PocketSmith Helps Me Manage and Understand Our Money
24 Nov, 2024
Budgeting is particularly at the top of my mind as I’ve been leaning heavily on it since quitting my day job in late October. Given that my regular paycheque is now gone, it is during times of change that I pay closer attention to our pūtea until things settle down.
In the lead-up to finishing work, I’d used my budgeting and saving skills to build up various bank accounts, which would act as a cash buffer/backup plan. I also automated a bunch of new bank transfers to savings accounts, and I’m checking on these now. My hunch was that we would be OK, but it pays to double-check. So I could feel confident about stepping away from a paycheque, PocketSmith, as always, played a massive role in helping me plan.
PocketSmith’s 30% off Black Friday sale is on through Cyber Monday, 2nd December. It’s been years since I’ve written specifically about why I use this budgeting software, how I use it, and why it's the one piece of money kit I can’t ever see myself without.
I also think it's timely to mention them because many keen beans wake up on January 1st vowing to up their financial game, only to return to their poor habits mid-month. PocketSmith is a brilliant tool, but it takes time to learn. I propose you get that teaching out of the way before the New Year begins, and your battle is already half won. You can then spend your summer break learning how to manage your money better. You are more likely to succeed this way.
People don’t give budgeting enough credit.
All the financially successful people I meet are budgeting in some way, shape or form. They see budgeting as a tool to get them where they need to go. They don’t roll their eyes at the mere mention of the word.
Something my Mum once said always stuck with me: budgeting feels like deprivation. Raising five kids in a low-income household meant that to her, there were a lot of negative connotations about having to budget for the household. There was only so much money, and she had to divvy it up carefully. If you ask, she didn’t give enough credit to her money management skills.
It’s easy to take on the financial baggage of your parents; therefore, I consciously flipped the budgeting script. I like to budget. The ability to make a plan for our money - to budget - means that I get to engineer our lives in the way we want. Budgeting, to me, means flexibility and freedom. My ability to manage our family finances means that I’m relaxed about our money.
Which sounds a whole lot better than ‘deprivation’, don’t you think?
If I had not understood where our money came from and went to (budgeting), I would not have been able to quit work. So yeah, you could say the ability to budget is pretty darn important in my whare!
I didn’t wake up one day knowing how to budget.
I had little money to budget in my teens and early to mid-twenties.
In my late twenties and early thirties, we made so much money we didn’t feel the need to budget.
But into my thirties, life got busy - mortgage, career break, motherhood. Finally, we juggled so many financial balls that I HAD to budget.
And when disaster struck in the form of the Canterbury earthquakes in 2011, I was so thankful I had already got a decent idea of where our money came from and went to. Our ability to budget made a tough few years that much easier.
Money is so fluid, and nothing stays the same for long, so I decided to embrace the idea of managing/budgeting our money, not push back on it. If you don’t do it, just start. In time, you will realise it will help you improve your life.
My systems were initially rudimentary, simply noting the balance of our declining mortgage balance each month. That led to noting down our fledgling but growing KiwiSaver balance. Then I began adding up the costs of areas that interested me, such as what we were spending on eating out or what the holiday we just returned from actually cost us. As I became more interested in my family income and expenses, I outgrew my pen-and-paper system, moved to a spreadsheet, taught myself a few formulas, and started to track multiple things. The issue was that my system relied on me to update it, and it coincided with a time of life (having our daughter) when I was either time-poor or not thinking straight. I tried a few online budgeting tools, but they each required me to input everything manually, so I returned to my spreadsheet and muddled through. But it was hopeless. I’d use it in fits and starts, but it was never perfect and certainly never up to date.
I’d ‘binge budget’, trawling through old bank records to answer a specific question, such as “What did we spend on Christmas”? Or “Is the car insurance premium higher this year?” But this ad-hoc approach was hugely labour-intensive, and I just wanted a quick answer, not two hours of scrolling banking transactions!
A friend of a friend introduced me to PocketSmith.
I learned about PocketSmith via a friend of a friend of Jason Leong, one of the founders who started it in 2008. But two things were holding me back.
I was a cheapskate.
I was worried about my banking security.
Foolishly, I was too cheap to pay a monthly (or annual) fee but seemingly perfectly happy to essentially waste two hours of my precious time working out what Christmas had cost us. After looking at it that way, I was happy to pay the monthly fee.
PocketSmith required me to enter my bank login details into their site, which is a big no-go, according to my bank. To satisfy myself about security concerns, I read every word written about the safety of my data (Security - PocketSmith). Although satisfied with what I learned, the beauty of a small country is that once I realised they were located in Dunedin, just 2.5 hours away, I contacted them directly and asked the same questions.
Ultimately, I concluded that my bank held all of my transaction data but failed to give it to me in a form that was in any way helpful. If I could approve PocketSmith using my data, knowing they had systems in place to protect it, then I could learn a lot about how I spend our money, which would give me the knowledge to manage my money a whole lot better.
The rest is history, and I joined in February of 2019. How do I know that? A five-second transaction search in PocketSmith gave me that information. No more trawling through transactions for me!
