Money Tools

You cannot even start to talk about achieving any degree of financial freedom unless you know roughly where your money goes.

True financial independence starts with spending less than you earn. In other words, it starts with saving. Investing is the icing on the cake, at least in the beginning.

I am a strong believer that big mortgages do actually work because they make you a forced saver.

You have no option but to “spend” a good chunk of the paycheque to pay the bank. You pay yourself first. Then 25 years later you own a house, magic!

Budgeting comes to mind as well, particularly if you owe debt or have a specific financial goal in mind (wedding, trip, kids college etc).

I was never a fan of budgeting. I guess psychologically it’s a bit depressing to know you cannot buy or do something because you have to stay within limits.

Noone likes budgets. (thanks Rishi…)!

They’re boring to set up, boring to maintain and stick to. Sometimes they’re necessary.

If you are disciplined enough you can do without a budget. But regardless.

I find it extremely useful, if not necessary, to at least have a rough idea of where your money goes.

This is the main reason I use Money Dashboard.

1. Money Dashboard – See where your money goes

Money Dashboard is a free app that gathers all your bank accounts in one place. You can connect only the ones you want and it will automatically pull the data (using OpenBanking).

It will then give you useful insights into your spending and income. You can:

  • Break down your spending by categories (Groceries, Rent, Experiences, Food & Drink, etc)
  • See how much you really spend per week, month etc
  • Connect multiple bank accounts, including partner accounts
  • Set a budget
  • Help you stay on track

Basically, it will give you a true picture of your financial life, not what you think it is!

A useful statistic is when it shows the upcoming expenses before they arrive. So you know that you’ve got mortgage and nursery payments coming up before they’re here (note to self).

It might need some tweaking to get it right in the beginning. You get the odd transaction that is tagged incorrectly but it’s mostly right. Or you might want to create custom categories.

For example, “Coffee” is one I could have created. The amount of whole-bean coffee we consume adds up if you drink as we do!

Then you have the more traditional PIE chart showing how much you spend where.

Finally, you can create a ‘Spending Plan’ which is basically budgeting.

Overall, the biggest benefit I see is understanding the “Big Picture” of your spending. For example, I knew we spend a lot on quality groceries compared to other people but that was based on intuition. I didn’t have a clue.

Between FarmDrop deliveries, online grocery shopping, local Sainsbury’s visits, shopping from multiple accounts (wife too) you can lose track.

You can also spot the odd subscription service you had forgotten to cancel.

To sum up, getting the big picture right is key to saving.

As Housel says, the majority of personal finance is

  • house
  • car
  • education
  • healthcare
  • childcare

The rest is a rounding error for most.

I use Neon which is the newest Money Dashboard remake. The old classic interface is something I have never used.

What about some data privacy?

Good old Excel is old-fashioned but does one thing well: Privacy.

With 3rd party apps, you give away your data in exchange for a service. Therefore, it’s very important to understand how your data is used or to what degree you can be anonymous. Especially if you’re giving away your entire financial picture.

Step 1: The first step with external apps is to check whether they use Open Banking or not. Sometimes you will see the PSD2 acronym too. Open banking is a control that ensures apps can talk to each other (via APIs) and you have the upper hand on what type of info is shared and when to revoke it.

For example, when Money Dashboard asks for my Santander account, I do not provide Money Dashboard with my Santander username and password. Instead, Money Dashboard opens a Santander page, in which Santander asks me if I authorize Money Dashboard to read statements and perform certain actions on my behalf.

When giving my consent, Santander will tell MD they have my permission and redirect me back to their page.

I’m not risking a rogue MD employee making bank transfers using my login credentials!

Careful with apps scraping your data without using Open Banking.

Step 2: Now even with Open Banking, it’s important to understand how your data is used after leaving the nest. One way to be a bit more clever about it is to ask how they make money.

In Money Dashboard’s case,

Money Dashboard makes money by providing insight and market research services to others companies to help them better understand trends in consumer spending. Rest assured that we have strict and robust procedures in place to ensure that we fully anonymise the banking data on the platform and that we never use users’ personal data in these market research products.

In the future, Money Dashboard may offer suggestions for financial products and services (for example credit cards, mortgages or insurances) that can save you money. If you buy something based on our suggestion, Money Dashboard may receive a commission from the product provider.

In short, Money Dashboard sells your anonymised data to 3rd parties who are interested in market trends.

2. Topia app – Your Financial Independence buddy

I have written before about FIRE and making work optional – Working because you want to, not because you have to.

That’s the main idea behind financial independence. Now, what if there’s an app to track your progress and help you along the way?

This is what Topia is all about. As a new entrant in the FIRE space, I like their interface and the work they’ve put in to help all FIRE enthusiasts.

Logan Leckie, who is the founder of the app can explain it better than I do. Here are a few words from him about Topia:

Who Topia is

My name is Logan, having discovered FI over 2 years ago I quickly become a massive believer in everything FIRE stands for and the wide array of positive externalities pursuing FI can have on someone’s life.

