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If there is one habit which I believe contributes to my ability to save as much as I do, more than any of the others I have developed in the past few years, it’s tracking my expenses on a daily basis.  This is a habit which takes me less time per day than I spend brushing my teeth, yet has one of the most profound effects on my behavior.  That makes perfect sense- you can’t know how to save money if you don’t know where it’s going in the first place.  To some, the discipline to track expenses might seem like a lot of work, but I hope to convince you that it’s really no big deal at all.  For those beginning their journey towards frugality, it’s entirely possible that once you see how much you spend in certain categories, you’ll be shocked.

Following a brief discussion of most of the common options for tracking expenses, I’ll provide some recommendations based on personality type and goals for which tool might work best for you.

Tracking Expenses: The Contenders

There are four popular options for tracking expenses in wide use today, and a great many less popular (but still effective) options.

Mint

Mint is probably the most popular of all the personal finance tracking sites. In many ways, they are the best free option available, but in others, they fall woefully short.

Not even close, Mint.

Mint is an online-only option that syncs with your financial institution, downloads transactions, and shows you current and historical data about your spending.  It supports banks, credit cards, assets/loans, and investments.  Mint does banks, credit cards, and loans fairly well.  For investments, on the other hand, it is a uniformly awful experience.  I have yet to see Mint report my investment balances, cost basis, or share price anywhere even remotely accurately.  It shows me ticker symbols that I neither own, nor have I ever owned.

I have a couple of other gripes with Mint.  For transactions which have not yet settled, the transaction amount may be wrong (such as when a tip is applied) or the transaction may go missing altogether for days.  For this reason, it’s very hard to know exactly where you stand.  This isn’t Mint‘s fault, per se– it’s simply a limitation of the online-only model.

More importantly to me, I want to see how my current choices affect the future, so I want to be able to project my balances in the future.  Mint has no concept of scheduled transactions.  You’ve got to figure this out yourself.

As previously mentioned, investment tracking is very, very bad.  This should never have gotten out of the beta stage.  My investments, which currently have a lifetime annual return averaging around 14%, currently show as averaging -48% in Mint, because the cost basis information is off by about 250%.  Yikes.

Mint does have a number of nice features like a free quasi accurate (called a FAKO) credit score updated every 60 days.  It has budgeting features by category, a goal setting tool, and some very nice reporting features that allow you to see changes in net worth, debt, and other key data points.

Mint supports itself with offers from partners and affiliates, so they somewhat insidiously insert all sorts of advertising.  Advertising itself isn’t so bad (This site contains ads too, and some of the links here may result in me receiving a referral payment), but what bothers me is that it is often phrased as having found you savings.  Offering me a high-interest credit card when Mint has access to know that all of my cards have better interest rates and telling me it’s going to save me money strikes me as troubling and deceptive.

All in all, Mint is a passable option.  I think it would apply to readers who want to be responsible for absolutely no data entry, and who don’t care too much about the accuracy of their investment tracking.  For me, though, it’s not adequate as I want up-to-the-minute information about my spending, and I need accurate investment reporting.

Pros:

• Very little work or manual entry involved.  You set up your accounts and there is little else to do.  Good for those who struggle with discipline.
• Access to most common banks and financial institutions with automated download of transactions.
• Huge community of users and an active forum.
• Value-add services such as a free credit (FAKO) score every 60 days, goal setting and tracking, and trend analysis are very nice features.
• Decent mobile app adds little functionality, but is still nice to have.
• Completely free of charge (you, as a target of advertising, are the product, not the customer).

Cons:

• No handling of transactions or balances for institutions which are not supported.
• Incredibly poor investment tracking.  I often see ticker symbols I don’t even own among my investment charts in Mint.  For those that I do own, share values and cost basis are completely wrong (often by a factor of 10).
• Delay between time of purchase and settled transactions means you seldom have a completely accurate picture of your finances (though it’s close).
• No projection of balances or scheduled transactions.
• Somewhat invasive advertising, often disguised as having “found you savings.”

Personal Capital

(Disclosure: Affiliate Link, signing up via the Personal Capital Link supports the site and allows me to write more content like this)

Personal Capital is another online-only finance tracker like Mint, but it does a number of things much better, most notably when it comes to your investment portfolio.

Personal Capital’s dashboard is clean and intuitive.

Personal Capital also has a much less cluttered, more data-centric dashboard for users.  I find it much less jarring to use than the Mint landing page, and the information presented to be much more relevant to me.  It displays net worth, cash flow, investment values and asset allocation on the landing page.  This, combined with account balances, is much of what I need immediately on an everyday basis.

