Over the last 10 years, there have been great advances in many areas of our personal lives affecting the way we communicate and interact with the world. However, when it comes to Personal Finance, we are stuck in almost the same place. There is no effective main-stream, mass-market personal finance solution.
Quicken has been the top of the market for years, but I argue that the market is narrow. It doesn’t come close to iTunes, iPhoto, Facebook, or Flickr. I am one of a minority of people that are meticulous about personal finance. Having used Quicken for years, I tracked every transaction enabling detailed reports on spending, budgeting, and investments at my fingertips. As much as tools like Quicken have improved upon the manual process of 20 years ago, they still require a good amount of time to remain useful. If the data is not up-to-date, then the reporting had no value. And most people have no interest in spending the time on something as uninteresting as personal finance.
This is The Personal Finance Problem.
The solution must address a number of issues.
1. Automation. Most people don’t care enough about personal finance to spend much, if any, time on it. The solution has to be automatic. Tools like Quicken provide the ability to download transactions from a bank which is a step, but not automatic. Services like Mint and Wesasbe take it a step further, but suffer from compatibility and other issues.
2. Infrequency. It must allow for people to look at their finances only a couple times a year and get value with a minimum expenditure of time. Automation helps with this, but there are other obstacles such as limitations imposed by banks only allowing access to the last couple months of transactions. Also the raw data has to be transformed into useful information which generally requires some sort of categorization.
3. Strategic. The tools must be focused on the strategic, providing information and insight for making decisions. When people do spend the little infrequent time that they have on personal finance, the value is not derived from tedious activities such as reconciling accounts, paying bills, and entering or categorizing transactions. It needs to quickly answer simple questions such as ‘How much have I saved this year?’ or ‘Can I afford to go on this big trip?’.
4. Security. People are funny about protecting their financial information. While they may publish every detail of their lives on Facebook and Twitter, they won’t do the same with their bank account. Perhaps this is due to legitimate concerns about security, or perhaps it is to avoid embarrassment.
So why am I writing about this? Basically, I am tired of managing personal finances and surely the solution lies in software. I spend too much time on the tedious and not enough on the strategic. There has to be a better way. In the next few posts, I plan to write a bit about some of my experiences and observations. It won’t be a complete review of products and services, but will evaluate some of the ones that I have looked at and the shortcomings of each. I can only hope that with time, someone will solve The Personal Finance Problem.