Online Tools Can Help Manage Money

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 brand spankin' new genre -- Geezeo.com, Mint.com and Wesabe.com -- all 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.

Web Sites for Money Management

Geezeo.com

Web site: geezeo.com
Accounts: Banking, credit cards, investments.
Tools: Budgeting, spending tracker, goals.
Community: Discussion groups, friends messaging function.
Other: Motley Fool ratings of stocks.
Mobile access: Yes.

Mint.com

Web site: mint.com
Accounts: Banking, credit cards, investments, student loans.
Tools: Budgeting, spending tracker, categorize, e-mail alerts, SpendSpace for comparing your spending with average of others and portfolio performance against the S&P 500, tracks banking fees, suggests best offers for accounts.
Community: A blog with Mint's CEO.
Mobile access: Yes.

Wesabe.com

Web site: wesabe.com
Accounts: Banking, credit cards.
Tools: Budgeting, spending tracker, categorize, goals, comparison with other members.
Community: Discussion groups, blogs, tips.
Mobile access: Yes.

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."

Users can set up automated budgets that notify them when they've overspent on one category, or overall. They can create e-mail alerts to let them know what's going on in their accounts. In short, these Web sites offer a powerful, free set of tools to help you see how your spending (and saving) patterns contribute to your overall financial picture.

Many of these sites offer social networking elements like discussion boards, messaging and personal profiles that allow unfiltered and wide-ranging discussions of personal finance topics. While exchanging advice and opinions on financial matters on these sites can be helpful and fun, the opinions of fellow members shouldn't be confused with the advice of a professional.

Security Holds Some Back

But in this time of economic turmoil, when everybody could use a better handle on their finances, what hang-up could one have about using these sites? One word: security.

"It's an issue of trust," says Needleman. "These sites work by getting financial data on your behalf from your banks, so that means you have to give them your password. Do you trust a startup with the keys to your checking account?"

To address this issue, Mint, Geezeo and Wesabe all have layers of encryption and data security that rival those of the banks they link to. While these sites each take a somewhat different approach to security, you can bet that the people running these sites understand the effect a security breach would have on their own sites and their entire industry.

"We have the same level of encryption that a bank does," says Aaron Patzer, CEO of Mint.com. "And that's not just SSL encryption. That's third-party verification ... and outside audits of our network and our security systems."

Patzer adds that the sites don't allow users to move money around or make payments from the accounts they access. So even if a hacker did break into your account, "they couldn't move money around; they couldn't drain your accounts. All they'd know is that 'HappyGirl17' goes to Starbucks."

"While they say they have unbreakable or very hard-to-break security, and none of them, to my knowledge, have been broken yet, if the passwords that they are storing on your behalf did get out, it would be very, very bad, and that's what people fear," says Needleman.

On the other hand, using these personal finance tools might help protect against fraud and theft. Each site can be set up to send e-mail alerts when purchases over a certain amount -- say $1,000 -- take place, and those alerts can go to your computer, cell phone or PDA.

"If somebody starts buying big-screen TVs because they've swiped your credit card, you'll get an unusual spending alert," says Patzer.

Most Appealing to Young

Still, many older Americans will probably be hesitant to divulge their online banking information. In addition, the sites in this space may have a hard time dealing with the more complex financial pictures of older users.

"I had a good budget for a month and a half, but I had to keep reclassifying my purchases, and frankly, I don't have the time for that." says Stephen Dill, a Mint.com user in Boston. "I felt like I gave it the old college try, but I just wasn't getting a lot out of it."

"If you have a rather simple financial picture, these services will give you a good picture of it," says Needleman. "But if you have a mortgage, an investment portfolio or alimony payments, or something like that, many of these services don't yet have the flexibility or depth to let you get a complete picture of your finances."

But these concerns aren't stopping younger Americans from signing up in droves. More comfortable by far with putting information about themselves online, hundreds of thousands of Gen-Xers and Millennials have already given up their online banking information in exchange for the services of a dedicated digital number cruncher working for them 24/7. And you can expect that number to increase as Internet-savvy young people meet financial challenges like saving for weddings, paying down debts, buying first homes and having kids. Here's a primer on the three sites shaping up to be the leaders in this segment:

Geezeo

Now residing under the umbrella of the TheStreet.com, Geezeo.com is MySpace meets Quicken. The emphasis here is on a combination of personal finance and traditional social networking. The site features "friends," messaging functions and the ability to create a profile with pictures, information about yourself and your confessions of financial ineptitude or acumen.

"We have a big social component with discussion groups," says Shawn Ward, co-founder of Geezeo. "It's funny, most people cringe when they think of mixing social networking discussions with finance. We believe that it's the perfect blend, because most people don't want to discuss their financial challenges with people they know."

Besides the normal transaction data and balances, Geezeo also has an excellent brokerage account feature that gives users a handy pie chart of their investments. The chart shows you what percentage of your portfolio is tied up in each stock and how Geezeo's affiliate, The Motley Fool, rates each of them.

Geezeo offers many of the same features as the other sites, including customized budgeting and spending categorization, and has pioneered the ability for users to set goals for saving and debt reduction. Overall, the site's blend of serious financial tools and "Facebook for finance" feel will no doubt win it fans among younger users.

Mint

The most popular and fastest-growing of the online personal finance tools, Mint's clear, intuitive and visually pleasing interface sets it apart. Open a pie chart of your spending and click on a wedge to have it broken down into finer and finer categories: merchants, individual transactions. See how your spending on categories like entertainment and rent compares with other users in your area as Mint automatically characterizes your purchases. It makes tracking your spending easy and fun.

"It's a really usable site," says Patzer. "We do a lot of usability studies; we do a lot of product design work. It's more effortless and it does more things for you."

Mint also has an innovative feature that looks at users' accounts and spending and scans a database to see if it can offer a better deal. Earning lousy interest in your savings account? Mint can suggest a higher interest rate if you switch to another bank. Paying out the nose on your credit card's interest rate? Mint will suggest a cheaper one. "Mint finds our average user (has) about $1,000 in savings," says Patzer. The drawback is that it makes only one recommendation instead of offering numerous options.

While Mint is still adding features and doesn't have the same community options -- for better or worse -- that the other sites in this genre have, it does do its number-crunching remarkably well.

Wesabe

Founded way back in 2005, Wesabe was the first entry into this corner of the Web. Wesabe combines personal finance tools like budgeting and expense tracking with social networking to create a brew that's helped thousands of users to get their finances under control.

"We provide community features that set us apart from all the other sites out there," says Marc Hedlund, co-founder and CEO of Wesabe. "We do a good job of connecting people with others that either are in their situation now, or were in their situation and have gotten to a better place and can share what works for them."

Hedlund calls this approach "collective intelligence," and many of the users seem to have bought into it. They post reviews of merchants and ask and answer user questions on message boards. In fact, they can even make selected financial details available to other members in order to get help or show a newbie how financial security can be attained. While Wesabe's data displays may not be as polished as Mint's, it does have an impressively large and dedicated community that can serve as a powerful motivator and guide for those looking to get control of their money.