The limitations of Personal Capital are some of the same as Mint.  It’s an online-only service and until transactions are completely settled, you’re going to be mildly to moderately out of date on your financial situation.  You’re also not able to project forward to see how current trends in spending affect you.  There is no concept of scheduled transactions.

All things considered, though, if you’re looking for a free and completely hands-off option, I’d go with Personal Capital over Mint.  I am more confident in the accuracy of the data I’m looking at, and there is less of an overt push to sell me sketchy products.

Personal Capital makes their money by offering financial services for users with greater than $100,000 in assets.  You may or may not be their target market, but there’s no obligation to engage them for those services, and you can continue to use the service for free regardless.

Pros:

• Clean, uncluttered account dashboard with the best coverage of investment performance of all options reviewed.
• Access to most common banks and financial institutions with automated download of transactions.
• Very good tracking of investment portfolio.
• Free of charge, and the customer’s data is not the “product.”
• Good handling of non-institutional assets such as vehicles, jewelry, and other property.
• No pushy or deceptive advertising.
• Mobile app offers no additional functionality over the web site, but is clean and intuitive.

Cons:

• As with Mint, no manual input of transactions.
• No handling of transactions or balances for institutions which are not supported.
• Delay between time of purchase and settled transactions means you seldom have a completely accurate picture of your finances (though it’s close).
• No projection of balances or scheduled transactions.

YNAB

(Above referral will save you $6 off YNAB)

YNAB (You Need a Budget) is less a finance management software and more a pure budgeting software.  Unlike the other options discussed here, YNAB makes no effort to fulfill the expectations of the user, and instead sets out a strict paradigm that the user is expected to follow.  In short, YNAB expects you to adopt the YNAB method of budgeting.  It does not adapt to you.

YNAB has one of the most ardent fanbases of all these products, and it’s easy to see why.  They aren’t trying to track your habits, they’re trying to help you adopt new ones.  YNAB’s site is chock-full of video tutorials in setting up your budget, entering of transactions, as well as scheduled, live classes on a variety of topics.

YNAB has OFX import, meaning you can download a file from your institution and then import it, but it lacks a direct interface with your bank to do so.  This adds one step to the import process, but isn’t terribly odious.  Still, when all the other option here can speak to your bank directly, it feels a little archaic.

YNAB’s monthly budget tracking screen.

YNAB has no forecasting ability whatsoever, and even seems to actively discourage doing so.  I’m sure this makes sense to those who are struggling to keep their heads above water, but it is less relevant when you’ve started to accumulate cash and are planning future investments.  There are a few hacky ways to project expenses forward, but they are unpleasant to attempt.  For me, this is a dealbreaker.

YNAB has only the barest support for tracking your assets and investments, and no interface with pricing or cost basis information whatsoever.  Thus, getting an overall picture of your financial situation is difficult or impossible in YNAB.

All in all, YNAB seems like a great option for those who need budget structure imposed on them, ie, those whose spending is completely out of control.  It’s harder for me to see how it helps those who are attempting to accumulate early-retirement level wealth.  Still, it’s important to choose the right tool for the job, so if you are in a debt emergency, and you need a strict budgeting tool, YNAB is probably the best choice.

Pros:

• Provides a disciplined framework for setting and obeying a budget for those who need it.
• Allows you to schedule transactions.
• Allows OFX import of transactions from your bank.
• Has a small but friendly selection of reports such as spending, income, and net worth.

Cons:

• Imposes too much structure on those who do not need or wish to follow a particular budgeting method.
• Lacks tools for effective financial forecasting beyond the next month or two.
• Does not have direct interface with financial institutions.
• Does not look at the “whole picture.”  Lacks tracking of assets and investments completely.

Quicken

Update: On 8/21/2015, Intuit announced that it would be selling its Quicken unit.  It is not yet clear what this will mean for users, as no buyer has yet been confirmed.  It is something worth keeping under consideration going forward.

I have a routine when it comes to tracking expenses for our household.  If I spend money during the day, I always make sure to get a receipt, which I tuck into the billfold in my wallet.  If I order something online, I leave the invoice in my inbox until I log it.  Every night, I sit down and enter each receipt into Quicken.  It takes me five minutes max (usually closer to one minute) and keeps me completely tuned in to everything going on with my finances.  When my spending starts to get out of control, I find out right away, not just when my credit card statement arrives.

