How to Know Everything About Your Money: Why I Use and Recommend Personal Capital
Knowing where your money’s at is the first step in financial planning. Before you can set goals, panic about having no money, or compliment yourself on your ability to buy a new back scratcher, you’ve got to know:
- What you earn
- What you spend
- Your debts
- Your assets
- In other words, your overall net worth!
Lucky for us, there’s a FREE service that’ll do all of this for us. It’s called Personal Capital. I talk about it all the time. I use it all the time. Today I’ll explain why.
Everything In One Place
When folks do a Reader Case Study here on Frugalwoods, the most time consuming–and critical–aspect is compiling all their financial information. It’s basically Marie Kondo-ing your money:
- Where are those college t-shirts you received for winning
- Where is that 401k from your first job?
For most Case Study folks, this involves some serious excavation of elder accounts, recalling of passwords lost to the mists of time and the calling of HR departments. But it doesn’t have to be this way, people. Personal Capital can do all of this for you, if only you’ll let her*. She wants to help you with her free, web-based, software-y brain.
As I age, I keep accumulating accounts despite my efforts at account minimalism. Like a stone rolling down a hill, stuff keeps sticking to me. After college I had exactly one account: a checking account. My income went in, I debit-carded out my spending. It was back to zero at the end of every month.
Now, I have a complicated web of accounts reflecting the stages of life I’ve been fortunate enough to experience. While I appreciate this financial tapestry of a life being well-lived, it’s super overwhelming. However, since I’ve linked all of my accounts to Personal Capital, I can see everything in ONE place on ONE screen!
Personal Capital tracks no fewer than THIRTEEN accounts for me and my family, including:
- Checking accounts: business and personal
- Savings accounts
- Retirement accounts:
- My old 403bs
- Mr. FW’s old 401k
- My current individual 401k
- Taxable investments
- The mortgage we hold on our rental property
- The 529 college savings accounts for our kids
- The Donor Advised Fund for our charitable giving
- Credit cards
Personal Capital helpfully has a little graph at the top of the page tallying my:
- Assets (good!)
- Liabilities (bad!)
It could not be any clearer and I don’t have to do anything other than ensure that all my accounts are linked up. Personal Capital auto-magically tallies and tracks everything for me!
*I’ve decided Personal Capital’s preferred pronouns are she/her.
Does This Seem Overwhelming To Implement?
I know it does. It’s like the organization of anything in your life: photo albums, clothing, your childhood glass unicorn figurine collection. It feels like an insurmountable amount of paperwork. But here’s the thing: you only have to do this once with your money. Link it all up, then check on it once a month! Since I require Case Study participants to do this compilation work, I know it’s a lengthy process, but here’s a small sampling of what I hear from them after they’ve completed this exercise:
Juliana wrote in her Case Study:
If this Reader Case Study exercise has taught me anything, it’s that I did not have a realistic view of our finances prior to compiling everything for Mrs. Frugalwoods.
Writing down every single monthly expense gave me insight into where our money is going, and it forced me to take a hard and cringe-worthy look at how much money I’m spending on insignificant things that don’t even matter to me in the long-term. For example, I could have saved more than $20,000 over the last five years if I’d given up my coffee/soda/eating out habit.
Prior to this, I was looking at my finances through rose-colored lenses and thought we were keeping more of our income than we actually are.
Sara shared in her Case Study:
I’m spending more than I’m taking home (OMG was not expecting that…. THIS EXERCISE IS SO USEFUL).
The Six Reasons I Use and Recommend Personal Capital
1) It’s FREE.
Yes, you can absolutely pay for financial software, but why bother when you can get it for free? At least, that’s my opinion.
Why is it free? Because Personal Capital makes their money selling investment advice, but you don’t have to sign-up for their investment advice. You can just use their free net worth tracking tools, ask them not to call you about investment advice, and they will not call you.
Selling investment advice is their business model–they’re a business after all–but the benefit is that their free expense tracking/net worth tracking service is awesome. In summary: you can sign-up for their free expense tracking/net worth tracking tool and not pay a dime. Ever.
2) It’s online.
The ultimate in easy consolidation. No need to shuffle through a ton of papers or–gasp–talk to someone on the phone.
3) It links to, and tracks, all of your accounts.
You could use 14 different banks, have 59 different accounts and Personal Capital will link it all up to provide one concise view of your overall net worth. All of this tracking is boring and time consuming, which is why most people don’t do it. Consequently, these people are in the dark about their finances. By linking everything in one place online, you no longer have an excuse for being in the dark. You will be in the light and the light will be good.
4) It updates in real time.
The ultimate in set it and forget it. I mean, don’t totally forget it, you need to check on it, but you don’t have to manually add your spending and retirement contributions every month, it all pops up right there on Personal Capital.
5) It has free budgeting, retirement and savings planners!
