Why I Use Personal Capital
Where’s your money? The first step to managing your money is knowing what you have: how much you earn, how much you spend and save, where it’s all kept, and what debts you owe. Sounds easy, right? Note: this page contains affiliate links. Wondering what those are? Check this out.
But I’m talking about knowing where ALL of it is: your mortgage statements, your 401k from three jobs ago, your student loan paperwork, your monthly spending, your credit card bill, your other credit card bill, your spouse’s old 403b retirement account, the 529 accounts your parents set up for your kids… see what I mean?
Hopefully don’t have to go on a literal treasure hunt, but it is something of a digital ordeal to track this all down.
Lucky for us, there’s an easy (and free) way to consolidate and display all of this information: Personal Capital.
Before you can set debt repayment goals, before you can calculate how quickly you can save up a downpayment for a house, before you can figure out if you can pay for your kids’ college, before you can know if you have enough saved for retirement, you need to have a holistic, comprehensive, updated view of your assets (stuff you own) and liabilities (stuff you owe). And it needs to be regularly updated and reviewed. Thankfully, Personal Capital will for this for you and thankfully, it’s free.
TLDR: I use and recommend the free service from Personal Capital. You can sign-up for it here. Below is why:
You Can’t Hide From Your Money and Expect Everything To Work Out Ok
Hiding from your money does not work. Not knowing how much you have, how much you owe, and where it’s kept does not work. Avoiding your money because you’re afraid of what you’ll find does not work. Your money does not care how you feel about it. Your money is nothing more than numbers on a page.
I know this because I used to be that hiding hider. I thought that if I never looked at my bank statements, everything would be fine. Initially, I avoided my money because there wasn’t very much of it. Then, I avoided it because it felt too complicated. Neither is a valid excuse. Neither, by the way, was an effective strategy for me.
I am in an interesting position where people come to me a lot for financial advice and, when they do? I get so excited! I love helping people with their money. But, before I can offer any advice, I give people a mountain of homework to do. Why? Because I can’t do squat for you without knowing:
- How much you spend every month
- How much you earn every month (net, not gross)
- How much debt you owe
- How much equity you have in your home (if you’re a home owner)
- How much money you have saved up in non-retirement accounts
- How much money you have saved up in retirement accounts
- If you have any taxable investment accounts or Donor Advised Funds or 529s or cash-under-your-mattress
In other words, before I–or anyone else–can offer financial advice, you need to know all of your numbers. This might be sounding a whole lot like every month’s Reader Case Study and that’s because it is. Every Reader Case Study includes all of the above information, as well as the participant’s goals and questions and roadblocks.
Before we can figure out how to make the goals happen, and before we can answer the questions and overcome the roadblocks, we have to know the cold, hard numbers.
Many Reader Case Study participants tell me something along the lines of what 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.
Juliana came to this realization after completing a Reader Case Study with me, but you can come to this realization by compiling all this data on your own, using Personal Capital.
The First Step Isn’t Hard
The awesome thing about the first step to better financial health is that it’s not difficult. You just need an overview of your money and transactions. No more, no less. This step does not involve any judgements or regrets or self-loathing or frustration. It’s just a question of getting it all down in one place. Yes, you could do this by hand, but it would take a ton of time and it wouldn’t be updated in real time, which brings me to the five reasons why I like Personal Capital.
Five Reasons Why I Like Personal Capital
1) It’s free.
Personal Capital makes money by selling investment advice, but the trick is that you don’t have to sign-up for their investment advice. You can just use their free net worth tracking tools and ask them not to call you about investment advice and they will not call you.
Selling investment advice is their business model–they are 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 beauty of using Personal Capital is that it’s an entirely online service. You do not have to leave your house, or talk on the phone (heaven forbid), in order to set it up. Living the dream, my friends.
3) It links and tracks all of your accounts.
