Fixing Personal Finance Software

How much do you spend each month?
How much do you earn each month?

I’m not talking about your business, I’m talking about your personal finances.

On the surface these are simple questions.

But, I’d bet that you don’t know exactly. Why is that?

Most people can tell you more-or-less how much money they have (or don’t have!) in their main bank account. But, as soon as you throw in a credit card and perhaps a separate savings account or some investments, getting a summary and tracking movements across all of your accounts is not straight forward.

And, while every salary earner can tell you how much they make per year gross, it’s not so clear cut once you deduct PAYE, student loan repayments, KiwiSaver contributions, etc, and then perhaps throw in some interest from a savings account to top it up. If you’re paid weekly or fortnightly it can be difficult.

What’s more, in my experience, it’s surprisingly difficult to answer these two questions accurately without investing serious amounts of time in managing your finances.

It’s not that people don’t care, or prefer not to know.

Consider this quote from a former developer on the Microsoft Money team (the bits in bold are as in his original post):

“The majority of consumers who buy computers claim that personal finance management is one of the top three reasons they are purchasing a PC. They’ve been claiming this for more than a decade. But only somewhere around 2% of consumers end up using a personal finance manager, with Intuit Quicken and Microsoft Money dominating the market. Both products have been around for — you guessed it — more than a decade. This dramatic disconnect between consumer demand and actual market penetration is mind-boggling.

Take a guess at what percentage of consumers launch Money ever again, after running it only once. You’ll need to remove a digit from whatever percentage you’re currently guessing. It’s seriously that low. Granted, most copies of Money are actually pre-installed by the OEM on consumer machines, so you’re not exactly dealing with a captive audience. But we’re still looking at a huge discrepancy between expressed consumer desire and actual consumer behavior.”


So, based on this evidence, you’d have to say that the tools are broken.

How do we fix this?

How can software help rather than hurt?

What makes it so hard at the moment?

The popular applications (Microsoft Money, Quicken, etc) are all simplified versions of business accounting packages, so they start with an assumption that you will categorise every transaction. This is where the problems begin…

Firstly, you need to come up with a set of categories that suit your spending habits. On the surface this is easy, but the devil is in the detail. For example, do you have one category for “Food” or do you split it out into “Groceries”, “Restaurants”, “Take Aways”, etc. You are forced to choose between a few high-level categories, which make it easier to categorise but don’t provide so much detail, or a nightmare of categories and sub-categories and sub-sub-categories.

Secondly, you need to get your transactions from your bank into your system. Overseas the tools integrate with the banks to automate this process, but here you need to manually log into your bank, export a file and then import into your application from there. This is a huge barrier to updating your accounts on a regular basis.

Then, assuming you can get all of that right, you still need to invest the time it takes to categorise each and every transaction each month. This is where it can quickly start to get ridiculous. If you tend to use EFT-POS a lot like I do then you’ll have hundreds of transactions to categorise each month. And if you don’t, you’ll need to remember how you spent your cash. For example, if you take $100 out from the ATM and spend it on various things over the course of a week, how do you deal with that? Or, if you buy a chocolate bar from the petrol station does that get split out or grouped in with “Petrol” or “Car” or “Transport” (or whatever category you’ve decided on to track that particular expense).

Some of the newer online tools have tried to use the advantages of the web to address some of these problems.

Wesabe allows you to tag transactions – so each transactions can be logged in multiple categories. They also recommend tags based on their community of users. Mint takes this a step further and tried to automatically code your transactions for you. The downside is that you have less control over the categories used, and have to live with some inaccuracy (they wouldn’t be able to deal with the chocolate bar and petrol example above, for example).

Wesabe has a browser plug-in which partly automates the transaction import for you. Mint fully automates this process by asking for the login details to your online banking site. As far as I can tell anybody who does this will breach the terms of use of their online banking site, and leave themselves exposed from a security perspective, so I wouldn’t recommend it.

There must be a better way!

So, let’s step back and question the assumption that underpins most, if not all, of these problems:

Do you actually need to categorise every transaction?

I don’t think so *.

Go back to the questions that I asked at the top of this post.

To answer those you simply need to be able to add up all of the money paid into your accounts (your income) and all of the money paid out of your accounts (your spending). Any transfers between your accounts can be ignored

Imagine a system which would do that automatically for you – no work required, just login and see the totals, updated each day.

And, if you could create a system that people would actually use then there are lots of potentially interesting things you could start to layer on top of that.

You could show trends to show how spending is increasing or decreasing. You could allow people to create “goals” – a savings target, or a specific debt to repay – and display a barometer to track their progress. Or, you could recommend related products or services that are likely to be of interest to that user, based on their earning and spending habits. These are the things that people actually have in mind when they say that they want to use their computer to manage their finances. But they are just three simple examples. I’m sure you can think of others.

Who could do this?

The banks should be able to do this sort of thing really easily, because they already have the transaction data. But, I’m not holding my breath.