I like them both as a company and as a product that improves my life. I’ve yet to meet another company in the money space with as much integrity. This 2024 podcast episode (How PocketSmith helps 100,000+ households save more money) will give you insight into how they run their business. It’s super interesting.
In all these years, I have never had an issue with the security of my banking information. In an unexpected turn of events, PocketSmith helps me protect my banking privacy. Although I use it mostly on my laptop, I check PocketSmith on my phone app if I’m out and about travelling because it allows me to see my bank account balances and transactions without logging into my banking.
Budgeting is a collaboration between my banks and PocketSmith.
Every time Jonny and I use money, we create data. A trail of breadcrumbs is left behind as Jonny and I go about our day, month and year. I use PocketSmith to help me understand that data. It tells a story about our earning capabilities and where we spend and invest our money. Budgeting helps us predict where and how much we will likely spend in the future. It also makes us question whether we spend it in the right places.
I had to put in a lot of effort upfront.
Learning to use PocketSmith took time. I stuck with it, and I am so glad I persevered because I now have almost five years of financial data, which enabled me to make some bold financial decisions. I now tell any new user they must give it a full three months to settle in because I think that is enough time to work through a few pay and expense cycles. By the second week, you will know all the main features. By the second month, you spend less time categorising your expenses and more time reflecting on your spending.
Over the last five years, budgeting has helped Jonny and I plan and pay for so many cool experiences, buy the things we need or want, and pay for all the things we don’t want to but still have to! Given we are firmly on a path to retire early from paid work, managing our money well is crucial to our success.
How do my bank and PocketSmith work together?
Any financial transaction that I need to make is done in my banking app. If I need to set up a weekly transfer to a sinking fund or pay a bill, I must log into my bank account and arrange it.
PocketSmith can not touch, change, or move my money. It is ‘read-only’.
My bank only gives me limited information. The name I have given each of my accounts, e.g. Emergency Fund, transactions I’ve made, and what the balance is:
PocketSmith will sync with my bank accounts, import these transactions in real time, and let me name and categorise them in any way I like. I can instruct my data to tell me a story about how much we earn, spend and save.
If my main bank account shows a $50 spend at Paper Plus, it doesn’t tell me much. But once that transaction is in PocketSmith, it is automatically added to my ‘Gift’ category. I can then add a note, “Beautiful puzzle for Katie’s birthday”. Now, it has meaning. And given I have a big whānau to buy for, a quick search can tell me who I’ve already shopped for, what I bought and what I spent.
We pay all our expenses from one account, so dozens of transactions happen throughout the week, and they are all for entirely different things: pay our rates, buy a gift, put petrol in the car, etc.
In my banking app, there is no way to make sense of these transactions in any meaningful way; all I see is each transaction and the current available balance. PocketSmith lets me add in details that have meaning.
When I started using it, I got to choose category names that had meaning to us, e.g. Health or Groceries. As I shopped, it quickly began to learn and auto-categorise each new transaction into the correct category. These days, it sorts hundreds of transactions a month, and I only need to process a couple a week manually.
This means that when I log in, I see each category total for 2024 (or any date range I select), and if I click on that category, I see each transaction:
My pinwheel in PocketSmith showing each category total for 2024.
Clicking on each category in my PocketSmith pinwheel will show each transaction.
Planning ahead
Because I can easily search any category, I can quickly work out what I spent, and PocketSmith helps me predict how much I will likely spend next year. This is something I have mainly focused on at the moment. I currently have ten sinking funds, separate bank accounts where I’m saving up for specific things like healthcare, car maintenance, pets etc.
I am not saving up a set amount; it's more fluid. I have weekly automatic transfers with my bank to move money into these accounts. And while I want to save, I don’t want to over-save because that money could come in handy elsewhere. So, I’ve been using PocketSmith to review my past spending for each category, log into my bank, and adjust my auto transfers accordingly.
I’m paying our bills weekly or monthly to avoid bill shock.
Common wisdom used to be that you pay bills annually because you could often save a few dollars, and you get to keep your money in your account a bit longer. If you were lucky, you might earn a little interest. PocketSmith has a calendar that can easily remind you of due dates for bills and show your savings progress towards them, but given we have always been on an irregular income, saving up for these big bills was just one more thing for me to worry about. We would set aside an amount each week, but the price often went up when it came due to pay the lot, and we were caught short. Or, I know that many people ‘borrow’ from these sinking fund savings accounts but then struggle to pay it back, leaving them short when the bill is due. These days, we pay as many bills weekly as possible because it evens out the amount of money leaving our account each week and month. I’ve spent a little time reviewing each in the last month.
When I gave up my job, I also gave up weekly employer and employee KiwiSaver contributions. To get the $521 government top-up yearly, I must voluntarily pay $1,042 into my KiwiSaver account. Saving for retirement is now my full responsibility. I created a weekly $21 payment into my KiwiSaver account. I can easily monitor its progress in PocketSmith.
I also tweaked Jonny’s voluntary KiwiSaver contributions and those of our daughter. They used to be monthly payments, and I’ve recalculated them to a weekly amount just to even out our monthly expenses.
