Tuesday, September 18, 2007

Review: Mint.com

I was one of Mint.com's private beta users, so I'll give it a quick review now that the press embargo is over.

The traditional approach to personal finance is epitomized by Quicken or Microsoft Money: basically, a double-entry book-keeping spreadsheet made to look like a checkbook register to help you reconcile, categorize, and balance your accounts.

The main reason why most people don't use financial software (despite all the bundling deals that Intuit and Microsoft do) is because it's difficult, tedious, and real work. If you enter the data manually, it takes a while, and if you don't enter it manually, it won't categorize your expenses properly, and you don't actually get accurate reporting. There are all these problems where buying and selling stock don't actually track properly, and the whole thing is a morass. I say this as a long time user of Quicken (I've been using Quicken for 15 years --- I bounced a check once and I never did so again because of Quicken).

Mint.com takes the fresh graduate's intuitive approach to money: I can't be bothered to track every cent --- as long as my bank account goes up, I'm doing something right, and if it can categorize 90% of my expenditures correctly, that's more than good enough.

The premise of the site is that you'll register for on-line access to all your credit cards and banks. You will then provide your user name and password to them. That should sound really dangerous to you, but Mint's security advisory is reassuring. They then get all your up to date statements and poll your financial institutions and download your transactions continuously. New transactions are categorized by an AI-like algorithm (which can be easily improved once they get enough widespread adoption that they can apply statistical analysis), and you set thresholds for alerts to be sent to you (for instance, e-mail can be sent if expenditure exceeds a certain amount, or if large transactions occur, etc).

There are a number of weaknesses. First, they don't do brokerages. So your transfers to your brokerage will show up as "Business Purchase." Oops. In my case that thoroughly skews my reports. Secondly, without double-entry book-keeping, you will not detect bank errors! There's no forced monthly reconciliation, and no way for you to notice, "Hey wait a minute, I didn't shop there", unless you scrutinize each item yourself. For me, this is why I use Quicken. I've caught bank errors, identity theft, bad merchants, and many other problems because the forced reconciliation feature forces me to really look at each statement. By relying on the "as long as my bank account goes up" method, you won't catch any of these.

There are a number of strengths I don't find in Quicken, though! First of all, your Mint.com account is always up to date, including your latest expenditure. Their approach to budgeting is awesome: they basically average your spending in all the categories, and alert you when your spending is out of whack. Very automated, very slick, and very intelligent. If only Quicken was this smart. Finally, when they see suboptimal use of financial institutions, they'll tell you what a better move is (say, by recommending a better credit card, or a bank that pays higher interest rates), and they will quantify how much money you'll expect to save or get by making the move. Are their recommendations good? Well, for credit cards, they recommended the same one that PFBlog recommends as the credit card of the year. He does these analysis a lot more than I do, and I trust his recommendations, and if Mint.com comes up with the same thing, that says a lot.

Am I likely to keep using Mint? Probably not. I definitely am addicted to the reconciliation feature --- the fresh grad. approach to personal finance isn't anything close to what I want. The reporting fails for me as well, since if most of my money goes into investing, giving me 70% expenditure on "Business Purchasing" is of no use. But the budgeting and alerts system and the recommendation system is so good that I fervently wish that Intuit will adopt this for Quicken (the auto-categorization is already there in the latest version of Quicken, though it doesn't save me as much time as I would expect).

All in all, if you're a fresh graduate or you are currently not using Quicken or Microsoft Money, Mint.com is way better than nothing. For tightwads like me or the financially sophisticated who have a lot of investments, I'm afraid that Mint.com will not save you too much work.

Recommended if you fall into one of the above-mentioned categories.

[Recently, mint.com introduced the new investment tracking feature. I've reviewed that feature here.
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