Lazy Man and Money

Wesabe Review: Can Wesabe Save You Money?

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Wesabe tracks your spending… let’s you know where your money went.

wesabe.jpgIf you are regular reader of personal finance sites, you’ve probably heard of Wesabe. It’s one of many personal finance start-ups that track your spending in order to help you maximize your dollar. I first heard of Wesabe over a year ago. I signed up to give it a shot. I had planned to write about Wesabe then, but I came away underwhelmed. The way Wesabe works is that it analyzes your spending and gives you suggestions from other members on things you could do better. When I put in my bank account, it had only two tips and neither were that revolutionary. I believe one was to buy a case of water from Costco and keep it in my car. It didn’t occur to me until later that I should have given it my credit card information, I typically only use my bank account for Costco because it doesn’t accept my credit cards.

So you can imagine why I wasn’t very enthusiastic about seeing their demo at Finovate Startup a few months ago. Fortunately, I was pleasantly surprised by demo they had… very pleasantly surprised. You can watch the demo here. You may want to right-click it and watch it full screen. Before you stop the video early, the good part really starts at the 3:30 mark. The video shows an example of finding a bike shop with a fantastic deal that may have been otherwise missed.

The demo impressed me so much that I shook off my monumental shyness and went to talk to the people at Wesabe at their booth. I even went as far asking Gabe at Wesabe to see it again, which he happily did.

I’m sure you’ve noticed the Wesabe conversations I’ve highlighted over the last month. It was the first time that I actually went out of my way and pitched an company to advertise their product. Before now, each advertiser has come to me. I urge you to take a minute and look at the Wesabe discussions. There’s a wealth of knowledge there… much of it coming from people like me or you… people just looking to learn a few things about money. (Note: This write-up is not part of the advertisement, I simply want to share with you something that got me excited.)

Zopa Scam? I Borrowed Money On Zopa. Here’s Why…

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A couple of weeks ago, I went to Finovate Start-up to learn whatever I could from various financial company start-ups and report back to you. I hoped to find three or four gems in the 40 companies that presented. One of the companies that I was least interested in was Zopa. In the UK, Zopa is a very successful peer-to-peer lending company. This lead to their widely anticipated US release. When the product was introduced, critics universally panned the service. For the investor, Zopa is basically a CD – you get a guaranteed fixed rate of return. For the borrower, you get a loan without ever having to deal directly with a bank. There simply didn’t see anything “Finovative” about the company.

At Finovate, they reinvented their reputation. By the end, they had one the coveted award of Best of Show. I was stunned. How did they do it? Borrowers can pay negative interest rates.

Let me repeat that, because it took me a bit to wrap my head around it… you can pay negative interest rates. How can that happen? When someone invests in a Zopa CD, they choose a borrower to help. This “help” reduces the rate that the borrower has to pay back. Zopa showed a couple of examples where borrowers are paying negative interest due to all the help they’ve received.

So if the borrower can make negative interest, the investor must be getting the short end of the stick right? Not exactly. A Zopa CD pays 3.75%, which compares well with the US Avg (2.90%) as well as the Top 10 US Bank CDs (3.65%) (source: Bankrate.com, 24-Mar-2008). The Zopa CD is insured up to $100,000, so it’s a steady investment if you like the returns on a CD.

I didn’t need a loan, so why did I get one? I have often written about peer-to-peer lending. I created the Carnival of P2P Lending. I felt that it would be interesting to be on the borrowing side. Most importantly though, I wanted to experiment to see if I could achieve a negative interest rate. If I can’t achieve a negative interest rate through connections like you, the odds are very long against the average Joe doing it. So the results of this experiment lie in the Lazy Man community… If you want to help me achieve a negative interest rate simply visit my Zopa profile and click on the Help Me Now button. I put up my favorite YouTube clip and a couple of pictures on that profile for your enjoyment.

Before my wife reads this and I get a nasty phone call… Honey, I only took a $1000 loan – the lowest amount possible. I got the lowest possible interest rate 8.49%. This means that if I keep the loan for a full year, I’ll pay around $85 to run this experiment. If I don’t receive significant help in 6 months, I’ll probably cancel the experiment and declare the negative interest rate hype and not something that one can expect. I’ll also keep the money that I borrowed in an interest bearing account, which means that it will cost less than $85 in total. With our net worth, income, and spending, this doesn’t really amount to much. One could even claim that it was worth it to realize that I was able to get the best interest rate that Zopa has to offer despite being self-employed.