Innovations boost money-management tools

DALLAS - The first thing most people notice is the absurd amount they spend eating out. They assume it's a mistake. They recheck the numbers. They swear at their computers. Then they start bringing lunch to work.

That's right. Money-management software doesn't just track where money goes. It all but forces users to spend smarter. And it's finally easy enough for ordinary people to use.

Money-management software such as Intuit's Quicken hit the market decades ago and promised to revolutionize personal-financial planning. But the early software was maddeningly cumbersome. Recording a single check took longer than balancing a week's worth of checks by hand.

Things are different today.

New competitors, some based online, have sprung up to challenge Quicken and Microsoft Money with innovative features. For example, modern software can import transaction information directly from your bank, brokerage and credit card company.

"The easier we make it, the more users we'll get, and that's good for everyone. Americans really need help tracking their money," said Donna Wells, chief financial officer of the Web-based program Mint.

Restaurants and bars are not the only surprisingly expensive habits. Some people notice that their innocent coffee habit costs several hundred dollars a year. Others find that they could pay a small mortgage with the money they spend on shoes.

Many new users limit themselves to informal changes. If, say, you are overspending at restaurants, you might stop ordering appetizers. If that does not cut your bills enough, you might substitute water for soda. Others set budgets.

Historically, money-management software made budgeting difficult. Not only did users have to enter expenses, but they also had to classify each one. The only thing the software did was add the numbers quickly and correctly.

These days, programs automatically import and characterize expenses. The only thing users do is set limits.

Web-based programs let users check their budgets by cell phone before making a big purchase. If users exceed their budget in any category, the software sends out e-mail or text messages instantly.

Some say the convenience of Web-based services - which also are called account aggregators - comes at the cost of security.

"If someone sneaks into your aggregator's database, he isn't walking away with just your credit card number - he's walking away with all your financial information," said Arkadi Kuhlmann, chief executive officer of the bank ING Direct. "Just one breach could mean financial ruin."

Worse, Kuhlmann said, "most account aggregators claim no liability for lost or stolen information. They are not legally obligated to reimburse customers in the event of a security breach."

That said, Web-based products use top-notch security. Indeed, most use the same security measures as banks such as ING Direct, and millions of users apparently were comfortable with them.

Yodlee, a company that serves both consumers and other financial programs, says it manages about 10 million accounts. Even Intuit has launched an online version of its flagship program, Quicken.

But it is hard to answer the biggest question: How much can software improve a user's financial position?

"We only have anecdotal evidence from consumers, not hard data," said Melanie Flanigan, a spokeswoman for Yodlee. "We are starting to do more analysis and surveys, so we will, over time, have more data behind this."

Even academicians concede their puzzlement.

"We can't tell whether these programs appeal to people who wouldn't otherwise track their finances, or whether they just make life easier for people who would track their money no matter what," said Conrad Ciccotello, director of personal-financial-planning programs at Georgia State University.

In his gut, however, Ciccotello suspects that software provides real benefits.

"For the final project in one of my classes, students must prepare a detailed financial plan for themselves," he said. "The ones who use some kind of software always get it done in half the time, and they do much better work."

Web-based software

Mint.com

Yodlee.com

Buxfer.com

Geezeo.com

Wesabe.com

Quicken Online (Quicken.Intuit.com)

(All are free except for the online version of Quicken, which costs $3 a month.)

Mint.com generally gets the highest marks because it offers a lot of features, and it is easy to use. Geezeo.com and Wesabe.com try to stand out by combining financial management and social networking. Users who fall into a specific group - say, cash-strapped, single twentysomethings - can join groups designed for their demographic and share ideas for saving money.

Desktop-based software:

Quicken 2009 Deluxe Edition ($80)

Money Plus Home and Business ($70)

SplashMoney ($30)

Critics have generally given roughly equal marks to Quicken and Money. That may change because Microsoft has stopped providing annual updates for Money, while Intuit keeps rolling out new features for Quicken. Also, keep in mind that Money will not work on Macs, and it is no longer available in stores; you have to download it from the Web.

SplashMoney lacks many of the features that come with the deluxe versions of Quicken and Money. However, critics tend to praise its ease of use, along with versions of the software developed for smartphones.

SOURCE: Dallas Morning News