I hate balancing my checkbook. It is a pain in the ass and not at all exciting. When I first got my checking account, it was no big deal. Then ATM cards came along and it got a little more challenging, but not quite. ATM cards eventually evolved into check cards. They're incredibly convenient, but I find myself using cash less and less. The convenience has a dark side, though. Keeping a tight reign on my financial life has become more and more difficult.
The first rule of wealth building is to spend less than you make, right? So that means you have to keep track of both your income and your spending. Over the years, I have struggled with that. There have been times where I have balanced my checkbook for more than six months at a time. I know, that's not good. I generally had no idea of where my money was going. I just made sure that I didn't get too close to zero. A few times, I wasn't very successful there, either. And, while they'll deny your credit card for going over the limit, banks seem to like the $35.00 for each debit transaction that overdraws your account. That makes for an expensive candy bar at the gas station.
For years, I have used Quicken to manage my money. Over the years, Intuit has built an incredibly powerful and comprehensive money management program. The problem is that it is almost too good. If I had a better understanding of accounting practices, I might be able to use it more effectively. Still, it requires the discipline of entering purchases and balancing your accounts. Even though it has some nice online banking integration, security protocols from my banks make it somewhat inconvenient to use.
Last year, I took Dave Ramsey's Financial Peace University at a local church. There, I learned to create spending plans and cash flow plans in a way that was empowering. Now, I had learned this in high school, but our teacher left me more terrified of this than excited. My money anxieties flared up any time I tried it, and I eventually gave up, but the tools that Dave provided in the course were easy and useful. By the end of the course, they had helped me to significantly reduce my debt and get my finances headed in the right direction.
My problem with Dave's tools were that they were mainly paper based. He does offer tools on his web site, but they don't integrate with my money tracking in Quicken. I tried using the tools in Quicken, but they were too complicated.
Over the past year, I spent some time looking at alternatives to Quicken. I found a number of programs that claimed to do the trick. Every one of them had some flaw that kept them from making the cut. Along the way, I did find a couple exceptional contenders. Money Well, from No Thirst Software, and moneyGuru, from Hardcoded Software, are among the best Quicken alternatives I found. The are both easy to use, provide comprehensive features, and help you see your financial situation at a glance. They're worth checking out.
About a week ago, however, I found an online program called Mvelopes from Finicity. It's also offered as a rebranded program through David Bach's Automatic Millionaire web site. I have to say that this is, by far, the best personal finance management program I have encountered.
When I first saw the program, I was hesitant. This is a completely web-based, subscription application. That means you pay a fee every quarter, year, or two years, to use the service. It's a little more costly than purchasing Quicken every two years, too. In order to use all of the features, you also have to give it information about your bank accounts, including usernames and passwords. Because it's a web-based application, of your financial data resides on their servers, not your own.
Those factors stopped me for a little while. I did some careful research into their security protocols, and found that they are solid. I realized a few things along the way. First, their servers are a lot more secure than my computer. Second, their connections are all heavily encrypted. Third, their computers are redundant, meaning something catastrophic would have to happen for my data to be lost. That third point was driven home when my mom's Quicken data file suddenly went missing from her laptop forcing her to start over from scratch.
I signed up for a free trial of Mvelopes and was ready to go within minutes (see tour). The most brilliant part of their application is that it talks to your banks. When I make a debit card transaction, once my bank clears the purchase, it's automatically entered into my account.
The application uses a digital version of the old envelope system that families have employed for decades to successfully manage money. When income comes in, it is divided into a series of envelopes. When expenses come in, they are deducted from your account as well as the corresponding envelope. That means you know what money is coming in and where it is going at all times. If you want to spend money, you look at the envelope to see if you have any money to spend. If the envelope is empty, you don't make the purchase.
If you use credit cards, this application is even more helpful. It prevents you from overspending and helps you to pay off your card every month. When credit card transactions are registered, it moves money from the corresponding envelopes into a special envelope for your credit card payment. Used properly, this means that you can get rid of credit card debt faster and never carry a balance again or wonder if you'll be able to pay your bill at the end of the month. It makes your credit card work more like a debit card.
Because of the envelopes, and great programming, budgeting is a breeze. Your net worth is available at the click of a button to gauge your progress. I already feel like I have a better handle on my finances. Better yet, it works perfectly with the money management practices that I learned in Financial Peace University, so I don't have to try to learn a whole new method. I'm actually excited about this program because it is so elegant and empowering. I highly recommend it.
On the road to a million, the difference between mvelopes and the other programs is the difference between using a GPS or a map and compass.
