Earmark

A mobile app that helps you spend your money on what really matters to you and skip the stuff that doesn’t. It's kind of like Mint.com + Pinterest. Skip this, buy that: Skip a beer and designate that unspent $6.00 toward your new shoes. Team up on shared goals and celebrate your teammate’s smart decisions.

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Jay Z's "Picasso" as an Earmark Feed

Anyway...We went ahead and translated the lyrics from Jay Z's "Picasso" into an Earmark feed...Welcome to #celebrityearmarks, our new board over yonder on Pinterest. See the full image on Pinterest.

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"It’s not difficult to find a good budgeting app. It is tough to find one you’ll actually like to use.

Earmark, which went live in the App Store six weeks ago, is less about balancing your spending with your income and more about the psychology of spending. The app rewards you for withholding. It’s kinda brilliant."

Why thank you, PandoDaily. I agree. 

[ermrk]

Millennials Embracing Minimalism - Dominating Other Generations

Hello Millennial,

We know your life is hard. Really, really, hard. For years the media has been bashing you and your peers for being lazy, entitled, narcissistic, unemployable and continuing to suckle on your parent’s teet for financial (and emotional) support. “Not so!” cried the Millennial writing this article.

Here are a few pointers about how millennials are actually trending towards minimalism instead of the crippling consumerism of their parents (#notbitter #boomers). Thanks Great Recession!

$#!* got real.

When the Great Recession hit in 2008, many millennials’ parents were no longer able to  financially support their college education. Additionally, when millennials entered the workforce, they suddenly realized the true meaning of expendable. While millennials continue to be saddled with enormous amounts of student loan debt, they are learning how to cope and many are embracing minimalism.

Millennials are ripping debt’s face off.

According to a recent study from Pew Research Center, “Generation Me” is bucking traditional consumer milestones in order to climb out of the red.

  In 2010 only 39% of younger households carried a balance on their credit cards which is down from 48% in 2007 and 50% in 2001.

Additionally...

Those same households saw a decrease in vehicle debt, down from 44% in 2007 to 32% in 2010.

OMG AAAAAND...

Millennials who were heads of households worked hard to pay off their debt. Debt in households run by an adult the age of 35 or older fell only 8% from 2007 to 2010. Those under the age of 35 dropped their debt by 29%. Suck it, Gen-X.

Priorities, Priorities. Experiences > stuff.

Perhaps, millennials are merely turning into minimalists because they crave experiences over material goods. In a recent study, 81% of millennials said they’d value experiences over tangible products and 72% would rather spend their money on said experiences.

We really are, the best.

So, next time you wander out of your parent’s basement and into one of their cocktail parties with their uptight, judgmental friends you’ll be armed with some quick quips about why Millennials actually dominate every other generation, ever.

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Millennials Outpaced Boomers in Luxury Spending...Wait...What?

Sometimes people ask if Earmark is attempting to change behavior. Nope.

Millennials are:

46% more likely to use at-home beauty treatments to save money

31% more likely to cook to save money

18% more likely to “self-treat” to avoid spending money on doctor’s visits

But, in what appears to be a paradox, they increased their spending on luxury brands by 33% in 2011, outpacing every other demographic cohort, even Boomers. 

I can't wait to see my first Caddy driving Millennial....

...so I can punch them. 

[ermrk]

Meet Your Irrational, Brilliant Mental Accountant

Disclaimer:  This post is written by the company nerd, and may cause severe drowsiness for some readers. Please exercise caution if you are planning to operate a vehicle, wrestle a gator or use tri-syllabic words immediately after reading.  

If you peel away the layers of pixels, processes and personality of Earmark, you'll find that, at its core, Earmark is simply the artful collaboration of technology and human irrationality. Yeah, that's right...we think you're irrational, especially when it comes to spending decisions; and we wouldn't have it any other way. This financial irrationality is part of a phenomenon called mental accounting, which we'll explain below. And while this may feel like purely academic reading, toward the end you'll see why your inner mental accountant - at once brilliant and sort of devious - gets along so well with Earmark.  

So what exactly are we talking about? Let's start with some examples.  

First, answer the following questions from a seminal study published in Science:

Would you drive 20 minutes out of your way to save $5 on a $15 calculator?

Would you drive the same distance to save $5 on a $125 leather jacket?

