Tuesday, February 3, 2009

Online Money Management with Free Secure Financial Tools

Ever wish for a financial adviser you could consult anytime, day or night, for an up-to-date picture of your finances, along with a pointer or two on how to improve them? Oh, and since money’s tight nowadays, could you make it free, to boot? Well thanks to the Internet, such help is available -- or at least an automated, digital version of it.

Online personal finance tools are rapidly gaining popularity as a way for the wired generation to keep track of their money. As cash usage declines and debit card spending increases, having a tool that brings all this data together can be incredibly useful.

The principle players in this new genre - Mint.com and Buxfer.com - operate in roughly the same way. Users create a secured account and then enter their online banking usernames and passwords, which the Web sites use to access a feed of information from their financial institutions. The sites then sift through this information to give users a real-time picture of their account balances, financial activity and categories they’re spending in.

Here you see how these companies describe their visions.

At Mint, we believe that money is for living. That’s why we’ve created the simplest and most effective way to manage your money…and why Mint.com is free. In five minutes or less, you’ll see where you’re spending your money, understand how your investments are performing, and set up realistic budgets. Set up email and SMS alerts and you’ll be automatically updated whenever there’s an important change in your finances. Only Mint.com finds you personalized ways to save money, using patent-pending software which analyzes your current spending. The typical Mint.com user finds $1,000 in savings in their first visit.

Baxfer goal is to create the best personal finance application on the web. Money is typically not the topic of discussion for a group of twenty-somethings wanting to have fun with their lives. But that’s only because today’s finance applications make it difficult and boring. That’s what we have set about to change! We want people to effortlessly understand their finances. And have fun while doing so.

Data drives the sites

Of course, all this depends on consumers having online banking usernames and passwords in the first place. Luckily, for these young startups, online banking is becoming more and more ubiquitous. A study by Internet research firm comScore found that in the fourth quarter of 2007, the top 10 banks alone had 47 million online banking users. And banks have responded by providing a rich flow of information for customers that is gathered in nearly real time.

Mint and Geezeo access this information through third-party providers Yodlee and CashEdge, respectively. Wesabe does not use a third party provider, preferring to establish a direct relationship with the banks it gets its information from.

"There’s a lot of data that comes your way just by using banks or credit cards," says Rafe Needleman, editor of CNET Webware.com. "The credit card companies know not just how much you’re spending, but where and in what categories. These sites kind of get that all together and tell you that between your five credit cards you’re spending $800 a month on dining."

Here’s a typical scenario: You go out to eat on Friday night. You order $15 worth of cheeseburgers, fries and beer and pay for it with a debit card. The next time you log onto your online finance tool, it downloads your new account balance, notes your $15 transaction and classifies it under "food & dining." Then, depending on the site you use and the settings you choose, it might scold you for going over your food budget for the month, offer advice from other members on how to save money when eating out, or display a pie chart showing what percentage of your income went to food during the last year.

"My husband and I started using Mint after we got married and merged accounts -- just so we could always stay on the same page," says Natalie Wardel, a Mint.com user in San Diego. "We have six different accounts to keep track of, and it helped us see everything at once."

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