In the beginning, the Web provided information. Quirky sites such as the IRS's Digital Daily made personal finance headaches like paying taxes a bit less painful. They explained the filing process. They offered advice. They even provided downloadable forms. But cybersearching for lower tax, insurance, and mortgage rates still absorbed inordinate amounts of your time and money, because it forced you to wade through reams of irrelevant data.
Now the Web is redeeming all that time and money by calculating exactly what you need and helping you find it. It saved Billy Mancil thousands of dollars on insurance premiums by scanning for the rates that best matched his personal profile. Bryan Buus used the Web to calculate the exact interest rate for refinancing his home and then applied for the mortgage online. A free scholarship search on the Web rewarded Sherry Bradford with $1,000 toward her degree. And an online tax program saved Pat Lottier hours of expensive tax consultation.
The Web won't zap away all of your Money Headaches, but it can certainly make you a more informed, efficient manager of your finances. Just follow the bookmarks below.
Webhead: Billy Mancil, 55, owner of two Hallmark stores and a Wymans department store in Douglas, Georgia.
Financial Headache: Finding insurance to protect my children from business debt.
Favorite Web Site: While researching stocks on the Internet this past October, I came across the Quicken site and noticed its link to Intuit's InsureMarket http://www.insuremarket.com . I had a policy coming up for renewal in January, so I took a look.
I didn't need to use its 60-Second Selector tool (a series of questions that help users decide among the five types of insurance: term, whole, variable, universal, and universal variable). I knew I wanted term life, the least expensive way to provide for your dependents. I needed a policy strictly as a precaution: If I die prematurely, my business debt will be paid off by the insurer rather than passed on to my children.
I filled out the four-minute personal profile, which asks some 20 questions about your age, weight, hobbies, and health. I immediately received quotes from State Farm and Lincoln Benefit Life, and was amazed at how much money I could save. Lincoln Benefit Life offered a term life policy guaranteed for 10 years at a fixed rate of $1,595 per year for $500,000 worth of coverage. My previous company's policy cost about $2,600 per year, which is a savings right there of $1,000, but I was also looking at rate increases of $5000 to 6,000.
I submitted an application, and one week later I was taking my physical for the policy. It was surprisingly easy. And I love how the Internet eliminates some of the overhead of selling insurance, so the savings can be passed on to customers.
Tip: Research the insurance company thoroughly. Check Out: its ratings and how long it's been in business. If the company doesn't have name recognition, see where it's listed in comparison with other insurance companies using ratings such as Standard and Poor's.
What to Avoid: Don't make a decision too quickly. InsureMarket saves your personal profile, so you can take your time and watch the rates move or research insurance companies. There's no salesperson hassling you to buy something. When you return to the site, all your information is still there.
Coordinates: William Mancil, email@example.com
Bonus Insurance Site: Insurance & Risk Management Central (http://www.irmcentral.com)
Check Out: The Longevity Game from Northwestern Mutual Life. Everyone starts with an average life expectancy of 73 years; that number goes up or down as you answer questions on 11 different topics ranging from diet to family history. Do you exercise regularly? Add three years to your life. Do you consume three or more alcoholic beverages at least three times per week? Subtract three years. It's fun, and it's a great way to identify factors that are driving up your rates.
Webhead: Bryan Buus, 26, Web Master at XOR Network Engineering in Boulder, Colorado.
Financial Headache Refinancing my house at the best possible rate.
Favorite Web Site: I first visited FinanCenter http://www.financenter.com when I bought my house two years ago, using their "Am I Better Off Renting?" calculator to help me understand the tax advantages of buying.
Then, in the spring of 1996, I began using it to figure out if I should refinance. I did calculations comparing 15-year loans with 30-year loans. I decided to go with the 30-year, unless the 15-year rate came down to 6.5%. It's easy to be specific because the site gives you a side-by-side comparison of the results for each type of loan. For example, my closing costs for the new loan were going to be about $2,000, and I wanted to make that money back within a year, based on my lower interest rate. My rate was 9.5%. By using the loan comparison tool, I figured I should wait until rates hit 7.5% before refinancing.
FinanCenter posts daily updates of interest rates. I watched the rates for about six months, coming back once a week to look at its graph of rate trends. When the rates fell to 7.5% this past October, I filled out the online application, submitted it, and received an overnight package the next day from American Finance. I signed my name about a dozen times, sent the forms back, and closed the loan a few weeks later. Minimal effort, to say the least.
Tip: Use the loan calculator to figure out what percentage of your payments will be interest versus principal; that helped me calculate what my tax savings were going to be.
What to Avoid: Be aware of the default settings in the calculators. If you're not exactly sure what percentages of your current mortgage are principal, interest, and insurance, the calculator will estimate for you using average figures. But those averages may not match your mortgage exactly. You have to play around with them until they match up to your mortgage statements; then you can go back and create more accurate comparisons with other loans.