Most online banking systems feel more like a thin layer of lipstick on a crappy underlying banking system rather than a web application designed with any consideration for what the users wants to do. And, while it may be a little unkind, I just don’t back a large bank to be able to execute on this sort of application.

And any bank that tried to do this would need to work out how to source transaction data from other banks so that all accounts can be included (this actually isn’t as unlikely as it sounds – when I was in the UK I used for my online banking, and they were able to display transactions from my HSBC accounts via their clever Money Manager system).

So I reckon this is an opportunity waiting for somebody to grab it.

Perhaps I should suggest this to the team at Xero?

* If you’re stuck with a system that insists you categorise every transaction, you can get the same results by limiting yourself to just two categories: “Income” and “Expense”.

Related posts (manually generated):

Additional reading:

It’s mostly unrelated to the topic of this post, but the MSDN blog I linked to above is actually quite entertaining. He seems to write one excellent blog post each year. I like his style! :-)

20 thoughts on “Fixing Personal Finance Software”

  1. Hi Rowan, I couldn’t agree more. I’ve been maintaining my Finances in Quicken (uninterrupted) since 1994. Every single upgrade since then has been absolutely flawless, which is a testament to well-written software (I won’t mention the continuous bloat with every new version).

    However, lately I feel like I just don’t derive any benefit from the huge effort involved in the upkeep.

    You say there is an opportunity, but you aren’t clear how that opportunity is different from Mint and Wesabe — at the end of the day you still need to give these services access to your private banking login (which is something I’m not prepared to do).

    Great post, thanks!!

  2. I’m not so sure people just want to look at an overall income and expense figure each month – pretty soon they’d want to see where they spent their money. And from the business’ perspective, you’d have much more to work with if you could target offers based on what people were spending their money on (rather than just how much they were spending/earning).

    If you can get data out of the banks (ala Xero), I’m pretty sure you’d be able to do some categorisation for people using Merchant Category Codes from credit card purchases. It would involve matching standard detail fields in bank transaction listings back to MCC numbers (ouch), but if it weren’t difficult everybody would be doing it ;o)

    See these PDFs for how detailed the MCCs can get:

    Click to access Merchant_cateogry_codes_control.pdf

    Click to access P58mcc_codes.pdf

    Financial co’s use these themselves to do data mining on purchase types for a raft of reasons that would freak most people out. With matching, you might also be able to apply these to eftpos transactions. That leaves cash transactions out, but I can’t think of any way other than self-tagging for that.

    Of course, the cynic in me says that people only say they are buying a PC to manage their finances because it helps them rationalise the purchase. Once they have the machine the rationalisation is over – so they don’t actually have to go to the effort of following through! Or, perhaps they start and then realise they would rather not know… it is easier to keep yourself ignorant than to change your lifestyle ;o)

  3. i wrote my own app over a couple of days, i have to import the bank statements but that pretty easy for me.

    i classify each transaction into one category only, i am happy to live with the inaccuracy. it remembers what the last classification i used was and next time around 80-90% of my transactions are automatically classifed

    i get a simple page and a couple of graphs < 10mins per month. does it help ? i’m not sure, i look at it and pick 1 thing i need to fix every month. usually the same thing every month, less takeaways

    it is interesting to watch petrol become a substantial part of the budget and i live close to work too

    it is a real shame the banks can’t do this. They are in the prime position to do so, and think of all the money/time it would save. if an existing customer applied for a home loan and the bank could just print a copy of their latest budget, rather then the user having to guess their income/expenditure. not to mention all the other budgeting services they could offer, even charging a few dollars per month for the added budgeting service.

    i don’t have much faith in banks either, but i must say my dealings with nz banks is about 100 times better then the service i have got from hsbc in the uk, which was even worse then the service from westpac (which a refuse to use anymore).

  4. Hi Rowan,

    I think it’s a great idea for Xero. I can see ‘Xero personal’ as a great free/cheap tool that would get a lot of traction in the market if it could provide a personal profit/loss statement. It would provide another channel to promote Xero too.

  5. Rowan, great post.

    The never ending migration of institution capabilities in financial technology from the wholesale end down through mid tier businesses and private banking to the normal retail customers still applies here. So yes, we will eventually get great tools like the ones you’d like to see.

    I know I am keen to use them but remain sceptical on when they will arrive.

    The problem is even large instos don’t have this working well yet (look at the trade matching problem in investment banks for example) and even private banks and financial advisers don’t handle the consolidation problem for people with investments all over the place.

    Let alone tracking that chocolate bar, although I’d argue why bother.

    I agree we can’t rely on banks to deliver this, they will always be aligned with delivering their own product’s data better than any third party. Especially with more bank consolidation on the cards.

    Even then, banks like anyone need to make a buck out of it somewhere to pay the light bill.

    So it falls to the independents like xero and saasu and wesabe and mint (and more)to consolidate, but we need to keep context – this has been a challenge for hundreds of years. Fortunately we are better placed to do it in the next 5-10 years than at any time before. Fingers crossed.

