Banzai Way is a brand new online application that helps you to manage your money more efficiently. I was given the chance to use the service since last week. Even though there are many other web apps that provide cash flow and net worth management functions, I think Banzai Way really provides some special service that’s not available on the others. After a week of trying out the service, I can say that it is so far so good.

In this post, you will find the interview of Banzai Way’s founder, Morgan Vandagriff. I want to thank Morgan for his time and for his patience while answering my avalanche of questions, and also Justin Morgan who connected us.

There are a real array of personal finance budgeting web apps available these days - why should we consider Banzaiway?

The Banzai Way is based upon the understanding that organization is not the same thing as control. As you know, Mint, Wesabe, and just about everyone else in this space focus on the former by specializing in data aggregation and analysis. While organization is fundamentally important (it keeps you from bouncing checks, ensures the electric bill gets paid, etc.), it does little to change spending habits over the long haul.

Rather than aggregating data from past transactions, Banzai uses a unique “Jars” paradigm (read all about it here) to focus users’ attention on the spending flexibility they have now and the impact their decisions will have on the future. Users are free to spend more than they had planned in any given area, provided they identify a compensating trade-off they are willing to make elsewhere. We’re leveraging the psychology of spending for the user’s benefit, rather than trying to change the way he/she thinks.

As you may know, one of Mint’s slogans is “Put your finances on autopilot.” This is an attractive proposition for someone who is already in good shape financially, but spells disaster for anyone whose current course is leading them into the side of a mountain. The last thing someone with a real spending problem needs is to have the impact of individual transactions obscured through aggregated reporting.

To this end, Banzai users assign every individual expense to a jar themselves–we don’t make the decision for them. While it only takes a few seconds per transaction, this step is crucial in that it allows users to see the individual impact of each spending decision and designate trade-offs where necessary to ensure that they remain on course.

For most new users, The Banzai Way represents a radical departure from the financial management paradigms they’ve used in the past. To assist with the transition and provide needed encouragement along the way, we assign each user to a “Banzai Coach.” Upon sign up, he/she is given the name and email address of their coach and encouraged to contact him/her whenever they encounter difficulties, be it with the website itself or with changing their habits to conform to The Banzai Way. The name of their coach and a contact link appear at the bottom of most pages on the site.

Who is behind Banzaiway? What did you do before this venture?

Banzai was co-created by Morgan Vandagriff and Kendall Buchanan. Prior to working on Banzai full-time, I (Morgan) spent several years working for the private client services group of a Philadelphia investment management company. Many elements of The Banzai Way philosophy came from watching the ways in which our wealthy clients managed (or failed to manage) their spending.

Kendall worked in the technology group of a Philadelphia financial services firm building and managing systems to process and store large volumes of personal finance data–the perfect preparation for building Banzai!

There is a feature called “jar” which is something more or less works like a budgeting tool. Can you elaborate how is it different from conventional budget plan?

Budgets are inherently backwards-looking–your progress is judged by whether your past spending was higher or lower than some arbitrary amount. By nature, budgets are inflexible and very difficult to keep over long periods of time.

In contrast, you can think of jars as virtual containers for your money. When you receive income, you allocate it across your jars according to need. When you make a purchase or incur an expense of some kind, you tell Banzai which jar should be used to fund the transaction. Incoming funds are placed into jars, outgoing money is taken from jars. Quite simple, but very powerful.

It is very easy to break your goals by spending more than you had planned in any given budget. (People do it all the time!) But you cannot “overspend” from a jar; Banzai will not permit the balance to go below zero. Instead, you must choose another jar from which to take the money. For example, let’s suppose that you’ve already spent all the money allocated to your Restaurants jar. Even though the balance is zero, you still want to go out to eat again before you next get paid. This isn’t a problem, so long as you identify a trade-off you are willing to make. In this case, let’s say you decide you can get by on less money for clothing over the next little while. You can take money from your Clothing jar and use it to go out to eat once more.

You can’t go “over-budget” using Banzai. The system will always ask you to make a trade-off. This feature gives users a much greater chance of successfully managing their spending.

For every subsriber, there will be a money couch assigned for assistance. What’s the role of a banzai couch?

The Banzai Coach is a real person available to you as a user to answer any questions and give any advice necessary for you to apply The Banzai Way to your own life. Whether you need help with using the website or just have a question about the philosophy, your Banzai Coach can help.

Have you got any tips for readers who want to maximize their net worth, a.k.a “reserved jar” in Banzaiway?

That’s a great question. There are a lot of strategies for increasing the balance of your Reserves jar, but I’ll comment on the one that should be fundamental to every user. Before your Reserves jar balance can increase, you’ve got to put yourself in a mindset such that you will never touch the money in the jar, barring an actual emergency. If you are making purchases using the funds in your Reserves jar, you’re moving backwards. Preserving your Reserves balance should be your very top priority.

One of the ways that you can make sure you never have to dip into Reserves is to make sure you’re allocating enough money to the other jars each time you receive income. While it is good to be frugal, don’t put so little in your other jars that you can’t realistically hope to live on the amounts allocated. Also, if you find that some of the jars you use for everyday spending still have money in them when it is time to replenish the balances, don’t sweep the excess into Reserves right away. Instead, keep the extra money in the jar as a cushion should you need to spend more than expected in the future. Just because you spend less than you’d planned on groceries, for example, doesn’t mean that you won’t need to spend more than normal at some point in the future.

Do you have any new features planned that you can tell us about?

We’re excited about a number of new features we plan to add to the site. Foremost among these is a planning module which will allow you to see the projected impact of your current habits well into the future. We’ll be able to tell you, for example, when you can expect to be out of debt based on your current plan or what your net worth might be in 30 years. This is simply a continuation of the “future focus” that we instill in Banzai users.

There are many free web apps for personal finance management. Instead of giving the public free access, Banzai Way charges a monthly subscription fees for the service. Why do you prefer to charge a user fee rather than other monetization method?

We believe that users have a much better chance of succeeding when they have individualized help available to them in the form of their Banzai Coach. This is something that the free sites just cannot provide economically–an individual user isn’t generating enough revenue to support the costs associated with providing one-on-one assistance via a dedicated person. Furthermore, new subscribers to Banzai receive a printed copy of The Banzai Way, a book we wrote to describe the philosophy, at no additional cost. Again, no free site would be able to support such a giveaway on a long-term basis. They’d lose too much money.

We’ve worked hard to keep the price low enough that it represents a nominal expenditure for our users while still generating enough revenue for us to pay the expenses associated with providing the full-featured user experience described above. For users who cannot or do not wish to pay for Banzai can gain free access by using our referral program. Users can access the site at no cost provided if they refer just two new subscribers per year–a bar which most users should be able to meet.

Technorati Tags: banzai, banzaiway, wesabe, mint