If your answer is "yes" to the first question and "no" to the second, then you, Dear Reader, are both irrational and quite normal. In the study, 68% of respondents indicated they would drive out of their way to save $5 on the calculator but only 29% would do so for the leather jacket. In each case the savings is identical, so what accounts for the disparity? What is the motivating force behind this illogical distinction?  Consider another example:  

Imagine you just arrived at a theater and as you reach into your pocket to pull out the $10 ticket you purchased in advance, you discover that it's missing.  Would you fork over another $10 to see the movie?

Compare that to a second scenario in which you didn't buy the ticket in advance, but when you arrived at the theater you discover you had lost a $10 bill on the way.  Would you still by the movie ticket?

This study reported that, even though the $10 loss is the same in both scenarios, only 46% of those who lost the ticket were willing to buy a replacement, but 88% of people who lost the $10 in cash were willing to go ahead and buy the movie ticket. The explanation for the stark change? In the first case, the participants reported feeling they were actually paying $20 for the movie because it was an expenditure from their entertainment budget. In the second scenario, the lost extra $10 simply felt like a deduction from their general fund.   

The use of these kinds of categories, labels and framing in spending decisions is called "mental accounting", a term coined in ground-breaking research in the 1980's by Richard Thaler of the University of Chicago. In the three decades since Thaler's original research, behavioral economists have produced a robust literature on the topic. The research explores how people give different weights (valuations) to identical amounts of money based on where the money comes from or the category or label that it's given (e.g., see opening paragraph). 

This makes for fascinating research and surprising insights, many of which have informed the design of Earmark.  For instance:

The act of prepayment seems to produce significant hedonic (i.e., happiness causing) effects, such that consumers will use mental accounting to facilitate "mental prepayment" to preserve the pleasure associated certain expenditures. Earmark digitizes your mental prepayments so that you can enjoy buying meaningful things.

Shoppers tend to leave "in-store slack" in their mental budgets so that they can make on-the-fly spending adjustments in response to promotions and bargains they find while shopping. Earmark enables you to, in real time, turn that in-store slack into allocations toward your goals. 

Short-term goals are often much stronger and more active than long-term goals. Earmark gets this, which is why the pre-set High Five goals don't include things like "retirement".

People tend to exploit "ambiguities" in their mental accounting by creating short-term loopholes to long-term self-control rules. Earmark helps you turn ambiguities into achievements, but in a way that keeps you mindful of your spending. 

Spending feels less painful when it's done with income that can be framed as an unexpected windfall (e.g., tax refund, lottery winnings) or framed as an investment (e.g., buying $500 espresso machine to replace daily $4 coffee shop trips), and we use mental accounting maneuvers to accomplish both. Earmark puts this tendency to constructive use by tying daily, little "windfalls" to real, smart decisions to forgo spending.   

There are numerous other phenomena detailed in the literature, which you can peruse at your leisure. For now, suffice it to say that the financial decisions you're making every day are part of a much more sophisticated process than you realize. One that is being run by that mental accountant in your head, who probably has an on-again/off-again relationship with traditional financial management wisdom.

Unlike most financial improvement tools, Earmark understands the irrationality and sophistry used by your mental accountant. And instead of ignoring, shaming or belittling them, we get your mental accountant synced up with spending goals that are truly motivating for you, which, if you think about it, is a supremely rational thing to do. 

[bestrooftalkever]

This meets me at a good intersections of interests: 

Getting better with money, and babies doing adult things.

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Size Matters When It Comes to Motivation

A topic of frequent conversation here at Earmark is how to draw motivation from simple measurements of everyday actions. With that in mind, Dear Reader, here's a question for you: When it comes to achieving goals, what's more motivating -- the progress you've already made or the remaining steps you need to take?

For example, you're in one of those buy-10-get-1-free coffee reward programs and you've already bought 2 coffees. At this point (Scenario 1), you can focus either on your 20% accumulated progress or on the 6 remaining coffees you need to purchase. Which measurement is more motivating -- your 20% accumulated progress or the 80% remaining?

Flash forward (Scenario 2), you've bought your 8th cup of coffee, and your focus could be on your 80% accumulated progress or the 2 remaining coffees standing between you and that free coffee. Now which measurement is more motivating -- your 80% accumulated progress or the 20% remaining?

At both points along the progress continuum, we're guessing that you found the smaller figure, the 20%, to be more motivating.  Nailed it, didn't we.