This is the #1 reason to use an aggregator like Personal Capital. My Personal Capital dashboard links together no less than THIRTEEN different accounts, including such things as:
- My old 403b from my previous employer
- All of our credit cards
- Our mortgages
- Our checking and savings accounts
It displays everything in our lives that pertains to money coming in or going out, and it’s all in one place. Yay!
4) It updates in real time.
While I could (and have) put all of my financial information into a spreadsheet, that spreadsheet would not update every month or every time I paid a credit card bill or deposited a check. That is unfortunate and would be boring and unnecessarily time-consuming to keep it updated manually. That right there–the boring, time-consuming thing–is why so many people don’t track their money. But with Personal Capital, you don’t have to do anything boring or time-consuming! I mean, you probably still do, but not in relation to tracking your money.
5) It makes it easy to do the right thing with your money.
Since Personal Capital assembles all of your accounts in one place and since it updates in real time and since it’s free, it makes it really easy to quickly check on your money. It makes it really easy to set longterm goals around your money. It makes it really easy to take the first step towards doing the right thing with your money.
What About Online Data Theft Risks?
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 for all of your banking, then your Personal Capital account will be just as secure as your bank. And, by the way, your banking information is stored online anyway, whether you want it to be or not.
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 that 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 perishing 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).
What Exactly Will Personal Capital Do For Me?
EVERYTHING! Ok not quite. But it will provide a holistic overview of your money including:
- All of your bank accounts and their respective totals (checking, savings, etc)
- All of your retirement accounts and their totals (401ks, 403bs, IRAs, etc)
- All of your taxable investments
- Your mortgage
- Your debts
- Your credit cards and their current balances
- Your overall net worth (which is your assets minus your liabilities)
From all of this data, Personal Capital provides you with information on:
- Your monthly expenses
- Your debt repayment progress
- Your retirement savings goals
- Your budgeting month to month
- The balance and diversity of your stock portfolio
Personal Capital Budgeting Tool
In addition to providing the above consolidation and overview of your monies, Personal Capital has nifty tools to aid in budgeting, retirement planning, and more.
I especially like the budgeting feature because it pulls in all of your spending from all of your accounts (credit cards, checking, etc), provides a real-time tally, and categorizes your expenses. The other neat thing is that it compares your previous month’s spending to your current month’s spending, which makes is easy to see if you’re above or below budget in a given month.
Plus, it has a historical record of your spending that’s searchable so you can pretty easily see what you spend in a year and how your spending varies over time. I like that I can select “last year’s spending” from the drop-down menu and see the total amount we spent last calendar year. This spending is also categorized, giving me an overview of how much went to each line item in our budget over the course of a whole year.
This is SO much simpler and so much more precise than me trying to keep track and add it all up on my own month after month, year after year.
Personal Capital Retirement Planner
This is another useful feature that’s included for free with Personal Capital. This tool pools all of your retirement accounts (401ks, 403bs, IRAs, etc) and, factoring in your age and your planned retirement age, gives you a holistic view of how you’re progressing on your retirement savings goal. It also allows you to list anticipated sources of income (such as social security, a pension, etc) during (or before) your retirement age, to facilitate an even more precise analysis of your retirement preparations.
Another feature I like is the “retirement fee analyzer,” which assesses the fees you’re paying on your investments and gives you an easy-to-understand rundown of how much you’re paying in fees every year on your investments. Much more straightforward than what most banks and brokerages supply to their investors!
Personal Capital Savings Planner
Similar to the retirement and budgeting planners, the savings planner is a tool where you can set annual savings goals and track your progress. And, since Personal Capital organizes all of your accounts, you can see which accounts you’re saving into and which accounts you’re not.
It’s just another simple, straightforward way to keep track of your financial goals.
Using Personal Capital helps you set realistic goals around your financial situation. It helps you know if your net worth is increasing or decreasing. It gives you a starting point for all financial decision-making.
Without this basis undergirding your financial choices, you’re essentially taking shots in the dark. Don’t shoot money in the dark. Come to think of it, don’t shoot money at all. Be enlightened. Be not in the dark. Do an easy, free thing to make your financial life better and sign-up for Personal Capital.