This blog contains some simple tips and advice from two regular guys. We're not accountants, financial advisors, or brokers, so follow, ignore, or discuss our ideas as you see fit.

Wednesday, May 7, 2008

Tracking income and expense with Yodlee

Posted by Matt

This is a topic I've been waiting to post on for a long while now. After lots of looking and testing, I think I've finally found a system for tracking my finances that works for me.

Like most people, I started out with a check register. This was a great way to keep track of what went in and out of my account, but building a budget from the information it contained required a lot of extra effort.

So, I tried out a spreadsheet. Once I put the data into this structured format, it was much easier to categorize and manipulate. In the years since, I've grown to love using spreadsheets, but this method still requires that I manually track every bit of income and expense.

So, the next things I tried were financial software packages (first Quicken 98 and later Microsoft Money) that allowed me to connect my computer directly to the bank to download my transactions. No more data entry! These were both pretty great applications and I'll assume that the refinements that have been added over the last decade are at least partly responsible for their dominance in the market. Unfortunately, not only did I have to pay for the software but back then, I also had to pay the bank a monthly fee to access my account information. Anyone else remember back that far? If it helps, I was downloading the data with a dial-up modem.

So, why haven't I switched back to one of those applications now that free "Internet Banking" has become de rigueur? Well, the short answer is that I'm a picky person. I find that I'm always wanting to "tweak" software and that led me right back to the spreadsheet. There, all my "control issues" are satisfied.

"But wait", you're thinking, "I thought you didn't like doing the data entry?" Well that (finally) is where Yodlee comes in. I'll explain how in a minute, but first, some background information.

Yodlee is a company that provides financial applications to both institutions and consumers. The application I use is called "MoneyCenter" and is essentially an online place to track just about any type of financial account you can think of. Below is a list of the types of accounts that I track with it, but that does not include all of the types of accounts to which it CAN be linked.
  • primary bank checking account
  • Internet savings account
  • mortgage accounts
  • 401k plan
  • 529 college savings plan
  • credit card
  • credit card rewards program

I added these accounts to my "dashboard" by providing my online usernames and passwords. Once they are all in the system, Yodlee automatically connects periodically to keep the information on the website up-to-date for you. This allows a whole host of features, but I'll describe the ones I've been using the most.

Net Worth Statement - this allows me to see my entire financial portfolio in one place. There is even an option to include estimates of equity in holdings that do not have an online account associated with them, like I do with our houses (I just had to; seeing all the associated mortgage debt was too unbearable otherwise). The net worth number is also tracked and graphed over time.

Transactions - here is where I get to finally connect back to my beloved spreadsheets. Yodlee pulls in all of the transactions for my various accounts and I can export them to a spreadsheet. What really helps is that Yodlee can be configured to automatically categorize the transactions. For example, I've specified that any transaction that comes through with a description containing "Pride Disposal" is automatically categorized into my "garbage bill" category. Some categorization even takes place without any work necessary by the user; Yodlee is very good at putting transactions from large restaurant franchises into the "Restaurants/Dining Out" category, for example.

At the end of each month, I log in to Yodlee, make a quick run through the transactions to make sure the categorization is accurate (I'm still refining my categorization rules), and then export the transactions in spreadsheet format. I copy that data into a sheet stored on my computer, which has a series of processing rules to display the categories in a way that makes the most sense to me. Many (most?) people can skip the exporting and spreadsheet tweaking steps as Yodlee has another great feature for organizing your data, namely...

Spending Reports - This is where the site gets fancy. The first thing you see on this screen is a pie chart showing a breakdown of all of your spending, along with a table alongside it that shows the breakdown of your expenses. You can use a variety of filters on the report to limit it to the previous week, month, year, etc. or show the activity from a defined group of accounts. Even cooler: say you are surprised by the dollar amount next to Restaurants (like I usually am)...you can simply click on that category name and instantly see all of the transaction details for that category in the specified time frame. Awesome!

This post is much too long already, so let me just quickly mention some of the other features.

  • Yodlee Bill Pay - pay your bills online
  • Budgeting - set targeted amounts for spending and track progress
  • Alerts - receive emails based on custom rules (large withdrawals, exceeding budgets, etc.)

By using this system, I've reduced the amount of time spent recording/categorizing financial records, while simultaneously gaining instantaneous access to the current and historical status of all of my financial accounts. If you're really nuts about finances and numbers, the tool is worth checking out, especially considering that it is FREE!

I should also mention Mint, though I won't do a detailed review here. I tried out the Mint website because it offers similar functionality to Yodlee (it may even use Yodlee behind the scenes), but also does a very basic analysis of your accounts to find money-saving opportunities. The ones it found for me were invalid and I wasn't that impressed with the site's categorization. Also, it only allowed connections to bank and credit card accounts when I tried it out. Sorry, Mint, you had your shot.
Let me close by acknowledging that not everyone is nearly so obsessed with tracking numbers, but I really believe that everyone should have at least some kind of rudimentary system. Any of the options mentioned above is better than nothing. You have to know where the money is flowing in order to ensure (as I said back in my second post on this site) that you have more money coming in than going out!

1 comment:

Rob Robinson said...

I prefer Yodlee to Mint, too. Mint is operated behind the scenes by Yodlee. It seems that Mint provides a more attractive interface, but Yodlee has more flexibility.