Pros and Cons of Using an Automatic Financial Tracking Application
One of the first things that my parents taught me to do, financially, was track my expenses. I remembering getting my first bank account, and starting to keep track of everything that went in and out of the account. I had a little paper booklet that I wrote down how much the original balance was, what I bought, how much it was, and what the next balance would be. When I went back to the bank to make another deposit or withdrawal, I would get the updated balance, and compare it to my paper copy. If it didn’t match, I had to figure out where that extra money went to, and why there was a difference.
I hated it. I eventually just stopped doing it, because it ended up amounting to pennies, and it was all because of a simple math mistake or a forgotten purchase. I never caught the bank making a mistake, I doubted that they ever would, so I just stopped doing it. Thankfully, technology eventually caught up with me and I was able to enjoy the benefits of things like online banking. While now there was an automated method of keeping track of my finances, however, my online banking software does not keep track of my budget. Enter the invention of online financial tracking applications, like Mint.com. I’ve been using Mint.com for over a year now, and while I’ve had some problems with it, I love to use it. However, there are always advantages and disadvantages of using programs like these.
Pros
It’s simple to set up and use. When you’re creating your own method of tracking your finances, you first have to figure out how you’re going to do that. Are you going to use pen and paper, or software, or an excel spreadsheet? What are you going to track? How are you going to input that data, and how often are you going to do it? With an automated app, it tracks everything for you in real time. It has a wealth of information, so no matter what data you feel is important to track, it is all there and available for you – you just need to take a look to see it. There’s an easy user interface for everything as well. Whether you want to set up a budget, track a type of expense, or look over your financial history, there’s a tab or an option ready and waiting for you.
It’s instantaneous. The application will track all of your data for you. It doesn’t do it once a week or once a month, like you might if you were doing it manually. All the information is automatically brought right into your account as soon as it is available. That means that you have a day by day way of checking to ensure that you’re on track and moving in the right direction. I’ve had it where Mint.com actually helped me react very quickly to a fraudulent transaction from an ATM machine. Someone had gotten a hold of our bank account details through a card skimmer (most likely), and they withdrew a bunch of cash. Within a few hours, I had already been made aware of it through Mint, contacted my bank, and started the process of getting my money back, all thanks to the automated system that was already in place.
Cons
Your information is less secure, and probably being used and sold. If the service is free, then the product is you. Mint.com, like other financial apps, is a free service. They have to pay their bills somehow, so regardless of what their privacy policy may or may not say, just assume that your spending history and trends are going to be recorded and analyzed, by someone, somewhere. Now, you shouldn’t have to worry about credit card fraud or identity theft, these companies are large enough and secure enough that you’ll never have to worry about something like that. Just recognize that your information, most likely anonymous, will be used and potentially even sold. Personally, I have no problem with that, but if you do, then make sure you avoid these types of services.
Automating everything to do with your finances can make you financially lazy. If your bills are paid automatically and your finances are track automatically, then what is there left for you to do? Not a lot, to be honest. So you might stop caring about what you’re spending and where your money is going. Eventually you may look at your Mint data and realize that you’ve blown your budget over the last two months, but by then it is too late. So if you do choose to use this program, ensure that you are also being diligent in checking in on your finances. Set up a weekly or biweekly check for yourself to go through your finances and hit on all the important points.
What are the pros and cons of using financial tracking software for you?
Comments
Sometimes applications don’t capture everything. And sometimes they are more complicated than they are worth. But they can make it easier.
I disagree that security is not a concern with sites like Mint.com. It’s very much a concern. If you use it to its full capacity, Mint will have every single login to all of your online brokerages. Any rogue employee of Mint is potentially able to login to your account and perform anauthorized transaction such as trade some low-volume penny stock he holds. Or, more likely, sell your login information on the black market. This is only a possibility with aggregator sites like Mint. And then it’ll be up to you to resolve the mess with your brokerage when you most likely explicitly signed some T&C documents agreeing to not divulge your username and password to any third party.
For the same reasons Mint has to be one of the biggest hacker targets in the world.
Yes, these are somewhat paranoid scenarios, but thoroughly possible ones. Mint is a nice service if nothing goes wrong, but the going wrong part can get very scary.
I don’t use Mint as I don’t like the idea of handing over my logins related to financial sites. There is too much at stake. That said, I also thoroughly enjoy the act of keeping track of my spending, down to the penny. Excel is so powerful, that with a little know-how, you can make it tell you anything you want.