Financial planning is supposed to make your life easier, but it is definitely a hassle. It becomes more of a hassle when you old financial planner has faded away and you feel the need to find a new one. Our new planner has his own ideas about what it means to have your financial life properly planned. It means financial assessments, many client meetings and writing three and four figure checks to our financial planner. Finally you end up in a new place, with your financial life not necessarily simpler, but at least orderly and following a sound financial strategy. And hopefully, you have less anxiety about whether you will be eating dog food in retirement. To lessen the anxiety, your planner generally provides a nice binder with pretty charts, words and numbers in it. In my case, the charts even came colored.
One thing that’s new with this financial planner is that we have most of our investments centralized in a brokerage. I chose Scottrade though I am sure there are other good and cheap brokers out there. Like lots of things related to getting your financial house in order, it’s a huge up front hassle for a long-term benefit. In our case, it meant setting up four separate brokerage accounts (one joint, one traditional IRA for me, and two IRAs for my wife, one traditional, one for rollover IRAs). It meant shuffling papers to the investment firms that gave them permission to let Scottrade buy and sell for us. It meant signing another form so one account could access all the other accounts. And it meant $630 additional to our financial planner, to make sure all the initial trades were done right. Using Scottrade with my planner looking over my shoulders online in a Skype session also gave me some insight into how day traders work. I felt I needed a set of green eyeshades, but mostly I am glad not to be a day trader. Rebalancing funds once a year is fine with me.
It also has meant becoming acquainted with mint.com, a free online web site now owned by the Quicken people to help you manage your finances. If you are hoping that mint.com will balance your checkbook, unfortunately it won’t do that, at least not yet. This is probably good for Intuit, the company that owns Quicken, because it keeps them selling their core product. However, for doing budgeting, minimizing hassle and giving you insight into your finances, mint.com is very impressive.
It took me only about half an hour to get it set up. I had to create an account then tell it about my various checking, savings and money market accounts. I had to give it my credentials for accessing these accounts, as well as for my various investment accounts. But it was super easy to do this. What really impressed me is that it knew about the Thrift Savings Plan, the federal government’s agency for managing federal employee’s 401K accounts. To track these investments in Quicken, I had to input the information from my quarterly statements, available in detail only online. Quicken, or at least Quicken for the Mac which is what I use, cannot access it electronically. Mint.com though just jumped into it, quickly summarized information by fund type and pulled in the transactions as well. It also let me know how well each fund was performing. Yeah, just like that. Slick!
Mint.com sifts through transactions in all your accounts and does a pretty good job of automatically categorizing your transactions into its budget categories. Then based on your spending it will try to infer a budget for each category and tell you how your spending is going compared to the budget. Of course you can refine your budget manually. Most people though are like me: inherently lazy. Mint.com caters to us inherently lazy people, and seems to get smarter the longer you use it.
In short, for general tracking your spending, investments and liabilities, it’s a great tool. For getting an overall picture of your financial health and tracking your finances over time, it’s slick as well. Unfortunately, it’s not smart enough to categorize everything correctly. You really should sift through your transactions and put the ten percent or so that are not categorized into the correct categories. But this seems to be necessary only for those who are anal. If big picture is good enough for you, mint.com is all you need.
As I noted, it won’t balance your checkbook. So if you need this level of detail, you are going to be using Quicken or one of its competitors. If you don’t bother to balance your checkbook and are only concerned if you might overdraw your account, mint.com will do a good job of watching for when you drop below thresholds and sending you notifications when you cross them. You just have to be smart enough not to write checks that are too large.
In short, it’s a site with a lot of potential, bringing financial organization to the lazy. If it can wholly replace the functionality of Quicken, it would keep me from the hassle of entering most of our transactions into Quicken, potentially saving me huge amounts of time. I would like the site to morph into a complete financial solution, so I can pay bills from the site with a few clicks. It already warns me somehow of when bills are due.
It’s about saving my time so I can do more interesting and fun stuff. Software like Quicken helps make managing my finances easier compared to doing it with pen, paper and a calculator, but Quicken is a huge hassle compared with mint.com.
Hopefully, mint.com will figure out a sustainable financial model. I don’t think it comes from their current approach, which is to serve targeted financial ads. I think it comes from selling services that balance your accounts, categorize your spending in greater details, pay your bills with a few clicks and that help you see the big picture. Maybe someday I can trust it to be my impartial financial adviser. If it can be as good as my financial planner, and be impartial, it could probably save me a lot of money on financial planning as well.