Quicken’s investment tracking

Quicken supports scheduled transactions, and can show you future balances and transactions for up to a year by default (see addendum below for information on hacking this to a larger value).  You can also download the transactions from your bank like Mint and Personal capital, and manually entered transactions are automatically reconciled with downloaded ones.  In this way, you get the best of both worlds: Current balances, downloaded “official” transactions after the fact, and the ability to see how it all affects you far into the future.

Quicken’s investment portfolio tracking is very good.  It’s hard to imagine that this came from the same people who built Mint.  Transfers from your bank accounts into your investments are handled gracefully, and show in both accounts as credits/debits.  It’s easy to see what you paid for each lot of shares.

Quicken shares most of the budgeting and reporting functionality of Mint.  You can see charts on your category spending, net worth over time, debt pay down, and a variety of others, including a calendar view of scheduled transactions, and a line chart of expected account balances over time.

Quicken’s mobile app is by far the best versus competitors (With the possible exception of YNAB’s mobile app).  In addition to viewing transactions and account balances, it allows you to enter transactions while away from the computer, take photos of receipts, and have them all synced back to your data file when you next update.  This is a killer feature that I haven’t done enough to take advantage of.  I do use the receipt capture functionality for all my business expenses.

To some, my choice manual data entry might seem fussy.  You can skip the data entry and just download transactions if you are so inclined.  If you’re like me, and extremely data driven, though, Quicken combines some automation with the ability to have up-to-the minute (and far into the future) data displayed in a comprehensible way.

Pros:

• Has manual entry for completely up-to-date balance information.
• Allows you to schedule transactions and project expenses and balances for up to a year by default.
• Has good support for financial institutions, but also good support for accounts and assets with no Quicken support.
• Excellent mobile application with receipt capture functionality.
• Good support for investment tracking, including accurate cost basis.
• Non-cloud solutions mean your data is always under your control.
• Includes features for budgeting and goal tracking, as well as easy-to-read reports.

Cons:

• Software is not free.
• Some may prefer a cloud solution or find the need to manually trigger a download from online institutions to be bothersome.

Other Options

Some other options that might be worth your consideration are:

• iBank: iBank is a personal finance software for Mac, iPad, and iPhone that aspires to be both “Mac-like” and feature complete.  It became much more prominent when Intuit allowed their full version of Quicken to languish, and only offered an “Essentials” version of the product for many years.  iBank has developed a dedicated following and has been decent to use the few times I have tried it.  It is relatively expensive while not offering some of the Quicken functionality, so I’ve always found myself going back to Quicken.
• GNUCash: GNUCash is the open source alternative to Quicken and iBank.  As with many pieces of open source software, it is a wealth of features and options, but at the expense of usability and user friendliness.  I am amazed at the feature completeness of the software, but I still find it unfriendly to use, and since we’re trying to build good habits (and make budgeting a rewarding experience) it’s just not for me.  One big pro is that it is, and always will be, completely free.  It’s also cross platform so it’s available for Windows, Mac, and Linux.
• Homebrew Spreadsheets: Still others track their expenses on spreadsheets they have built.  There’s a lot of flexibility to this method since you can poke, prod, and display the data in any way you like, but you give up niceties like online transaction download, mobile apps, and other items which the popular options have.

Head-to-Head Comparison

Bottom Line

So which option is the best?

The answer is “it depends.”  While these tools are all in the same realm, they have subtly different goals in mind.  Accordingly, I’ve picked my preferred tools from the categories of Hands-Off, Hands-On, and Budget Only.

Personal Capital is the best option for those who simply want a reliable tool to track the “big picture” of their financial situation without any manual intervention whatsoever.  It is the best combination of automation, elegance, and lack of sketchy advertising.

YNAB is the best option for those unconcerned about the big financial picture or net worth tracking, but rather about making and keeping to a budget.  For those experiencing a “hair on fire emergency,” this is the way to go.

Quicken is the best option for those who want highly granular, up-to-the-minute data about all accounts, including bank accounts, investments, loans, and assets.  Mobile and desktop softwares make it an unbeatable package for the control freak such as myself.

Most importantly, it doesn’t matter which tool you pick to track your expenses.  It’s just important that you do it.  Most of us have huge amounts of waste in our budget that we’re completely blind to because it happens a few dollars at a time.  Once you see the big picture, you’ll be able to quickly find places to cut back you spending and supercharge your savings.

What do you use to track your expenses?  Share it in the comments below.  If I missed something, good or bad, about one of these options, be sure to let me know.

If you happen to own Quicken for Mac, I hack my data file to project much further out than the application allows you to by default.  I wrote up some instructions here.