As many of you know I go through the exercise of producing a detailed monthly financial report each and every month on this blog. In order to provide an up to date report I have to access a number of accounts:
- 2 Checking Accounts
- 2 Savings Accounts
- 2 Mortgages
- 4 retirement accounts (1 401K, 2 IRAs, 1 SEP IRA)
- 7 Credit Cards (which we pay off completely every month)
- 1 Regular brokerage account
- 1 P2P lending account
- 1 REIT account (Rich Uncles)
Total accounts = 20 (and likely growing)
The task of logging into these accounts is the easy part (but still cumbersome). Without a tool like Personal Capital I would have to manually categorize all income, expenses, investments, assets, liabilities, etc.
What about the value of your house or cars? We will answer that in just a minute.
There has to be a better way!
You ask and you shall receive. Personal Capital allows you to aggregate your entire financial life in one account. All you need to do to see all your accounts in one place is log in once through Personal Capital and voila! But it doesn’t stop there. They even automatically classify all your income and expenses for you. Oh and you remember that question you asked about how to update the value of your homes and cars? Well, they bring in the estimated value of your home from Zillow and the Kelly Blue Book value of your cars, all automatically.
In my monthly financial reports I want to present my data in a certain format and Personal Capital allows me easy access to the data I need to plug into my custom built reports I use to report Net Worth, Income, Expenses, Assets, and Liabilities. But they also offer some really nice looking charts and graphs within the application itself.
Let’s take a look under the hood of Personal Capital
When you first log into your PC account, you will be taken to your dashboard page. On the dashboard page you will see all of your linked accounts on the left hand side of the page (not captured in screenshot below), a summary of your net worth, income, and spending for the last 30 days.
Note: Due to account privacy I am only showing you partial screenshots. Also, screenshots were taken sometime in June.
With this kind of tool you now have the technology you need to stay on top of your finances. The dashboard gives you a high level look at how you are doing financially. With this simple but effective view you can start asking yourself questions like:
- Do I have a spending problem?
- Or do I have an income problem?
Building wealth is actually fairly simple when you think about it.
Spend less than you earn and invest the difference wisely.
Let’s say you think you have a spending problem. All you have to do to drill down is click on “Cash Flow” and then you are brought to the detail cash flow page, which contains all the juicy spending details. Notice that it actually automatically categorizes all your expenses for you. To the right of the spending summary it also shows you income (blue) and spending (Orange) by week. This is all based on the time frame you select, but it defaults to the last 30 days.
The last thing I would point out is that the details of the expense bucket are found right under the charts. Now let me warn you that although Personal Capital does a great job automatically applying categories to your expenses, it does get it wrong from time to time. But you can fix the category manually so that it gets counted in the right expense bucket. I hope that in the near future they will add functionality that allows you to create a rule that categorizes certain expenses with the label you define based on certain criteria.
Once you’re done digging into your expenses you can switch over to the income report. It essentially gives you the same view as the expense tracking but for your income. If you look closely I have not done much to split out the different streams of income. Mostly because I am lazy and I don’t want to go through the effort of classifying the income each month. So I just do that offline, but eventually I should just do it within the PC application.
Net Worth Tracking
My favorite place to go in Personal Capital is to the Net Worth page. For me this is the one metric that matters as I am in wealth building or accumulation mode. On this page you can select any time frame you want to view your net worth progress from. And of course we are all hoping for a trend that is up and to the right. My net worth in my PC account does not match my actual net worth I report because I exclude our cars from the number I report in my monthly financial reports.
Other Cool Features in Personal Capital
- Fee Analyzer – When I first got personal capital, this was one of the first tools I checked out. Most people don’t realize how much of their account they are giving up to fees. After you use this tool, it may make you think twice about the different funds you are invested in when you realize that it could equate to hundreds of thousands of dollars over the life of your portfolio. Mutual funds are notorious for outrageous fees, and you have a right to understand what that means to you financially. You may be better off moving your funds out of the mutual fund and into a low fee index ETF. Especially when you consider the fact that 80% of mutual fund money managers underperform the benchmark indexes for their respective funds. You have to ask yourself what you’re really paying for.
- Investment Checkup – This tool allows you to compare your current investment allocation to the ideal allocation that is set to minimize risk and maximize returns in order to reach your financial goals. It will make recommendations to optimize your portfolio and even allow you the ability to do some back testing.
- Net Worth Calculator – I talked about part of this tool above and showed the screenshot of the net worth chart that Personal Capital provides you. But this tool also allows you to dig deeper into the breakdown of your asset allocation and portfolio performance. It even allows you to benchmark your performance against the major indexes like the S&P 500 and the DJIA.
- Cash Flow Analyzer – This is really what I already mentioned in the above “Income Tracking” and “Expense Tracking” sections.
- Money Management Services – Once you open your FREE account you are entitled to a complimentary financial consultation where they will review your entire financial world and point out strengths and weaknesses. You’re under no obligation but they will then offer you their money management services to execute a personalized plan on your behalf. The management fee starts at 0.89% up to the first Million and then tiers lower as your assets under their management increase.
- Retirement Planner – This is actually one of the newest tools added to the suite of tools found inside the app. It allows you to run many different scenarios and has access to your actual income and expense as a solid starting base. It is actually one of the most robust tools I have seen out there. You can plan for future expenses like a new home or college tuition. You can even plan for different types of income events like social security or inheritance. Check out this short video:
I personally only use Personal Capital for the amazing FREE tools they provide. As you can see they offer a really robust suit of tools for you to monitor your financial health and progress towards your goals. Compared to Mint (a tool I also use), Personal Capital is much more investment focused, where Mint is more budget focused. They are both FREE tools that make managing and monitoring your money super easy.
The only reason I use both Mint and Personal Capital is because I have been with Mint for years and have spent a lot of time creating rules for income and expense classification. But if I didn’t have either account and had to choose one today, I would go with Personal Capital. The one feature that I do hope Personal Capital does add in the future is the ability to add classification rules like you can do in Mint. This is the only complaint I have.
Over time my goal is to transition fully over to Personal Capital. But I will likely hold out until I can set up the rules. The rules save me so much time every month when I am putting together my detailed financial reports every month. In Personal Capital you have to classify things every month if they don’t get classified the way you want them too.
You should decide for yourself. Open up an account with both and use them in parallel for 3-6 months and decide which one fits you better. You will quickly find that Personal Capital provides a lot more in the way of tools and robust functionality when it comes to planning your financial future and optimizing your investments. But you will also find that there are many similarities as well.
Are you already using Personal Capital? What has been you experience? What do you love about it? What do you wish it could do?
– Gen Y Finance Guy