I love tracking stuff. Whether it’s using my Apple Watch to track my fitness and sleep, or tracking my time using a tool like Timing (affiliate link). And when it comes to tracking personal finances, I love using Pocketsmith (affiliate link) to see what’s going on with our finances.
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Pocketsmith is a personal finance tracker that works by connecting to your bank accounts. Once connected, you can categorise your transactions to get more visibility into your spending so you can be smarter with your money. Pocketsmith can be used to create a budget, track spending, calculate your net worth and forecast your future bank balances.
In this article, I’m going to share some of the ways that Pocketsmith helps me to manage our personal finances more effectively.
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1. See where your money is being spent
This is probably the main benefit of using a tool like Pocketsmith. When you categorise your transactions and track your spending you can see exactly how much you’re spending on things like groceries, utilities, transport, clothing and more.
If you’re pretty loose with money, this increased visibility can really help you make a budget and get your spending under control.
It also makes going back in time to look at historical transactions really easy. This winter we received a particularly high power bill and it was really handy to look back at our spending on power for the last few years to see how it compares.
2. See how much you’re saving
On the flip side, you can also see where your money is coming in. For example salaries, wages, renting out a room on Airbnb, investments, any side-income or selling stuff you no longer need.
Once you know how much you’ve received and how much you’ve spent, Pocketsmith can show you your monthly surplus (or deficit).
You’ve probably heard the advice to ‘spend less than you earn’. Well, one of my favourite reports is the Cashflow statement where I can easily see a list of all income vs. expenses for each month of the year. This makes it really easy to see how much we’re saving each month.
3. Budget your upcoming expenses
If you’re someone who lets their spending get out of control, then setting up a budget can be a great way of holding yourself accountable each month.
In Pocketsmith, you can set a budget for how much you want to spend each month across different categories. Then, whenever you log in, Pocketsmith reminds you how much you have left to spend within that category for the month. You’ll even be alerted when you’re close to exceeding your budget for the month.
4. Forecast future balances
We’re pretty good at controlling our spending, so for us, the budgets aren’t really used for keeping spending under control. Instead, I use the budget to help forecast future account balances.
The way this works is that you budget what you're expecting to receive each month (e.g. salaries or business income) and what you’re going to spend. So I know that each month we have certain fixed costs for things like our mortgage, internet, phone bills and expenses within my business. I also forecast approximate amounts for things like groceries, power and petrol which are more variable.
Once this is all input to Pocketsmith, you’re able to see a forecast for each bank account and your combined net worth.
This is really cool! It means you can easily see when you’re going to reach your savings goals and when you’ll be able to afford that next holiday, new car or home renovations.
5. ‘What if’ scenarios
The more you put into Pocketsmith, the more you get out.
For example, once you’ve set up budgets and have created an accurate forecast of your financial future, you can create ‘What if’ scenarios to see what the impact of a big purchase would be.
Let’s say you’re looking to buy a new house. This is going to incur a load of new expenses like mortgage payments, insurance and property taxes. You can create a ‘Scenario’ to show the impact these new expenses would have on your financial forecast.
Back in 2017, I was trying to work out if we could justify Hayley leaving her salaried job to work with me in the business. I was able to use scenario planning to show the impact of not receiving her salary and the new costs we’d have for things like office rent. This feature in Pocketsmith made it really easy to see if we could afford the change.
6. Create a spending diary
A useful way of using Pocketsmith is as a diary for your spending. When you click on a transaction, you can add notes and tags. For example, a few years ago we were renovating our kitchen which involved a load of different expenses for things like builders, electricians, cabinets, tiles etc. I was able to group all of this under a ‘Kitchen Renovation’ tag to easily see our combined spending for the entire project.
7. Store receipts for warranties
Another useful thing you can do with each transaction is store files.
So whenever you make a significant purchase, you can photograph the receipt and store this inside the transaction in case you ever need to claim a warranty or make a return.
8. Listing your assets and managing net worth
Besides your day to day accounts, there are options in Pocketsmith to list the assets you hold e.g. property, cars, investments, Bitcoin etc. You can also list your liabilities e.g. mortgages, credit cards and other personal loans.
Pocketsmith then compares these assets and liabilities to give you a calculated ‘Net Worth’.
And if you’ve set up budgets for your income and expenses as previously mentioned, Pocketsmith will project our your net worth over time. And if you really want to get fancy, you can add depreciation or interest to an asset to show its gain or decrease in value over time.
While money isn’t everything and your true worth isn’t determined by the stuff you have, it is pretty handy to see where everything stacks up from a financial standpoint.
Questions? If you have any questions about Pocketsmith, please let me know in the comments below!