March 17, 2010
By Laura du Preez
Two new programs can help you to get to grips with your spending habits, but fully integrated online budgeting software is still some way off.
Our financial services industry may be relatively sophisticated for a developing country, but when it comes to using technology for a simple task such as analysing your expenses and budgeting, we are way behind.
This past quarter saw the launch in South Africa of two programs aimed at assisting you to track your personal income and expenses.
These programs, developed by a bank and a software company, take the tedium out of drawing up a budget and tracking whether you are sticking to it. They allow you to import your electronic bank statements, and analyse what you are spending your money on and how your expenses stack up against your income.
Spreadsheet fans who are already importing their bank statements into Microsoft Excel may be unimpressed, but these programs will make budgeting easier for the unskilled.
However, a quick review of similar offerings, particularly in the United States, shows that these kind of tools could be made more convenient and could even be set to work helping us to identify ways to save.
Nedbank launched its Personal Money Manager in June. Internet banking clients with current or savings accounts can download the software from Nedbank’s site (here) free of charge. Nedbank says the value of the software is R499.
Once you have installed Personal Money Manager, you need to use its Account Setup Wizard to recreate your Nedbank accounts (you can have more than one) in the program.
You then download your statements from your Nedbank internet bank accounts as comma separated values (csv) files. The demonstration on Nedbank’s website shows that it takes one easy step, selecting "Import all statements" from the "File" menu, to load all your bank statements automatically.
Next, you need to classify your transactions by "type" according to a pre-populated drop-down menu that contains the names of the merchants or service providers you have paid, or that have paid you, as recorded on your bank statements. Alternatively, you can add your own transaction types. This allows you to order your transactions by type and find out how much you spend, for example, at Pick n Pay or at your favourite coffee shop.
Next, you can classify all your transactions into groups – such as groceries, medical expenses, home expenses, vehicle expenses, and so on. This enables the software to identify how much you are spending in each expense category.
Once you have done this, you can view a bar chart or a pie chart of your expenses – both of which will enable you to identify where the greatest slice of your income is going.
The "Budget" menu allows you to set up your personal budget, against which you can compare your actual income and expenses for the current and previous months.
Personal Money Manager includes a loan repayment calculator to help you make wise budgeting decisions. You can use the calculator to see what effect making room in your budget for additional repayments will have on your mortgage, for example.
You can use Personal Money Manager’s bank fees calculator to identify what your banking costs you. However, if you want to find the most cost-effective way of banking at Nedbank, you need to visit the bank’s fees calculator on its website (look in the "Rates and fees" section for "Bank fees calculator").
Personal Money Manager is a useful tool for people who bank exclusively at Nedbank. It could be a lot more useful if it included your credit cards and updated your transaction history automatically (without your having to download and then upload your statements).
Bryan McLachlan, Nedbank’s head of transactional products, says the bank intends to introduce both credit card statements and automatic updates into Personal Money Manager, but this may take time.
He says the economic downturn motivated Nedbank to offer the software as it is, to assist its clients to manage their finances better.
McLachlan says later versions may extend to bank accounts beyond Nedbank, and the software may even be sold to users who are not Nedbank clients.
A bigger picture
The second offering, launched in May, is Pastel InCheck (www.pastelincheck.co.za) from Softline Pastel Accounting, which specialises in payroll and accounting software.
Pastel’s program differs from Nedbank’s in that its software is online. In addition, it provides a complete picture of your finances, as you can load into it any bank account, credit card and investment statements that can be downloaded as open financial exchange (ofx) files (files supported by all the banks). If a statement cannot be downloaded as an ofx file, you can add that account’s details manually (although this could be as laborious as using a ledger).
According to Pastel, pay-as-you-use online software is the latest trend, as it is always up to date, the provider backs up the data, and you can access it from any computer connected to the internet and not just the one onto which the software is loaded.
With Pastel InCheck, the first three months are free and thereafter it costs R120 for the year.
To use Pastel InCheck, you need to create a profile with a username, password and your email address.
You need to name your bank accounts, but you don’t have to provide your name or account details.
Pastel InCheck uses encrypted data to ensure that no one can intercept what you input and has firewalls to stop people hacking into the database.
You need to enter the starting balances of your accounts in the "Setup" section of the site. Then, from the "Setup" menu, go to "Payees" and "Categories" and create a list of the companies or people you pay regularly, or who pay you, and the categories into which your expenses can be classified.
Once you’ve done this, as with Nedbank’s Personal Money Manager, you download your statements from each of your online bank accounts, but this time as ofx files. You then upload them by choosing "Import ofx file" from the "Transaction" menu.
Your transactions should load into Pastel InCheck, and you’ll need to select the payee and the category from a drop-down menu for each transaction.
You then follow the "Reports" link from Pastel InCheck’s home page and view:
Your spending by category as a pie chart;
Your ins (income) versus your outs (expenses) on all accounts as bar graphs (hopefully, the income bar is taller than the expenses bar);
Your ins versus your outs as bar graphs for each month of the past year; and
How you are doing relative to a previous year in terms of income and expenses.
Softline Pastel E-business divisional director Nils Woxholt says Pastel has plans to expand InCheck’s functionality without charging you more.
He says it will provide services, such as fuel logging (possibly allowing you to use your cellphone to record the details each time you fill up). Then, without compromising your privacy, InCheck could provide comparative statistics for, say, all its users who drive a particular vehicle, so that you can see whether or not you need to adjust your driving style – or service your car more often.
Taking things to the next level
While these planned features will be a plus, the biggest benefit would be if you didn’t have to download your statements from your bank account and then upload them into InCheck.
Woxholt says Pastel is talking to the banks, but such automatic feeds could still be a way off, as South African banks don’t, unlike those in the US, allow different levels of access to your account. In the US, bank clients can give money manager software or websites their account numbers and passwords but restrict their access to reading information only (that is, block any transactions).
Thanks to this and many more internet bank users in the US than in South Africa, there are at least 16 budget-analysing software providers in the US.
Microsoft was one such provider, but stopped selling its Money program in June this year. Speculation is that sales lagged those of its competitors and Microsoft needed to save money. As with Personal Money Manager, Microsoft Money loaded onto your computer, but it was integrated with online services, such as your internet bank accounts, a bill-paying service, share prices and the latest tax information.
Another popular program among US consumers is Intuit’s Quicken. Quicken is now offered free online and is accessible from cellphones. Quicken earns its revenue from selling other software, its own credit card and deals from participating retailers.
A new entrant into the US money manager software market, Mint (www.mint.com), is also free.
Mint earns its revenue by offering you alternative financial services that can save you money and, if you accept them, it earns commission. For example, Mint may analyse your cheque account and inform you that you could earn better interest from another bank’s account. It also earns revenue by selling aggregated information about users’ spending habits.
US developments are not lost on local providers. Woxholt says Pastel may look at using Mint’s referral model to fund InCheck to reduce the cost for you. This may be a great future enhancement, but don’t sit around and wait. The existing offerings from Pastel and Nedbank can already assist you to make more informed spending and budgeting decisions.
This article was first published in Personal Finance magazine, 3rd Quarter 2009.See what’s in our latest issue
  
 
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