Actually, this phenomenon (termed "the small hypothesis") is the subject of a study recently published in the Journal of Consumer Research and predicts that "motivation increases with the perceived impact of each new step, and each new step will appear more impactful if compared to a smaller set of other steps toward the goal." In other words, we're more incentivized to take the next goal-oriented action when we perceive that it will have some meaningful effect. Returning to our example above, we're more motivated to buy the next cup of coffee when doing so will result in a 20% to 30% leap forward in our progress (Scenario 1) or will cut the remaining actions in half (Scenario 2).  It all depends on what measurement is being focused on.

The article also includes lots more details, big words, charts and formulas like this:  (x2(1, N = 39) = 16.08, p < .001) .  Obviously, we highly recommend it.  And, having read this blog post, you're basically 5% done with the article already.  Read the first paragraph and you'll have doubled your progress!

Minjung Koo & Ayelet Fishbach, The Small-Area Hypothesis: Effects of Progress Monitoring on Goal Adherence, Journal of Consumer Research (Oct. 2012), available at http://bit.ly/THwPjm 

[heyyyybrother]

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Best High Five of all time. 

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Why Can't I Connect My Bank Account Directly to Earmark?

Pretty great question! This is a question we really wrestled with in building the public launch version of Earmark, and one that we are still in the process of answering. For now, here's our position: we would love to let you move money directly between your bank and Earmark, but there are 4 main reasons why we haven't implemented that yet:

1. Privacy & Ease of Use: In order to let you move money directly into an Earmark account, you would have to open a new bank account with a bank we partner with. Then, we would need to collect a ton of personal information from you: social security number, credit card numbers, driver's license, etc. That would make signing up for Earmark a pain in the ass, and it would force you to add another bank account to your life that you might not want to manage.

2. Psychology: We've studied this a lot. It turns out the majority of people don't actually need their Earmarking decisions turned into separately stored money in order to keep spending wisely. You just need to capture those smart decisions, frame them around truly motivating goals, and keep tallying those wins. In fact, you're probably already doing this to some degree through "mental accounting", a remarkably sophisticated cognitive budgeting process that happens between your ears. In other words, you're already Earmarking - we're just digitizing it.

3. Effort: It's really freaking hard and expensive to build and maintain, which is why we're grateful for innovative companies like Dwolla who are figuring out ways of making moving money faster, cheaper and secure...er. 

4. Partners: We've spoken with many of the big players in the banking industry - we just haven't found a suitable partner yet. And by "suitable" we mean one that is capable of providing Earmark-hosted accounts that are secure, easy-to-use and feel like a natural extension of the Earmarking process. We're optimistic that the right partner will emerge in the near future. In the meantime, please try Dwolla and give us your candid feedback on what you like and don't like about their system. 

Tell us your thoughts!

This is part of our "Answers to Questions Somebody, Somewhere is Asking" series which explains the logic, research and intuition that have informed the design of that little bundle of digital joy called Earmark.

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Millennials Shirking Responsibility to Overspend on Dining Out

Business Insider breathlessly reports that Millennials (18- to 34-year-olds) are doing something unprecedented: eating out less.

Millennials are eating out roughly once a week less than the same age group's eating habits in 2007, according to an eye-opening report out today from NPD Group.

Oh, its gets worse. As described with admirable metaphorical restraint by an industry analyst:

"This is a shift of biblical proportions for the restaurant industry," says Harry Balzer, chief industry analyst at researcher NPD Group, which surveyed 2,400 adults 18 to 34 nationwide. "I've done this for 35 years, and we could always count on this age group as the biggest restaurant users. But not the last five years."

"Eye-opening" and "biblical" not dramatic enough for you?  The BI writer then unleashes this doozy:

The statistics are jarring: Millennials will eat out 202 times annually this year vs. 252 times a year for their age group back in 2007.

As much as we hate to be the bearer of such epically sobering news, we feel it's our duty to let you Millennials know how badly you're disappointing previous generations. 

[hitchedmag]

58 percent of those surveyed reported that they hid money or purchases from their spouse

http://www.hitchedmag.com/article.php?id=1492 (via hitchedmag)

[bighoopsandanattitudeproblem-de]

#2013 #resolution to #finance with intention

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Hope she hears about Earmark! #weapprove

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Wants vs. Needs

Earlier this year the American Institute of CPAs spent lots of money hiring Harris Interactive to conduct a survey that found that finances are the most common source of discord among American couples - a result that surprises exactly nobody. However, the survey did produce an interesting finding on the specific issue that causes the most financial arguments: differing opinions of “needs” versus “wants”.  Fifty-eight percent of those who argue about money identified this issue as the most common cause.