Understand your financial picture with Personal Capital

Understand your financial picture with Personal Capital

To understand your progress towards financial independence (FI), you need to compare the current state of your finances to your financial goals. Setting financial goals can be exciting, because it allows you to visualize your ideal future. The burden of tracking expenses and investments is far less enjoyable, which is why I recommend automating with Personal Capital (PC).

What can you do with Personal Capital?

Personal Capital provides a free online financial tracker that allows you to enter your login credentials for all of your bank, credit card, and investment accounts. PC will then update each account when you login, giving you a real-time understanding of your financial picture. With this information you can:

  1. Track and characterize income and expenses to gauge where your money is going and what your savings rate is. Seeing the expenses across all of our accounts in one place has helped us monitor for fraudulent activity. Since we have taken to opening travel rewards cards, we have a lot more to keep track of.
  2. Set a monthly budget and assess your progress. We do not budget, and prefer instead to weigh all optional purchases against our long term goals. But I am glad they included this feature for those who benefit from budgeting.
  3. See a chart of your net worth.
  4. See your individual investment holdings.
  5. See your investment asset allocation and where it lies in relation to the “efficient frontier” and your target asset allocation.
  6. Enter different retirement scenarios (expected yearly savings, retirement age, retirement spending requirements, social security payments, etc.) and see how they may fare. I’m not willing to bet our financial future on these predictions because of the number of unknowns and time scales involved, but it at least provides a gauge, however imperfect, for retirement (or financial independence).
Access through web browser

Access through smartphone app

Personal Capital has very intuitive web browser and smartphone app interfaces, which makes it easy to check your finances regularly. Both interfaces are similar, although the browser has a bit more functionality.

Accounts can be updated automatically or manually

AssetsInvestment & bank accounts – login through the PC interface and it automatically updates moving forward.

Property value – enter your address and it will use Zillow to estimate the value.
Investment & bank accounts – you create a manual PC account for each investment account and then enter the individual holdings & quantities in each account. Update the holdings at whatever frequency suits you, such as quarterly.

Other assets – manually enter and update as you see fit.
LiabilitiesCredit cards – transactions are imported and can be easily characterized for tracking or budgeting.

Credit cards – You can update the balance, but not enter individual transactions. Luckily, all of my CC’s, including Chase, American Express, Citibank, and Barclays work using the automatic method.

Other (ex: mortgage principal) – manually enter and update as you see fit.

A few notes on updating accounts:

  1. If you want to manually enter an investment account and PC doesn’t recognize the exact holding (for example some less common mutual fund), you can select a similar fund that it does recognize and adjust the number of shares to reflect your balance. This will at least keep your asset allocation data nearly correct, and will also capture most of the relevant market movement.
  2. I don’t use the Zillow property value estimate (“Zestimate”)… at least not directly. In terms of net worth, I know to realize the home equity, we will have to sell the house and pay closing costs and realtor fees. So for the current home value I manually enter 0.92*Zestimate, which assumes 8% of the home value will be siphoned off by others. There is of course some uncertainty in the Zestimate, but that value is better than anything else I have.

Why I prefer Personal Capital to Mint

I originally started tracking our finances using Mint. It is another good option, and it served us well for a long time. However, after trying Personal Capital, I have stopped using Mint for a few reasons:

  1. Personal Capital does a better job determining the asset class of investments. In PC, all of our holdings are automatically placed into the correct asset class. In Mint, our asset allocation is displayed as “100% Not Sure.” That is 100% Not Helpful.
  2. Changing the expense category of purchases is much less frustrating. One week into the month I go back and categorize all of the previous month’s expenses. I usually do this on my phone while I have 10 minutes of downtime somewhere. The PC app has the expenses listed in chronological order and any mis-categorized expenses are easily updated. Mint is similar in theory, except their smartphone app tends to rearrange the order of expenses when you update their category. Extra headache? No thanks.

What else does Personal Capital offer?

Personal Capital’s main business is wealth management, meaning once you have linked all of your accounts, they will offer to manage your accounts for you (paid service). Since I am a financial DIY’er, I can’t speak to their wealth management service. However, I believe almost anyone can manage their own wealth by leveraging a small number of resources (check out my Securities and Taxes & Investing pages). Even if you do end up deciding to pay for wealth management–through PC or otherwise–the resources linked above will at least make you a more informed and satisfied client.

In summary

Personal Capital offers a very intuitive and easy way to track your finances. For me, it has the proper balance of ease and utility, so I don’t expect I will change financial trackers anytime soon.

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