When working with clients who are planning for retirement, one thing we almost invariably ask about early in our relationship is their spending habits. Some couples already understand this very well, while others may have started working with us to get help on this specific item. While there are many ways to dive into spending, we like to start with something that is both accurate and relatively easy for our clients to use.
For customers who have never budgeted before and hate spreadsheets, we will generally recommend that they consider Mint as their first option for putting all this information together. There are plenty of budgeting apps available, but Mint still seems to be one of the easiest to use with fairly robust account aggregation.
For readers unfamiliar with it, Mint is a free personal money management website and mobile app from Intuit, the company behind Quicken and TurboTax. The app is available on your computer and mobile devices and is designed to help every user keep track of their budget by downloading transactions from their bank, credit card, and investment accounts. Depending on each person’s priority, it allows you to build up a budget, a savings plan or get out of debt.
With the right setup and effort, Mint can be very powerful. I work with a family who use it to create their annual budget – and use it to create their planned annual expenses for the following calendar year. As with any software application, I always like to define up front that it takes some effort over time to get it right.
Mint will categorize most transactions correctly when logging into your bank and credit card accounts, but every now and then it will need to be corrected. For example, I have a recurring bill from Centura Health that Mint said was from “Century Theaters” and was classified as “Amusements” rather than medical expenses. But, with a few quick updates, Mint was able to adjust this category so that it always associates the recipient with the “Doctor” category in the future. Once you’ve done a personalization like this, trends and budgets are quickly adjusted.
By performing a quick check of your transactions every few weeks, you can get an accurate picture of your spending.
Over the past year, my team of advisors have looked at spending for many of our clients, especially during COVID. It was a good opportunity to reassess how much of their spending is essential versus what is desired. Having this kind of information is essential to building a detailed retirement plan.
It can be extremely useful to delineate what you really need in retirement for your basic needs, versus what you have more discretionary control over. In turn, this can help you understand what kind of cushion you’ll have in retirement – against unexpected events you might encounter, such as low-performing environments, bear markets, or unpredictable events like COVID.
With little effort, it is also possible to view your spending by category or by merchant in Mint. I recently did this myself and was amazed to find out that my family spent over $ 9,000 last year on Amazon! Granted, we were preparing for the arrival of our second daughter and stocking up on items, but it took me a bit by surprise nonetheless.
Having those kinds of numbers in front of you can really help you figure out where your paycheck is going. In my case, the last few years have included a lot of health care spending. I don’t expect this to continue in the long run, but knowing how it all adds up has helped us understand the need to cut spending in other areas to make sure we don’t run into issues.
For these reasons, I continue to recommend Mint to my clients, especially young families who want to build a long-term savings plan. It’s never too late to start, and there are a few cool things you might learn along the way that will help you improve your financial situation.