    Cheers, Peter.

  6. Hi Rowan
    yes, something that has frustrated me since before Xero… so I created in my ‘spare’ time…

    its based on wesabe/mint/xero stuff. uses wesabe like tags to classify, and auto-classifies based on user and shared patterns.

    The main thing it does is sort out your GST (if you’re a contractor), then feeds this in to a IR3 at the end of the year.

    its very alpha at the moment, but will be refined over the next few weeks. Hopefully BNZ will rediscover my application for PC banking service, so I can automatically download data.

    I hesitate to mention it, since it is alpha, but… hey, seize the day right?!

  7. actually, since Im a pretty agile developer, if anyone has a wish-list for simple money management along the lines of 33percent, let me know… be great to get some ideas from real people! at

    i’ve designed 33percent to deal with my needs. Its not for small business, its just for people who want to easily track bank transactions. and have gst sorted and archived, and fed into IR3 at year end. So any ideas/requests etc, let me know and I’ll look at building them in.

  8. Great post – ever since trying to sort out my spending with a financial advisor I have been missing something like this.

    Some observations

    1. Unlike businesses who have to do this for compliance reasons, individuals will choose to do this -> implies per your suggestion it has to be super simple.

    2. I think this is a progressive thing for consumers as it is essentially learning new behaviour – its hard enough just starting to look at income / outgoings so maybe that’s where you start and move progressively onto categorising

    3. If it could be tied into ways to improve consumer’s financial position (basic assessment of interest paid and better deals available or a/c consolidation) then I think it would be more compelling

    4. Tying it into net worth or some kind of financial goal and the actions you need to take to get there would be cool – kind of a mini mash up between xero and plan hq…

    5. My own personal experience is that this becomes top of mind when you move from a strong cashflow position to a weak one :)

  9. FANTASTIC blog post Rowan, great first return from a week away…

    I work for one of the top banks here in NZ. Suffice to say that we are well aware of the opportunity in this space. It’s great to see that there is latent demand in the market – as well as a clear understanding in some corners around how difficult it becomes to implement an engaging solution to what appears at first glance to be a straightforward issue. Most of the comments above touch nicely on the myriad of considerations in this space. I am confident that we have answers & proposed solutions on them all, and others – albeit no product/service in the market…

    I could say much more than that on our thinking & plans, but as you can understand its highly confidential.

    I will however point a few things out…

    Firstly, that a sustainable commercial model for the likes of Mint & Wesabe is not clear. Unlike xero et. al. which have a compliance, regular-use offering & can therefore charge their clientele, that proposition is not going to fly for personal users. A personal user ofering is going to have to be all abount engagement, convenience, and possibly community (not that Xero et. al don’t have those things – they just also have a quantifiable value based on existing and necessary business practice on which to price that offering).

    Secondly – big banks can do this kind of service / functionality well – check out Bank of America’s MyPortfolio offering. BoA has 2 crucial advantages over start-ups – a much bigger locked in audience in their existing online banking user base (in ~10 months, BoA has more users than all of the competing start-ups combined, yet only 10% of their own customers have signed up so far), and cross-sell / up-sell into other products and services around which to build the business case.

    Finally, on the local scene there are a number of start-ups around – see &… and suffice to say that Rod & co. have already thought of this opportunity…

    Rowan – drop me a line if you’d like to discuss further. We could well do with a savvy customer perspective to help sway the business case in the right direction!

  10. I use a NZ site: It has a very easy bank statement interface – you still have to log onto your bank and download a file but it recognises previously imported transactions and automatically categorises transactions for you. If you force yourself to always use EFTPOS this works really well.

    The problem I’ve found is analyzing the grocery spend. I know we spend too much on groceries but beyond that all I know is we spend almost all of it at New World. It would be nice to be able to see the alcohol spend versus veges etc

    We use Fly Buys, so New World know what the breakdown is but they won’t tell me. I’ve written to both Foodstuffs and Fly Buys requesting my “personal information” and neither of them have replied.

    So it seems the only alternative is to analyse the till tapes – which I’m not in a hurry to do.

    I’ve written to the Fly Buys to give me

  11. I run 4 companies through Xero at present and LOVE IT!! I would like to give it a go running our personal finances through it, and may get around to doing it and paying the $10/month for a “non GST” entity. I think $10/month is fair for personal finance management (considering the saving in end of year tax return prep), though a free personal version may have some viral attraction that allows people to try it out, and then bring their companies accross when they also “get hooked” :-)

    Perhaps also because we are running 4 companies through Xero it could possibly entitle my team/staff to a few free personal accounts?

    We run the accounts on Xero for HireThings, two property businesses, and a trading company (so 2 x GST & 2 x non-GST).


  12. I agree some of these. It’s a question. Now I’m using iMoney to manage my personal finance. it’s simply and easy.

  13. I recommend Fortora Fresh Finance – it’s very straightforward to learn and use. No software bloat, and has all the features most people need. Best of all it’s available for both Mac and Windows. You can see it at

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