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Takes an (online) community to control finances

TODAY Financial editor Jean Chatzky on how online networking can work as a financial tool to help you get out of debt, budget cash flow and more.
/ Source: TODAY contributor

My mother used to say that if anyone in her generation had stopped to ask how much it cost to raise a child before they had them, none of the people in my generation would have been born. And that was 40 years ago. Social-networking Web sites are very popular — who hasn't heard of MySpace? Such sites have become hot tools for companies launching new products, bands promoting music and even job seekers looking for their next paycheck. Recently, several sites have popped up that spin the idea of using online networking as a financial tool, one that may help users get out of debt, budget their cash flow and reach their financial goals. Personal-finance communities, such as the ones that have formed on Wesabe.com and Geezeo.com, don't have the impact of MySpace. But they're certainly picking up steam.Wesabe, which launched in December 2005, has “tens of thousands” of users, and the younger Geezeo has attracted more than a couple thousand since it went live at the end of May.Both sites work by pulling together all of your financial information in one place, so you can always see a real-time snapshot of your checking, savings and credit card balances. And while that’s not exactly earth-shattering, they also categorize every dollar you spend from those accounts, so you know just how much of your money goes into food, clothing, bar tabs and manicures. The numbers alone could very well shock you into changing your ways, but if they don’t, the community aspect will: You can join groups made up of people with similar goals, share money-saving tips and compare financial service products based on the experiences of others. One other selling point? Both sites are free to users. So how do you use them to your advantage while keeping your personal information to yourself? Safety firstWesabe and Geezeo say that they are extremely proactive about maintaining a high level of security. Wesabe works by downloading a program on to your computer that then pulls information from your bank. The company doesn’t store your personal information and passwords; instead, they’re all on your very own hard drive. “If someone hacked us, what they would get is a ton of data, but absolutely none of it is personally identifiable,” explains Jason Knight, co-founder and CEO of Wesabe. Geezeo partners with a third-party company that works with your bank directly, meaning no stored passwords or account numbers on their site, either. (That being said, it’s always important to be cautious, so use good judgment.) With identity-theft scams one of the fastest-growing crimes in the United States, you should never share your personal information with others. If the whole thing still sounds a little too sketchy to you, both sites will let you manually upload your transactions, taking their connection to your bank out of the equation. Track your spending“I think that broadly, people would agree that the beginning of success financially is to understand where your money is going,” says Knight. He’s absolutely right. As I have said before, you don’t know how much you’re shelling out for brunch every Sunday morning until you write it down. And chances are, it’s more than you think. Once you know how what’s going out compares to what’s coming in, it’s much easier to make cuts. Geezeo will even help you by sending you text messages with your bank balances. Set some milestones We talk about goals all the time, whether it’s paying down debt, building up an emergency cushion or going on a big vacation next summer. But talking about them seldom does much good. My own research — conducted by Roper, for my book “The 10 Commandments of Financial Happiness” (Portfolio Trade (2005) — has shown that people who actually go through the process of planning each step toward reaching a goal not only end up with more money, but they feel better along the journey. If you put your goals into words on one of these financial communities, you’ll be reminded of them every time you log on. “You can also see other people who’ve had a similar goal, the strategies they’ve used and the pitfalls to avoid. Leaning on peers who have similar goals to you can really help,” says Peter Glyman, co-founder of Geezeo. Draw from the tips of others
You’ve heard it a million times: If you just cut out one latte, one dinner out or one shopping trip, you’d have some extra money to put toward debt or away for retirement. Cutting back really does add up fast, but a little concrete evidence is helpful. On these sites, that comes in the form of someone who’s given up their lattes and lived to tell about it.“You could save $180 a year by switching your wireless plan or shopping for groceries differently. Tips like these become the method to help you achieve your financial goals,” says Knight. Wesabe automatically furnishes you with tips that are directly related to your purchases.Solicit opinions
You always want to look into a company before giving them your money. Trouble is, it can be hard to get unbiased information about the hundreds of credit and banking options out there. These sites both allow members to give feedback on student loan companies, credit cards and banks. Geezeo’s policy even requires that people have an account at an institution before they can rate it. “Collectively, we can all raise each other’s financial intelligence,” says Shawn Ward, Glyman’s partner. 

I’m all for that.

With reporting by Arielle McGowen.

Jean Chatzky is an editor-at-large at “Money” magazine and serves as AOL’s official Money Coach. She is the personal finance editor for NBC’s “Today” show and is also a columnist for Life magazine. She is the author of four books, including “Pay It Down! From Debt to Wealth on $10 a Day” (Portfolio, 2004). To find out more, visit her Web site, .