (or useless) these products are.
• Organize posts in such a way for the information you want to be easily accessible. Not everything I post will be relevant to everybody. Here on this blog, I'll do my best to tag articles so that you can find the type of advice you want. That said, I hope you'll explore around and find useful information everywhere! And if you want to stay current, you can check out and follow my twitter account @CuttingEdgePF.

What this blog hopes not to do:

• Repeated hackneyed budgeting advice. How many times have you seen that giving up your daily Starbucks will make you rich? Look, I'm not disputing that if you stop dropping $3.90 on a latte you'll save a lot of money, but I'm pretty sure that's common knowledge at this point. I'll discuss The Latte Method (making cuts to little expenditures that add up over time) in a later post, but with a little more finesse than other sites.
• Tout get rich quick schemes. I'm not going to teach you how to make $90k working from home, pick penny stocks or sign up for pyramid schemes. That's what the rest of the internet is for.
• Make unfounded claims about what products are best for you. Even though there are a select few blogs that don't engage in the top two bulleted behaviors, they are prone to this one. Everybody has a unique financial situation. I'm not going to pretend that I know what products and strategies are best for you, but I am going to give you the tools and information to figure it out yourself. Trust me, the minimal effort on your part will be worth it.

Sounds like a plan, right? Before you traipse around the rest of this blog (or YouTube, let's be realistic) there are a few things you can do for me. Follow the blog on twitter (@CuttingEdgePF), post comments and questions, share with your friends and feel free to e-mail me with feedback or requests at cuttingedgepersonalfinance |at| gmail.com. If at the end of the day, one of my articles has helped at least one person, I'll consider my mission accomplished.

EDIT: I changed some small parts to make them funnier and less repetitive. I hope I succeeded...