I get asked all the time about saving money, both by my readers and my friends. Once they hear that I saved $20,000 in a year they go through a sequence of disbelief, acceptance and then curiosity.
Most people just aren’t familiar with saving money. They may have “saved” for a few months so they could buy that new car or handbag. that’s not saving.
I was there once – before I had by big money epiphany and realised I was doing it all wrong.
That’s not saving – it’s postponed spending, and it’s not going to help them when they retire and realise that their government only offers to pay the most basic of their living expenses!
Saving money isn’t easy, but it’s very simple:
- Track your expenses.
- Lower your expenses and/or make more money.
- Make your savings grow so you can benefit from the 8th wonder of the world: compound interest.
It all starts with tracking your expenses to see where you’re at, and the best way to do that is by using Personal Capital.
The Best way to track expenses
Personal Capital is an online financial adviser and personal wealth management system. In layman’s terms, it’s a kick-ass way to see all your money in one place.
You can simultaneously keep track of your daily expenses, your mortgage and your investments. You can even add any other assets or liabilities you may have, like cars, sofas or electronics. This is as good as it gets!
Check out their official intro, as they’ll do a much better job at explaining than me! 😛
Personal Capital now has over 1,300,000 users, with an overall $310 billion in assets tracked on their free platform. That’s a lot of zeroes.
I’d love to tell you that I use it myself because, if I could, I definitely would.
Annoyingly for me, Personal Capital is restricted to the US (for now!), so living in Spain I can’t use its awesome money tracking features. Although I have used similar programs, they can’t quite match Personal Capital’s robustness and support.
When I wanna keep track of my net worth I need to check at least 3 different places… While I’m not complaining (too much), I would love to use Personal Capital and save me some time – if you live in the US, I’d take advantage of this incredible piece of software!
The fact that I’m still recommending it despite not using it myself should tell you how good it is! 😉
Is Personal Capital Safe?
The first “but” that you’ll probably think of is whether it’s safe. Giving access to all your accounts to a website can seem as crazy as writing your bank account details on a banner overlooking a busy motorway.
I used to feel the same way until I read a bit more about their encryption. They use AES-256, which is a bank-grade level of encryption. Ain’t nobody hacking that!
Another massively important piece if information is that you can’t actually do any transactions with personal capital.
It basically accesses a “read-only” version of your accounts. Even if someone managed to get access to your account -which is extremely unlikely with the amount of security they have in place – they wouldn’t be able to do anything to your money.
How it works
Once you create your Personal Capital account, all you have to do is link all your accounts. It will then pick up all their respective balances once a day for your viewing pleasure.
This is what the Dashboard looks like:
As you can see, the main bits of information that you need to keep track of your money are there for you. You can see your net worth progressing with time, as well as your income vs. your expenses.
Saving is all about keeping your income higher than your expenses, and having an easy way to visualise makes it easier.
Seriously, try saving without tracking your expenses. It’s like trying to lose fat without calorie counting – it can be done, but it’s way less efficient!
Another great feature is being able to see all your investments in one place. Although I believe in long-term investing – particularly dividend investing – I still check on my investments every day. It’s one of my small addictions…
I probably look a bit like Scrooge McDuck but instead of coins I look at different bank and broker dashboards and Google spreadsheets 😛
Everything up to this point is completely free and is good enough if you just want the best way to track expenses and don’t really care too much about your retirement.
However, if you’ve got big plans for your life after an early retirement, you’re gonna love Personal Capital’s more advanced features.
This is what sets Personal Capital ahead of its competition
Having a goal is vital to success. This applies to any part of life, especially the financial one.
Saving and building a portfolio is a means to an end. For me, that’s financial independence and early retirement, but any financial goal that makes your life easier in the future is valid.
You’d think you’d have to plan this separately, but no! Personal Capital has an inbuilt Retirement Planner.
By adding your accounts and life events that you expect to have in the future it will be able to forecast how likely your retirement scenario will be!
The best part is that you can tell it that you’re thinking of making a big purchase, such as buying a house or having a child, and it will let you know how this will affect your retirement plans.
It’s way too easy to make huge life decisions based on what we think is going to happen. However, when you crunch the numbers it often tells another story!
I also really love how they’ve added a feature that lets you see how your investment fees will affect your investments over time. These can be anything from broker fees to hidden fees.
This is often overlooked, which is a big error since fees can compound the same as gains. This is the type of compound interest that you don’t want!
Note: Everything up to this point is completely free. Do your future self a favour and sign up for Personal Capital now.
If this is all free, how do they make money?
Personal Capital’s business model involves attracting affluent users with their world-class free services. They can then offer their personalised financial advice for a fee.
If you wish, you can work with one of their financial advisors to make sure that your invested assets will meet your financial and retirement goals. Of course, this comes with a fee, which will be a percentage of all the assets you’ve let Personal Capital manage for you:
- Anything under $1 Million: 0.89% of account balance
- For clients that invest $1 Million or more:
- First $3 Million: 0.79%
- Next $2 Million: 0.69%
- Next $5 Million: 0.59%
- Over $10 Million: 0.49%
Those aren’t the lowest or the highest fees around but, considering the benefits that your portfolio will experience, I think they are worth it. They will re-balance your portfolio, optimise your taxes, and offer a personalised asset allocation.
If you don’t know what those mean, just know that they’re very important to a profitable long-term portfolio. I could write entire sets of articles on each one of those!
Personal Capital is AWESOME. Everyone in the personal finance blogging world is using it and raving about it. So are 1.3 Million people!
It’s by far the best way to track expenses, as it’s done automatically and presented very clearly for you. Its free investment tracking and retirement planning features make this a no-brainer.
Even though I can’s use it myself because it’s US-exclusive, I’ve fully vetted it and can wholeheartedly recommend it. I just hope it comes to Europe soon – or at least something as good as this!