One of the recent developments in many Florida cities is the installation of a large number of red-light cameras at all major intersections.
I was driving through one of these a few weeks ago and realized something important – we should be doing this to our finances! In fact, most of us already have many of the systems that function on these principles.
First things first, however:
How a Red-Light Cam Works
Regardless of their legality (currently challenged in Florida courts) and their effectiveness (potentially increasing rear-end collisions), the basic theory behind red-light cameras works.
The idea goes something like this:
- You commit a red-light violation.
- An automated system takes a short video and photo of your bad driving.
- Both of those items are reviewed by a living person (hopefully, not a sleeping person) to determine whether you broke the law.
- A ticket is issued if it’s determined that you did something wrong.
- You get the ticket and watch the video, typically while using a few choice four-letter words.
- You pay the ticket.
- You stop running red lights in the future, or the process is repeated again. At the very least, you probably run them less often (it makes you think twice about flooring that accelerator).
A red-light ‘citation’ is like a regular traffic ticket – the ultimate goal is to change an undesirable behavior by using a financial penalty.
The beauty of a red-light camera is that it works automatically, consistently, and it’s very hard to hide from. That means it catches most violators, most of the time. While the final determination of wrong-doing is still done by a human being, fresh candidates for tickets pour in auto-magically.
We need more red-light cameras in our own life! How difficult would it be to patrol every intersection of our financial structure for problems?
Using a Similar Logic
I’m sure you appreciate being told when something’s wrong. What if it happened automatically? Consider the following parallels:
- Red-light running = Damaging financial behavior
- Red-light camera = Automatic system to detect violations
- Manual review = Follow-up to examine the problem
- Ticket = Modification in financial behavior
If you follow the logic, the task becomes setting up automatic systems that will detect a problem and alert you immediately. With computers handling most of today’s financial tracking systems, it’s fairly easy to do, and mostly involves the management of alerts.
Installing Your Cameras
There are only three principles to setting up any good alert system:
- It needs to detect pre-determined violations based on established boundaries or triggers.
- It needs to do so automatically and without intervention.
- It needs to notify you as soon as possible when it detects such a trigger so that a manual review can take place.
Here are some ideas for red-light systems that would work on a personal level:
Large transaction alerts – Currently, Mint and several banks allow you to setup email and/or text message alerts when a large transaction clears your account, whether a deposit or withdrawal.
Budget alerts – While transaction alerts take care of large items, budget alerts can let you know when the little stuff has added up to much more than it should. Most online finance software is also great at doing this.
Upcoming bill alerts – It’s helpful to know if you’ve forgotten to pay a bill or two. Quicken tracks all of my bills, which I usually pay weeks ahead of time. If I miss one, a flag conveniently pops up a week before it’s due to remind me.
Credit score watch – My current service of choice is MyFico, which gives me near-immediate feedback on changes to my credit report. This is crucial if I don’t realize I’m doing something harmful.
Fraud alerts – This is sometimes called a ‘credit freeze’ and requires lenders to call you directly when someone tries to open new credit in your name. It helps deter unauthorized use of your identity by thieves.
Date-based alerts – If you make regular use of a calendar, setting up alerts is a great way to stay on top of things like bills. Set up a recurring event (with a reminder alarm) for all your regular bills, and delete each month’s event as you pay the bill. That ensures any unpaid bills will ‘pop up’ when they come due.
Stock price & news alerts – These are easy to set up through your stock broker’s website or through the many free websites offering stock alerts. While long-term investing relies on a certain degree of separation from daily trading, you’ll want to know if a stock you own has just lost 75% of its value.
Friend alerts – They’re not really ‘alerts,’ but good friends to whom you’ve committed certain actions should hold you accountable with relentless nagging. You can agree on a date when a friend will intervene and let you know if you haven’t completed something.
Keyword alerts – If there’s something specific related to your finances that’s of interest to you, Google is nice enough to allow you to setup alerts for specific keywords. For example, if I invest in the makers of Kleenex tissues, I may want to know the latest news and reviews of Kleenex products.
Price/product alerts – If you’re looking to buy or sell a home, you may want the latest information about real estate in your area, or about your specific home. Services like Zillow offer email alerts just for this purpose.
Can you think of more?
There are many dangers to using alert systems. For example:
- If we rely on alerts too greatly, we stop checking things manually for problems.
- Computers systems can and do break down frequently.
- It takes time to review and process alerts to ensure that they are legitimate.
- It also takes time to set up the entire system in the first place.
Even with all the inherent potential problems, the danger of a head-on collision in a major intersection is too great to ignore. Financial disaster looms on the horizon for those who choose to ignore or forget about their problems.
Take the time to set up the system, and keep in mind that although your financial life will be better protected and more automatic, when driving through life, we must always be vigilant.