It is important to regularly monitor your overall financial situation. I recommend that you total all of your assets and debts once every three months. This practice will help you understand exactly where you stand and how close you are to achieving your financial goals.
It can be tedious to remember each username and password for each of your accounts and save the totals on a spreadsheet.
Personal Capital is a free online tool that makes this process a breeze. To make a financial statement, instead of having to connect separately to your 15 different accounts, you just need to connect to personalcapital.com.
There you will see all of your balances. This allows you to get a snapshot of your financial situation in seconds.
Personal Capital uses all kinds of nifty charts and tables to show your balances and progress towards your goals. The overview page shows you your net worth, cash flow, budget, portfolio balance, retirement savings and emergency funds.
Using the information you entered when creating your account, Personal Capital will show you how well you are doing in different areas. For example, based on your income and expenses, it will show how much money it recommends you have in your emergency fund.
In the same way, it will show how ready you are to finance your retirement, pay off your debts and pay off your mortgage.
I particularly like the “Retirement planner” section. After plugging in your numbers (age, date you want to retire, how much money you think you will need in retirement, etc.), he will analyze the effectiveness of your current retirement financing plan.
Personal Capital tells me that I have a 75% chance of reaching my retirement goal. Specifically, he says, “You’re pretty much on the right track for retirement, but your plan may require flexibility.” So there may be things I need to change.
Another useful feature is the budgeting tool. It categorizes your monthly expenses so you can see where you are spending your money.
However, the budgeting tool has certain limitations. It can only classify purchases you make with a debit or credit card. If you use a check or money to pay for something, he may tell you that you have spent money, but he will not know what you bought.
For example, when I click on “budgeting”, I see a summary of my expenses by category. When I scroll down, I see that the category with the least money spent ($ 19.95) is “taxes”.
Ha! Does Personal Capital really think that I only spent twenty dollars on taxes? Doesn’t he know that I live in Illinois?
After a little detective work, I realized that the $ 19.95 was a fee I paid to H&R Block when I filed my taxes.
Since I don’t pay my property taxes with a credit card, that doesn’t include these expenses here either. He bundled my property taxes with “other expenses”. I had to browse this category to find my property tax payment and manually move it to the “taxes” category.
If you need a solid budget program, keep looking. You might consider using Mint, another free personal finance app. I didn’t use it, but I read that it had a much better budget section.
Personal Capital makes its money by offering to manage your investments. From time to time, he will invite you to speak to an advisor so that you can “optimize your portfolio”.
These ads are small and easy to ignore. I have never called on one of their advisers, so I can’t say too much about it. I will say that the description of the service seems correct, and their rates are reasonable.
So, would I recommend Personal Capital? Absolutely. The ability to see all of your accounts on one screen is great. The different tools that show your progress towards different financial goals are useful. And it’s free.
If you need help tracking your financial situation, Personal Capital is a great app.
Dave Kinzer is a music teacher and financial coach at Springfield. Contact him at www.davekinzer.com. His column will appear here every second Wednesday.