Quick Update on Acorns Review from a few weeks ago:
Acorns launched a beta version of their rewards program called Found Money. If you shop with their partners, those partners will then invest money into your Acorns account. For example, if you are a member of Dollar Shave Club, like I am, they’ll invest 10% of your Razor Membership into your Acorns investing account. It’s a nifty way to put some few extra dollars into your investment account.
Now let’s get to Personal Capital…
In today’s podcast episode we’re doing a review of Personal Capital, a financial management software that is similar to Mint.com but geared toward higher net worth individuals. Higher net-worth individuals, in this case, are usually defined as those that have a net worth of over $100,000.
Before you click away from the screen thinking “I’ve got student loan debt up to my eyeballs so so I don’t have a net worth of $100,000”, don’t worry. My net worth is nowhere near $100,000 and I’m still using Personal Capital.
The real point is that you start thinking about net worth and get started, even if it’s just small steps. And that’s why I’m bringing this Personal Capital review to you.
But first, we need to have a little lesson in net worth.
What’s the big deal about net worth?
If you truly want a good snapshot of your overall financial picture, you’ll want to start tracking your net worth. Here’s a simple formula to help you figure it out:
Assets – Liabilities = Net Worth
So let’s say you have $50,000 in cash and investments, but you owe $5,000 in credit card debt. In this case, your net worth would be $45,000.
The reason net worth is important is because a lot of people mistakenly assume that a healthy financial life is tied to the amount of money they make.
While having a high income can certainly help, if you’re spending it all or owe more money than you actually have, it doesn’t really matter how much you’re making because you’re still broke. That’s why a lot of people argue that good money management is more about how much you save rather than how much you make.
Personal Capital vs. Mint.com
The main thing you need to know about Personal Capital is that it’s basically Mint but for investing. Quite frankly, if you know how to use Mint then Personal Capital will seem a bit familiar.
Where Personal Capital exceeds Mint is in the investment and net worth department. Mint has long been known as being the go-to free software for budgeting, but their investment portion leaves a lot to be desired. So if you’re starting to take investing more seriously, Personal Capital can pick up where Mint leaves off.
What You Get With Personal Capital
Once you’ve linked all your accounts and organized the transactions (more on this in a bit) you’ll notice a few very helpful things on your dashboard.
Income vs. Spending
Personal Capital automatically tracks your income and your spending. This is pretty nice because with Mint I found myself having to make an “Income” category in the budgets section to really get a feel for what was going on.
You’ll also see what you’ve spent your money on in this past month. This alone can be a huge time saver in determining where your money is going and whether or not you need to make improvements.
You’ll have a separate section just for net worth, though, honestly, you can see it in big green numbers at the top every time you log in.
This is where Personal Capital starts beating Mint. When you log in you’ll see a breakdown of where your money is being invested. Mint does do this in terms of showing you winners and losers, but Personal Capital’s report is far more in depth.
This has actually become my favorite feature. In the last couple of months, I decided that I would invest as much of my money as possible. Since I’m still living at home to help out with caring for my grandmother – I decided I would put the equivalent of a monthly rent payment into exchange traded funds. I’ve also got Acorns running all the time. It may really suck to see that money go now, but I know I’m going to thank myself later.
Each month that I log into Personal Capital I’m seeing the portfolio balances section creep up and up. When I saw that I’d gotten past the $10,000 mark I started squealing for joy. It was a very cool feeling and I felt like it was a major win for adulting.
You can set up bill reminders with Personal Capital, just like you would wth Mint. Although, honestly, at this point I’m all about auto-bill pay so I don’t really use this feature.
The only liability I have are credit cards. I always pay the balance in full each month, but I basically use credit cards for everything to get travel points.
If you have a mortgage or a loan you’ll also see this on your dashboard organized by their respective categories.
This is where things got a little messy for me when I first opened my Personal Capital account. When I linked my accounts the transaction categories were a total mess and I had to spend some time fixing it.
This isn’t a major con because this happens every time you try new financial software, but it is worth noting that you may need to spend some time fixing this up.
Personal Capital also supports over 400 different kinds of accounts – including Acorns which I couldn’t get linked to my Mint.com account. The downside is I couldn’t get my Digit savings account linked so I always have to remind myself to manually calculate those savings into my net worth.
This is another really cool tool that has become very helpful as I up my investment game. Personal Capital offers a free investment checkup where it assesses how you’re doing based on your profile. I was happy to see that, according to them, I’m on track.
However, I also learned where I could make some small adjustments and improvements to make sure everything is balanced. For example, it told me that I should have a little more liquid cash saved up – which is totally crazy because I never thought my investments would surpass my cash, but they did – so now I know to focus on boosting my cash savings.
How Personal Capital Makes Money
Personal Capital is free to use. And, unlike Mint, they aren’t constantly trying to upsell you on opening new accounts or credit cards. They make their money by offering financial advisory services which you have no obligation to actually use.
I actually really like Personal Capital. I admit that in the beginning I was resistant because I tend to hate change. I know my Mint account like the back of my hand, so I was hesitant to learn yet another financial tool. However, since deciding to take investing more seriously, I have found this tool to be extremely helpful in seeing my entire financial picture.