So far, you’ve attacked unfrugal habits with checklists instead of ledgers and spreadsheets. As a result, you’ve dodged the many headaches of data entry. But checklists don’t show whether you live in the “magic zone” where your income constantly exceeds your expenses. For that level of assurance, you need to enter the realm of bean counting—in other words, you need to track what you make and what you spend. Income is easy to figure. Simply consult your pay stubs, W-2 forms, or tax returns. When it comes to expenses, however, the hassles increase. In any given year, members of your household perpetrate hundreds of transactions. Fortunately, new services help you track it all without turning yourself into a full-time accountant.
Since 1997, I’ve entered each expenditure onto a spreadsheet that shows my monthly expenses down to the penny. In 2011, this required over 600 manual entries, and stole about 30 hours that I might have spent on my Nordic Track machine (purchased in 1993; still works great). Although these spreadsheets show that I live well below my means—which gives me great peace of mind—they also require a massive amount of time, effort, and obsessing.
As I’ve typed away like it’s 1999, a revolution has raged at automated budgeting sites such as Mint.com. (Competitors exist, but I focus on Mint because it’s garnered the most traffic.) Mint allows users to download their online accounts—credit cards, checking, debit cards—onto a single interface that tracks expenditures and generates detailed reports. I’ve worked with Mint for more than a year and I’m a convert. The site saves me hours of grunt work and, best of all, it’s FREE. I even spend more time on my Nordic Track.
Like most other budgeting sites, Mint asks you to provide the user names and passwords for all the accounts you use to pay expenses. This is highly sensitive information that hackers potentially might use to steal your money. Before you decide whether to use Mint, it’s prudent to assess your risk of loss.
Mint utilizes multiple systems to protect your funds. It bars money transfers, so if hackers steal your Mint password, they can look at your account holdings, but they can’t make withdrawals. Mint notifies you of any unusual transactions, which lets you take quick action in the event of nefarious activity. Mint encrypts all your data so that it’s unreadable without the use of multiple decoding keys, which Mint divides among several “key” executives. So far, these many security measures have worked. Since it began in 2007, Mint has never reported a breach. If you still remain skittish, you can protect yourself in several ways.
□ Use a Complicated Password
The more complex your password, the less likely hackers will ever access your Mint account. Use random numbers, lowercase letters in combination with uppercase letters, and the same symbols that cartoon characters curse with: “!#*&$.”
□ Don’t Link Accounts With Major Assets
Don’t tell Mint about your savings or brokerage accounts. The advantage to you: hackers can never view these holdings if you never list them in the first place. And if you ever draw down on these accounts, you always can record the transactions in Mint with manual entries.
□ Buy Software Instead
If Mint ever gets infiltrated, any user’s ultimate backstop against loss will be the federal law that limits personal liability on credit card fraud to $50 per card (see Chapter 49). The problem, however, is that this law has never been tested in courts as applied to budgeting websites. Card issuers will argue that customers lose federal protections when they disclose to budgeting websites their user names and access codes. If the matter ever comes to a head, who will prevail: consumers or the big credit card companies? There’s no way to tell in advance. If you’re queasy about this legal uncertainty, consider software that retrieves your expense data from the internet and maintains it on your computer’s hard drive. The leading product, Quicken, costs about $40 and is offered by the same company that owns Mint. Of course, you’re still exposed to loss if anyone steals your account passwords or hacks your computer.
□ Try Another Budgeting Site
At BudgetPulse.com, you don’t supply any user names or passwords for your accounts. This provides terrific security, but in return you have to make a truckload of manual entries.
More than ten million users have opted for Mint despite the possible security risks. If you make the same decision, these hints will make tracking your expenses a breeze (and a Minty fresh one at that).
□ Push More Spending to Credit Cards
The more you pay with plastic, the fewer manual entries you need to make. Follow the tactics in Chapter 49 to increase your percentage of plastic transactions. (Reminder: don’t ever use cards unless you pay them off in full every month.)
□ Teach Mint How to Allocate Expenses
Let’s say that whenever you visit a 7-11 store, you only buy gas. You know this, but Mint doesn’t. With a one-time manual entry, you can instruct Mint to categorize all future 7-11 charges as gasoline purchases (highlight any 7-11 entry, click “Edit Details,” click “Manage your rules,” and follow the onscreen instructions from there).
□ Purify Your Spending
Mint automatically allocates all supermarket receipts to groceries, but if you also buy cleansers and paper towels there, it overstates your food spending. If you limit your supermarket purchases to food only and buy non-food items elsewhere, you improve Mint’s accuracy. Other places to purify: at gas stations buy gasoline (no snacks or drinks), at drug stores buy OTC remedies and cosmetics (no food or clothing), and at office supply stores, limit yourself to office staples (no DVDs or foodstuffs).
□ Allocate Single Transactions Among Several Line Items
At some stores, any given receipt can implicate several different expense categories. A stroll down Target’s aisles can fill your cart with OTC drugs, house wares, food items, bed linens, books, and more. If you’re willing to make manual entries, Mint lets you click on any given transaction and distribute it among several line items (highlight the transaction, click “Edit Details,” click “SPLIT,” and divvy up as necessary).
□ Create Catchall Categories
Another solution for transactions that inescapably involve multiple line items: assign them to a catchall category. To capture your visits to Target and Walmart, for example, you can create a new “Discount Stores” category. If at any point this line item gets too large—say over two percent of total spending—you can examine individual receipts and allocate them to more specific line items (see above).
□ Enter Reimbursements Manually
Several times a year, you receive money back that Mint can’t possibly know about: you charge your credit card $89 for a group dinner and receive $65 cash from others, you pay $199 for contact lenses and a $20 rebate arrives six weeks later, or your insurer refunds you $175 for overpaid premiums. Do nothing, and Mint overstates your spending. If you enter the reimbursements manually, however, Mint’s accuracy improves (on the top right hand corner of the Transactions Screen, click “+ Add a Transaction” and follow the on-screen instructions from there).
□ Account for Cash Spending
Mint picks up all of your ATM withdrawals, but it can’t report where you spent the cash. One solution is to create another catchall category by telling Mint to treat any ATM withdrawals as “miscellaneous expenses.” If this catchall grows too large—again, more than two percent of your overall spending—you can review your receipts and reallocate them to more specific expense categories (click the “+ Add a Transaction” button).