During my first week of leaving my job, our water bill arrived. They are never overly large bills, but I get a surprise every time they turn up! I quickly created a weekly payment schedule and will never receive a bill again. Once again, I can quickly check our monthly or annual water bill contributions at any time. In many ways, it is easier to use the information PocketSmith provides over the information the KiwiSaver provider or local council provides.
As each of these transactions flows through our bank accounts, they are categorised in PocketSmith, making it impossible for anything to slip through. If the system doesn’t recognise one, it brings it to my attention, and I will manually categorise it.
PocketSmith letting me know I have unrecognised transactions that I need to manually categorise.
PocketSmith links with almost any bank in the world.
I bank with two different banks, one for personal and one for business, and I’ve linked them both to PocketSmith. I keep them very separate and have given each its dashboard, budgets and categories, but it is incredibly useful to have all of this information updated and in one place. The only link between the two is when a weekly transfer occurs between The Happy Saver bank account and our personal account, which shows me I have paid myself. Given that income generated from this blog is replacing my lost part-time wages, it's more important than ever to keep an eye on what is happening.
PocketSmith might be Dunedin-based, but they are truly global. I’ve not had the need to, but I’ve met plenty of people who earn and spend in many different currencies, and each of these can get imported into their PocketSmith.
Are we sticking to our budget?
Overall, YES. At the start of the year, I created budgets for many categories, such as groceries and pets. As I’ve tightened up our spending over the last month or two, I’ve checked each of these more closely, looking at whether we are under or over. If that account also has a sinking fund, such as Pet Care does, I’ve been adjusting the money I move into that particular sinking fund with my bank.
For example, our pet spending has blown the 2024 budget I created. When I look at the transactions, I know precisely why it has happened. I can see the day and the cost of trying to treat, but sadly, putting our beautiful dog, Blue, to sleep. Sometimes, budgets blow out in the most unfortunate ways. That is what an emergency fund is for. I’ll amend the budget I set for 2025.
But our Petrol and Car Maintenance budgets end the year under budget (fingers crossed). I thought we would spend more than we did, so again, I’ll amend our budgets for next year.
PocketSmith showing me my Pet Care has blown the budget but Petrol and Car Maintenance have ended the year under budget.
I hope you understand that my budgeting is entirely personal to my whānau. And it is very fluid. Life happens. Budgets get adjusted accordingly.
If I overspend my budget, will my purchase be declined at the checkout?
No. Given my PocketSmith budgets have no control over my actual spending, my debit card didn’t get declined because I was over budget when I went to pay the vet bill! But when that expense was automatically categorised into my Pets category, I was alerted to the overspending and could see that we needed to stop spending in this area.
Creating budgets still relies on my self-control. We have a plan for our money, and staying in control is not difficult when you have a plan that is far more exciting than your desire to impulse shop.
PocketSmith also lets me run a wide range of reports where I can dive deeper into particular areas or give myself a higher-level overview. Returning to what I mentioned in the beginning, I can find out within moments if I have a sudden thought that I want to know what we spent on our daughter's schooling in 2024. It was $1,243. No more spending hours searching through transactions. Then, I’m onto the next thing!
Budgeting helps me stay in control and understand our money, particularly during times of adjustment like now.
My favourite screen is Net Worth.
As Jonny and I roll towards work becoming optional, tracking our net worth is critical. Watching it inch higher and higher is extremely important, not to mention satisfying. I’ve synced all of our bank accounts to PocketSmith, but I’ve also synced our KiwiSaver, Smart (formerly Smartshares) and Sharesies investment portfolios. PocketSmith doesn’t allow me to track the actual performance of my investments (I use Sharesight for that), but it does give me a current balance of each, which is what we need to calculate our net worth. Plus, I manually update our house and car value once a year, giving us a total net worth figure. Super helpful. It is super motivating as it tells us we are on the right track.
Automate. Automate. Automate.
The point of quitting my day job was to free up my time. And although I enjoy doing so, I didn’t free up my time to use it managing our money. Our systems were pretty good already, but extra focus over the last few weeks has tweaked them to suit our new situation. Automation is the key to getting as much of our banking running as smoothly as possible so Jonny and I don’t have to spend our time ‘remembering’ to do this or that.
Take advantage of their Black Friday Sale:
Once a year, PocketSmith has a 30% off Black Friday sale. It runs from now to Monday, 2nd December: Black Friday Sale - 30% OFF Annual Plans
They offer a free version, where you manually enter transactions, but once you have decided to budget, in my opinion, you are better off just getting on with it. A paid plan will give you more functionality from the start.
A picture can tell a thousand words.
I’ll end with the first thing I always see when I log into my PocketSmith: my unique-to-me pinwheel. A picture can tell a thousand words about where my priorities lay. And I can dig into any of these ‘priorities’ at any time. My tweaks and adjustments have us entirely on track and we’ve adjusted well to my working less. So far, in 2024, it looks like we like to go on holiday, eat, and look after our health! Meaning that I’m pretty happy that we are spending our money in line with our priorities.
My unique-to-me PocketSmith pinwheel. So far, in 2024, it looks like we like to go on holiday, eat, and look after our health!
