If you don’t keep up with your spending and monitor your accounts in some way, you might as well just bundle your cash up and donate it as a dye pack at the bank. There are several ways people manage their banking, investment, and credit accounts. In the past I have used GNUCash to manage my personal finances, prior to using GNUCash I dabbled with the account aggregation service Yodlee. Today I want to look at each of your options when it comes to personal finance software , in addition to the pros and cons of each.
Online Account Aggregation Services
Aggregation is defined as “a group or mass of distinct or varied things“ or “the state of being collected.“ When people talk about account aggregators like Mint or Yodlee they are referring to online data collectors, which use a variety of methods to collect data from all of your accounts and present them to you within a single interface. They use “screen scraping” to pick up the key fields and transactions from your various accounts, and then pretty it up and present it to you in one single location.
Pros
The balance of all of your accounts are available in a single location, with only a single logon. You no longer have to login to 10+ different sites to check the balances of your accounts. Easy access to ALL of your accounts makes detecting unauthorized activity a snap, in fact you can setup alerts to notify you of balance changes on cards you don’t typically use.
The category recognition is very good so you won’t have to be constantly updating or entering categories for every transaction which comes through.
These sites can typically scrape your bill accounts as well. This allows you to ensure your other bills like DirecTV, Comcast, Power Bills, Water Bills, and Phone Bills can be tracked along side your financial accounts.
In addition to bills, bank accounts, credit accounts, and investments, Yodlee lets you track your rewards card balances as well. So I can see my points for Marriot, Upromise, Delta, and more in the same interface
These online aggregators love to be visual, they have some good reports that are flashy and nice, if you are into that kind of thing.
Cons
You are giving the keys to your financial kingdom to a website and hoping their, and your, security are sufficient to protect all of you assets. Yodlee and Mint have very good account access procedures but no system is hack proof, and these aggregators are the ripest, sweetest apple on the tree. Luckily they are a pretty hard apple to get to and for the time being the smaller apples are way to easy to get.
Manual transaction entry is a recent development for these systems and is typically reserved for manual accounts. Yodlee provides me the option to enter a manual transaction on the account screen for each of my accounts, however, I don’t see where there is any reconciliation between the manual entry and the scraped entries. This means you can’t estimate your future balance by pre-entering non cleared transactions.
Financial Management Software
Financial Management Software refers to programs which require you to input or otherwise import transactional data from your financial accounts. This group includes my favorite, GNUCash, as well as Quicken and MS Money. You would use these systems much like the check register in your check book, you do still have a check book right? Meaning as you make purchases or receive income you input those transactions into the system and it keeps a running total of your balances. These systems will typically tie into something like Yahoo Finance as well to keep your investment account balances up to date with the market.
Pros
You are in complete control of all updates made within the system and don’t have to provide any of your login credentials to be able to manage your finances.
Some of the systems allow you handle business accounts as well as personal accounts. This feature can be huge if you are doing invoicing or payroll and need a more complete accounting package as opposed to just a place to view your accounts.
You can set your future transactions, like bill payments, to post the accounts early. This early posting allows you to see the future balance of your account when these bills have been paid. Online aggregators will only display the posted transactions, not pending transactions or outstanding checks.
Your information is available even when the internet is not. Allowing you to better manage your finances in the event of an emergency where you were unable to access the internet.
Cons
You are in complete control and responsible for entering every transaction on your accounts. This can be a painstaking process if you go for an extended period of time without inputting data. When I was updating my Net Worth data for yesterday’s post I realized I was way behind on inputting information. Instead of inputting it all right then I fired up Yodlee and had what I needed in just a few minutes.
Reporting on GNUCash is not that great, and budgeting in these programs isn’t as fluid or easy as the online aggregators.
Not all investments you may have are going to track correctly to market symbols. I have an IRA that I had to manually update because it is an Annuity type investment. The aggregators just scrape the current balance so it is no problem.
The Wrap Up
So which one is best for you? It really depends on you. Some people are not comfortable with passing out every password, maiden name, and car color they have ever had. I don’t blame you. Some people want complete control over transaction entry. In either one of these cases you should probably look at a manual entry system, I recommend GNUCash because it is a great program and free. If you don’t want to hassle with constantly updating your transactions but still want to track your spending and monitor your accounts then I would lean more towards the online account aggregators. Either way you go you are doing better than a lot of people, if you aren’t keeping up with your accounts at all and want to get started then look into Yodlee or Mint first, the learning curve is much smaller.
What do you use? Do you prefer the aggregation services or do you like to be control?
Photo: (colinbrown)
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