Slow news day, so I figured I’d talk a little about this personal finance program I’ve been revising this month, which we intend to start selling online in February.
In my opinion, the main thing the program does is teach you about the different types of assets you can purchase with your money. Here are the different categories of assets:
Income-producing (IP) assets throw off additional money – they produce a return on your investments. These include stocks, bonds, mutual funds, CDs, savings accounts, Treasury bills, etc.
Income-consuming (IC) assets are the opposite of IP assets – once you buy them, you have to spend additional money to maintain them. Houses are income-consuming assets because you have to pay property taxes, maintenance, insurance, etc. Cars are income-consuming assets because you have to pay for gas, insurance, repairs.
Non-performing (NP) assets are assets that realize a gain, but you can’t get the gain until an event happens. The appreciation in the value of a home is an NP asset. For example, if you bought your home for $150,000 and it’s now appraised at $170,000, (Edit: I had this wrong when I first posted it) you have a $150,000 IC asset and a $20,000 NP asset. However, you can’t get your hands on the $20,000 until you convince someone else to buy your place. IP assets are liquid; NP assets are not liquid.
Neutral (N) assets neither throw off income nor consume resources to maintain. Art, jewelry, and furniture are in this category.
The program also keeps track of liabilities (L). Liabilities are money you owe – mortgages, car notes, credit card debt, etc.
The program defines saving as anything you do that causes an increase in income-producing (IP) assets or a decrease in liabilities. The program charts out how much of your assets will fall into each of the asset categories, based on what you’re doing now with your money, for the next 25 years out, projecting total dollar value of each type of asset, and showing the percentage each type of asset will contribute to your total net worth. This data allows you to answer the question everyone wants answered – “am I saving enough?” If you don’t like the future the program shows you, you can adjust what you’re doing in the present to change it.
Note that this program is not Quicken, and does not try to be. Quicken is great for handling your financial present (e.g. online bill paying) and seeing what you did in the past. Our program helps you plot your financial future, using a unique algorithm that is covered by a United States patent.
Working with the program gives a lot of insight why people’s finances are so screwed up. Many people have been told to buy as much house (or condo) as they can, taking out a mortgage to pay for it. That’s an IC + L double-whammy: Tying up almost all your money in an asset that eats future income, and then using debt to pay for it. Do this and our program will not show good things happening in your financial future. Of course, home ownership is a goal for most people, and it’s nearly impossible to buy without a mortgage these days, but our program will show you the long-term cost of the “spend all you can” philosophy.
The program also illustrates where conspicuous consumption will get you. We’ve been taught to purchase cars as status symbols, paying for them with financing. Again, this is the IC + L combination. Purchasing bling-bling jewelry on a credit card is N + L. In neither of these cases are you saving.
That’s just a quick overview of the kinds of things the program can tell you. I’ve been working with the program’s inventor, Lee Ryder, for 10 years now. I’m in the process of setting him up with his own blog, because he has a lot to say about personal finance and the discoveries he’s made using the program.
We took it to market once before, about 5 years ago, and it was a disaster. For one thing, the program wasn’t ready. It had certain features that caused it to be compared to Quicken, that didn’t add any value and needed to be removed. Secondly, we wasted a bunch of money on expensive print media advertising and a Flash-based website. This time we’re going to follow the example Seth Godin sets out in his book Tribes: We Need You to Lead Us
We also made a mistake pricing it last time. We thought it should cost about what Quicken cost, and priced it in the $50-80 range. This time I’m pushing for $14.95 as the price. You’ll be able to pay for it online and immediately download it and begin using it. I also want to create an affiliate program, so that people who use the program and find value in it can get paid commission for referring it to their friends.
Anyway, that’s a quick summary of what I’ve been working on the past 6 weeks or so… I really have been doing more than just sitting at the Saucer drinking Fire Sale beers all day long. I’m heading to Nashville the first part of next week for a meeting with the inventor, and then the wheels will really be in motion to get this thing to market. If you want to be notified when the program is released, e-mail me at paul@paulryburn.com and I’ll put you on the list.