Coordinates: Bryan Buus, firstname.lastname@example.org
Bonus Mortgage Site: Homebuyer's Fair (http://www.homefair.com)
Check Out: The Salary Calculator. Let's say you're not just refinancing, you're thinking of moving from Atlanta to New York City. If you make $50,000 in Atlanta, the Calculator will tell you that your salary in Manhattan needs to be a whopping $99,408 if you want to maintain the same lifestyle. The Moving Calculator will figure the approximate cost to move the furniture from your two-bedroom house 870 miles north to New York: between $4,067 and $4,976. Homebuyer's Fair covers all the major cities in the United States.
Webhead: Sherry Bradford, 43, assistant to the editor of the "Journal of Marketing" at Oklahoma University in Norman, Oklahoma.
Money Headache Finding money to pay for an associate's degree in management information studies at Oklahoma City Community College.
Favorite Web Site: In the fall of 1995, I decided to quit my job as an academic counselor for graduate students at the University of Oklahoma and go back to school full-time. I needed financial help, but I knew there'd be limited funding for a middle-aged woman returning to school. I'd seen fastWEB (http://web.studentservices.com/fastweb) before, so it was one of the first sites I went to. It's the Internet's largest free-scholarship search engine, run by Student Services, Inc. and sponsored by eight companies.
I entered my bio on fastWEB and about 25 suggestions with real potential came back immediately, including a $10,000 Tylenol Scholarship based on grades and accomplishments and the $500 Jeanette Rankin Foundation Awards geared to women over 35 with demonstrated need. Each suggestion included a contact name, the award amount, criteria for the award, and a filing deadline.
The most promising was a $1,000 AVON Scholarship for Business and Professional Women. The application deadline was this past March; I heard back from them in July. Out of over 400 entries, 50 were selected for awards — and I was one of those 50! I'm not stopping there: I've used fastWEB to identify other scholarships that I'm applying for.
Tips: Write a 500-word essay that clarifies your long-term goals. Once you send in an application letter, almost all of the organizations write back asking for an essay — sometimes the deadlines hit very fast. And as soon as you hear back from fastWEB about potential scholarships, study each foundation's Web page so you can reframe your essay for the specific sponsor.
Also, I frequently change my bio on fastWEB so as to broaden my eligibility. My area is management information systems and business, but I recently added education to see if any other scholarships would pop up. The modifications have already garnered another 20 sources.
What to Avoid: Unsolicited offers. Since I've applied for the AVON Scholarship, I've received a couple of offers that loosely matched the scam alerts written by Mark Kantrowitz on the Financial Aid Information Page http://www.finaid.org/ . They said they could get me a scholarship regardless of my background; they had typographical errors; they wanted me to send a $35 fee. Those are three of Kantrowitz's warning signals, so I dumped the offers.
Coordinates: Sherry Bradford, email@example.com
Bonus Education Site: The Financial Aid Information Page, http://www.finaid.org/
Check Out: The 41 different calculators that help you do everything from estimating your family contribution to comparing monthly payments for loans with different terms and interest rates. The College Cost Projector shows that if you're expecting a new child in the next nine months, the total costs of educating that child will be $339,534 for four years of private college or $159,527 for four years of public college.
Webhead: Pat Lottier, 47, publisher of the Atlanta Tribune in Atlanta, Georgia.
Financial Headache: Trying to file my 1995 taxes before the final extension date of October 15, 1996.
Favorite Web Site: It was October 1 and I had just two weeks before the last extension deadline. I fooled around on the Internet and came across NetTax http://www.vni.net/~nettax/ . It's a free program, designed by an accounting student at the University of Milwaukee-Wisconsin, that calculates your taxes and helps prepare your 1040. I spent four or five hours going through the questions and charts, including one where you input values for 14 different deductions — each deduction is linked to its IRS definition. Then I printed out my 1040 form and the schedules for rental income, capital gains, and home business using Adobe Acrobat. I put dummy numbers in when I didn't really know what I should say, and I came away with a rough estimate. It gave me peace of mind, because I realized I was going to get a refund!
I had three unusual situations that I couldn't find answers to online, so I met with a tax consultant. He asked a few questions, and we had my taxes done in two hours. NetTax saved me a lot of time and money. And if you have a relatively simple form with, say, just one extra schedule, NetTax can handle it all for you.
Tip: Gather returns from the last three years and all of your tax forms before going on the system. If you have everything right there, you can probably figure out your taxes in an hour. It took me five hours because I didn't have all my paperwork.
What to Avoid: I came across two or three tax accountant sites that promised to do my taxes for X amount of money — that's not for me. I'm not going to send my tax information and my money without really knowing the people.
Coordinates: Pat Lottier, firstname.lastname@example.org
Bonus Tax Site Ernst & Young Tax and Financial Planning Corner (http://www.wiley.com/ey/ey.html)
Check Out: The 50 Overlooked Deductions, including tax preparation fees, cleaning services when traveling, contact lenses, depreciation of home computers, employee educational expenses, business gifts of $25 or less per recipient, cellular telephones, employment agency fees, and points on a home mortgage.
Coordinates: Pat Lottier, email@example.com
Eric Matson is a member of the Fast Company editorial staff.
A version of this article appeared in the Feb/Mar 1997 issue of Fast Company magazine.