The Wesabe blog

(Original photo by Hughes Leglise-Bataille.)

About two years ago, I started thinking about how much stress I’d felt about money in my life, how much I’d seen people around me feeling the same, and then what I might be able to do about that. I began interrogating everyone I met about how they managed their money and how they felt about it. Pretty much immediately it became clear that my original ideas for helping people with money (which I’ll talk about some other time) were never going to work. Just as quickly, though, it became clear that money was a much bigger stress in peoples’ lives than I’d realized. Even many of the people I thought of as well-off and stress-free were convinced that they were bad with money.

Since then, I’ve tried to ask everyone I can — friends, coworkers, friends of friends, casual acquaintences, people in airports, cabbies … you get the idea — how they deal with and feel about their money. Over time, I started classifying people into one of three camps:

The “Accountants”:

People who know where every penny goes, who reconcile their checkbook against their bank statement, and who feel much more annoyance about the amount of time they spend dealing with money than stress about it. Fewer than 1% of the people I interviewed fell into this category.

The Stress-Free:

People who do not manage their money tightly, but who spend less than they earn, and generally feel fine about their finances. Some of these people are very well-off and express that they are no better at managing money than anyone else, but have “dodged that bullet” one way or another; others just feel like they’ve always known about money. This group was a little less than 5% of the total.

Everyone else:

Nearly everyone else I spoke with — from those with the least money to many who were very well-paid — express a huge amount of stress about money, and usualy feel that they have much more stress about it than other people they know. Many of these people use exactly the same descriptions of their feelings about money (lack of understanding, feeling ripped off by banks and credit card companies, having a lot of fear about the future) no matter what their economic circumstances really are. This group was roughly 95% of everyone I spoke with, over a two-year period.

It’s not surprising that people have stress around money — what surprised me was how wide-spread that stress is, and how broadly it is spread across class, race, gender, geography, and many other characteristics. Nearly everyone seems to think that everyone else has some secret manual for dealing with money better than they do themselves.

For myself — and I’m sure this is true for others, too — I go back and forth between categories. Some of the time, I’m an “accountant,” and I’m incredibly diligent about filing receipts, tracking down those last three cents that just won’t reconcile on my checking statement, and entering in every upcoming transaction so I know what my bank balance will be months in advance. Other times, I fall completely off that treadmill and into the “everyone else” group, and just spend without knowing what will come next. Being an accountant is too much work, and tracking down those three cents is blisteringly boring; but the other option is if anything more work, if you count panicking as work.

The next time you’re feeling stressed out about money or as though you’re much worse with money than others, look around you. For every hundred people you see, about 95 of them probably feel just the same. Of course there are real differences — some people have no credit card debt, others have lots of debt — but just acknowledging that money is an incredibly hard issue for nearly everyone can be liberating. In fact I think it’s the best first step. This stuff is hard, and it hits everyone from time to time.

It’s my hope that Wesabe can make some dent in this stress for the people who join. I think you can get out of “everyone else” without having to become an “accountant,” and without having to dodge bullets. Isn’t that an amazing thing to be able to work on — reducing the number one cause of stress in many people’s lives?

Pumped up by the great power coming to real estate buyers through the Internet (last post)? Okay, time to sit down.

The BusinessWeek cover story this week is all about adjustable-rate mortgages, and the trouble in store for people whose homes are financed with them:

The option adjustable rate mortgage (ARM) might be the riskiest and most complicated home loan product ever created. With its temptingly low minimum payments, the option ARM brought a whole new group of buyers into the housing market, extending the boom longer than it could have otherwise lasted, especially in the hottest markets. Suddenly, almost anyone could afford a home — or so they thought. The option ARM’s low payments are only temporary. And the less a borrower chooses to pay now, the more is tacked onto the balance.

The bill is coming due. Many of the option ARMs taken out in 2004 and 2005 are resetting at much higher payment schedules — often to the astonishment of people who thought the low installments were fixed for at least five years. And because home prices have leveled off, borrowers can’t count on rising equity to bail them out. What’s more, steep penalties prevent them from refinancing. The most diligent home buyers asked enough questions to know that option ARMs can be fraught with risk. But others, caught up in real estate mania, ignored or failed to appreciate the risk.

Of course, with the real estate boom like the Internet boom before it, the very same magazines proclaiming gloom and doom today were touting easy riches and inevitable growth just a couple of years ago. The article is worth reading, but remember when you read it that the stories magazines put on the cover are the ones they know will sell copies, and like terrorism and stars’ love lives, encroaching economic doom sells.

(One of the things I’ve had the most trouble with in desiging Wesabe is how to resist manias. The Internet is great at pulling out “The Wisdom of Crowds” and figuring out what a consensus of people believe to be true. Manias, however, are by definition very widely-believed but short-lived. The stock market hammered Warren Buffett when he opted out of Internet stocks in 1998-99, but then lauded him in 2001 when the bubble had burst and he was still standing. Can you make an Internet application that would help people have that long-term view? I’m still not sure.)