Since Personal Capital has all your accounts in one place, there are several nifty tools you can access on your dashboard:
- The Personal Capital Budgeting Tool (located under the “Banking” drop-down menu):
- This lets you create a holistic budget that accounts for all of your accounts–including your credit cards–so you’re working with real-time info.
- You can easily compare your spending month to month to understand how your expenses shift throughout the year.
- You can compare your spending year to year to see how your spending behaves over time.
- The Personal Capital Retirement Tool (located under the “Planning” drop-down menu):
- A compilation of all your retirement savings/investments as well as your anticipated social security payments and your progress according to your current age and planned retirement age.
- I also appreciate their “Retirement Fee Analyzer” which gives you a clear picture of how much money you’re losing to fees.
- Personal Capital Savings Tool (located under the “Planning” drop-down menu):
- Pretty much what it sounds like: an easy way to monitor your progress towards various savings goals
So much more than just expense tracking!
6) It makes it easy to do the right thing (with your money at least).
Seeing your net worth so clearly articulated makes it super obvious:
- If you can afford a vacation
- If you’re on track for retirement
- If your debts surpass your assets
- What your next financial move should be
You can’t adequately answer any of these questions without knowing your full net worth. By using these free integrated budgeting, savings and retirement tools, you can do your own personal Case Study on yourself and understand your next financial steps.
What About Online Data Theft Risks?
I can HEAR you asking this question, so let’s break it down:
- Yes, Personal Capital handles tons of financial information all in one place.
- Yes, there are risks to living your life online; but, if you use a unique, secure password (more on that below) for all of your banking, then your Personal Capital account will be as secure as your bank.
And by the way, your banking information is stored online, whether you want it to be or not. Even if you personally are a pen and paper person, you better believe your bank has everything stored in servers that are connected to the internet. It’s a fact. The only way to not have your information online is to essentially be a ghost: you’d have to pay for everything with cash you keep in a safe in your home, you’d have no mortgage, no credit cards, no bank accounts whatsoever, no cell phone, no job (or a job that pays you only in cash), no retirement accounts, you wouldn’t receive social security, you wouldn’t pay taxes…. you get the picture. People do live this way, but I assume if you’re reading this on the internet, you’re probably not one of those people.
Companies like Personal Capital hinge their entire existence upon appropriately stewarding your info and being impervious to hackers.
This isn’t to say your data won’t be stolen, but in my opinion, the risk/reward ratio is very much in your favor. I think with a service like Personal Capital, you’re getting a lot of utility for free for not very much risk.
Put another way: it’s much more likely your finances will be in bad shape if you’re not managing them appropriately than it is likely for your data to be stolen. It’s sort of like how we tend to fear airplane crashes more than car crashes even though our odds of dying in an airplane crash are 1 in 188,364 whereas our odds of dying in a car crash are 1 in 103 (source: The National Safety Council).
Get a Password Manager
A side note about using unique, secure passwords. If you, like me, are concerned about your online security do NOT do any of the following:
- Use the same password for everything.
- Write your passwords down and hide them in your desk drawer.
- Email or text yourself all of your passwords.
- Forget your passwords.
- Use “password” as your password.
- Walk around with a notebook of all your passwords written in it.
Instead, do this:
- Pay the nominal fee for an online password manager
My husband and I use 1Password, which I find easy to use, affordable and extremely useful (affiliate link).
Personal information is most often stolen due to user error. It happens when people click on suspicious links, reply to spam emails or texts, willingly hand over their banking or social security numbers via text, email or phone, use weak passwords, etc. Be a human firewall and have a password manager.
Why Bother Tracking Your Money?
Why should you care about managing your money? My answers via fortune-cookie platitudes:
You can control your money, or it will control you.
- If your money is a mystery to you, your goals will also be a mystery.
- How you use your money equals your values.
- It’s not good enough to do good with your money one month, you’ve got to do good with your money all the months.
- Frugality–and wise money management–aren’t about doing things right all the time. They’re about setting guardrails and guidelines around your money that are easy to follow.
- There’s no perfect time to start managing your money, so you might as well start today.
- Frugality (and Personal Capital) frees you from the day-to-day anguish of managing a rigid budget.
- You can’t buy your way to happiness, but you can certainly go into debt trying.
- Frugality mutes the noise of unnecessary desire and consumption and instead focuses us on our priorities.
- …add your answer in the comments! I’ll post the best ones below!
Reader Fortune-Cookie Platitudes:
- From James W. Day: “Do not put off what you can do today.”
Summary To Do List:
- Sign-up for Personal Capital and start monitoring your net worth on a regular basis.
- Get a password manager, such as 1Password, to secure your online information.
Do you use Personal Capital? What questions do you have? What are you favorite fortune-cookie $$$$ platitudes?
Personal Capital Advisors Corporation (“PCAC”) compensates Frugalwoods for new leads (at no cost to you). Frugalwoods is not an investment client of PCAC. Here’s a boring (but important) explanation of how Frugalwoods makes money. The Personal Capital and 1Password links in this post are affiliate links.
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