If you’re thinking at all about buying or selling a house in the next few years, run don’t walk to read The Last Stand of the 6-Percenters?, an article in today’s New York Times. It’s about Internet businesses giving home buyers greater access to real estate listings, and taking away some of the traditional comissions earned by (particularly buy-side) real estate agents. The interesting thing is that sell-side agents, those representing the people selling houses, are apparently refusing to show houses to potential buyers making use of these sites — even though the comissions of the sell-side agents are not (immediately) affected.

The Times piece put a great tidbit in a (parenthetical) second to last paragraph, that the real estate industry is “particularly eager to fight one Redfin innovation: a display of how long homes have been listed on the market, a possible tip-off to buyers of an eager seller.” That’s very useful information for buyers, and something Internet applications would be well suited to show.

Some other good quotes:

Redfin opened in 2004 as an online real estate listings site for Seattle, and now has 35 employees, including 12 agents in Washington State and California. Its first innovation was to layer maps with historical prices for each area as well as information on property taxes and which homes had a view, for example.

In February, it introduced a Web site that automates the bidding process — and the commission rebates. The sale of a $500,000 house, for example, typically yields a 3 percent commission of $15,000 for the buyer’s agent. A Redfin customer would get $10,000 back.

“At that point we became a true pariah to the industry,” said Rob McGarty, Redfin’s director of West Coast operations.

And:

Like many Redfin customers who were interviewed, Mr. Webster and his wife, Robin Meyers, told of encountering hostile selling agents who said their offers would not be competitive if they used Redfin. But other agents’ antagonism only seems to make Redfin customers more loyal.

Matt Bell, general manager of sales at RealNetworks in Seattle, said that “when the listing agent wouldn’t show me the house, that’s when I knew Redfin was on to something.â€? He added: “If agents don’t like it, then it must be better for consumers.”

I’m not sure Matt’s statement is right — sometimes a business will hate something not because it gives more to a consumer, but because it gives more to a competitor. It’s always a risk that Redfin, or any company like it, will wind up replacing the current system with another one that is as bad or worse for consumers. (An old political science professor liked to say, “They call them revolutions because they go around in circles.”) What I hear above, though, makes me optimistic — this certainly seems to be heading in the right direction.

Update: Jeff Jarvis has an excellent take on the same Times story here. Well worth a read.

I tried to pay my credit card bill on the American Express web site yesterday, and put in 350 for the amount I wanted to pay. Back came this error message:

Yeah, they wouldn’t accept my payment because I’d entered 350 instead of 350.00.

Now, I don’t like to be a big conspiracy theorist nor say that a cabal of cruel credit card cads is looking for ways to drive us all up the wall. (Okay, it does actually feel good to say that. But I like to give people the benefit of the doubt, even credit card companies.) I can’t help but wonder, though, how many times a day this error happens on the American Express web site. Hundreds? Thousands? I know that I personally hit it basically every time I pay my bill. Is it really possible that they just have no idea how aggrevating their site is? Note, by the way, that they’re more than happy to ignore a comma in a bill payment — 1,234.56 is just as acceptable as 1234.56. Are they willing to make things easy when you’re paying thousands of dollars, but not when you’re paying cents? (I love the example text that suggests paying 345,678.00. Thanks, next time I have a third of a milllion dollars in Amex debt, I’ll remember that!)

I won’t speculate about why they allow this aggrevation to happen every day, and whether it is intentional or not. I’ll just say that credit card companies in general make a very significant portion of their revenue — up to one-third — from “fee revenue,” which is the money you pay them not including interest (things like late fees, overlimit fees, and so on). American Express in particular would make more money from me this month if I’d gotten so aggrevated with their annoying web site yesterday that I walked away, and forgot to come back until after the due date. So I didn’t.

People who study user experience — for instance, our friends at Adaptive Path — can teach companies how to value a great user experience. It’s unfortunate that the math is somewhat inverted, here: American Express has an economic incentive to make their web site usable (since web payment is far cheaper for them than getting checks in the mail), but not too usable. The best situation for them is if you pay your bill through the web, late. Using Adaptive Path’s formulation: “To achieve increased fee revenue, we can make our payment site available but aggrevating by making the customer pat their head and rub their belly at the same time.” Great.

I think, next month, I’ll send American Express a check, on time. Hey, Amex, fix your site! I’d love to pay you more easily.

(Matt Haughey has another great example of how annoying the American Express site is, from last year. Update: my friend Nelson has yet another good example from a few years ago, as well.)

I love this quote from Ted Conover’s excellent book, Rolling Nowhere: Riding the Rails with America’s Hoboes:

I had first read of [the National Hobo Convention] while folding newspapers for my delivery route, when I was barely a teenager. The brief article, which I clipped, quoted “Steamtrain” Maury Graham, the “King of the Hoboes,” as saying he could tell how the nation’s economy was doing by the length of the cigarette butts he found on the sidewalk.

Maybe that particular indicator no longer works, but the idea behind it is interesting: when we’re doing well, small forms of waste don’t seem like that big a deal; when things are tight, they do. That makes for a pretty good tip: ask yourself what you’d being doing differently if the economy was in the tank, and do it today instead.