However, I quickly found that despite constantly discussing and talking about FI with my close friends and family, they all seemed to really struggle to initially understand what FI was and also really struggled to get started on their own journeys to FI.

It dawned on me that getting on the FIRE journey was actually a real pain in the ass for a lot of people. The core ones are:

  • Understanding the numbers under-pinning FIRE as well as the relatively complex calculations needed to build your FIRE roadmap
  • Knowing where to start and what to do next
  • The custom-built excel spreadsheet needed to track progress (+ the monthly grooming/tweaking of the spreadsheet)

I found all of the above proved to be big enough pain points to prevent a lot of people from pursuing FI. I found it incredibly frustrating that my closest friends and family didn’t understand something I was so sure could have such a positive impact on their lives.

So, out of this frustration, Topia was born; I thought I have apps that make other aspects of my life a lot easier, why couldn’t there be an app to help make pursuing FI easier?

Topia started as a small side project and slowly but surely gained momentum. I have always had a sweet spot for entrepreneurship and so pretty quickly decided to leave my job in finance to crack on with Topia full time.

No more excel spreadsheets or monthly manual data inputs

In Topia, you can connect all your investment, pension, mortgage and debt accounts directly into the app. This enables Topia to track your net worth and progress to FI in real-time.

On top of this Topia will also do all the number crunching – we provide simple inputs which enable you to personalise your roadmap, Topia will then crunch the numbers to produce your very own roadmap to FI.

Tinker + life events

Easily build scenarios to determine how you could get to FI faster. What if you increase your savings rate by 10%, how much sooner will you get to FI?

What if you decided to buy a property? or have a child? How would that impact your journey to FI?

Track your savings rate and get to FI sooner

We all know how important your savings rate is in getting to FI. You can connect your bank account to Topia and track/monitor your savings rate in real-time.

Based on your spending Topia provides hints and tips to turbocharge your savings rate.

Ever wondered how much sooner you’d get to FI if you downsized your house/flat? Or switched over to public transport? What about bulk buying your food? Geo-arbitrage?

Who is topia for?

For advanced FI-ers Topia can complement the spreadsheets you already use by automating the tracking of your portfolio and savings rate in one place that you can check on the go.

But Topia is especially relevant for people at the early stages of their FI journey. Topia is designed to make it really easy to get started on your journey and help you get to that FI goal as soon as possible.

Topia also comes with a community of like-minded people as well as ‘Mentors’ – passionate and knowledgeable people from the FI community to ask questions and/or challenges you have at each stage in the FI journey.

Is my data private and safe in Topia app?

Topia is a brand new app and a startup.

I asked Logan to provide some info about how data privacy works in Topia, who has access to the data and whether my data is sold.

Topia never sell any data to anyone – no 3rd parties have access to any of the financial data. Internally, the only time data can be accessed is if a user reports an issue around the open banking data. If this happens the data is automatically anonymised before developers can then look into the problem which was flagged. See also how Topia manages user data in their video here.

From a security standpoint: We put in place every measure possible to ensure that all data is locked tight and secured at all times. This includes military-grade encryption, regular penetration testing and bi-monthly internal testing. On top of this Topia is registered with the Financial Conduct Authority (FCA) (FRN: 934702) and authorised as a PSD Agent. We are also registered with the Information commissions office (ICO number – ZA778054)

What is the Topia business model?

Topia is a free app and there is no charge anywhere inside the app.

Soon, they will allow users to invest through the app, without leaving Topia. Any users who opt to start their investment journey through Topia will pay Topia a platform fee, similar to how you pay Vanguard/AJBell/HL a platform fee to invest through them.

Give Topia a try and good luck to Logan and the team. Exciting times ahead!

3. Keeping track of your investments

As your investments grow in size, it’s increasingly more important to track your investments, your annual returns and asset allocation.

What gets measured gets managed and all that.

The biggest benefit is understanding your returns, how complex your portfolio is and how it compares versus a benchmark, say Global Equity. If it underperforms for a long time perhaps you should stick to passive investing and stop taking any active punts.

Have your ‘satellite investments’ become too big or perhaps they are a drag on your portfolio returns?

Is your number of holdings unnecessary long? Simplicity trumps complexity in investing.

Moreover, understanding your asset allocation is important because it helps you rebalance. Are you back on track with your 80/20 portfolio? Are you overweight GBP by way too much? If your assets have drifted from your target allocation it’s time to take action.

Last but not least, another reason for tracking your investments is to get a nice momentum when things work out. This should push you to keep going. And let’s be honest, the past 10 years were truly amazing for equity investors.

How can we track our portfolio if we use multiple online brokers?

3.1 Morningstar Portfolio Manager

Morningstar’s Portfolio Manager is a free tool to track your portfolio. It’s old-fashioned, but it just works.

The main screen is a snapshot of your current holdings and their value. Something like this:

Morningstar portfolio manager snapshot example

It shows you the market value for each of your holdings, its weight and the total sum of your portfolio.

You can build more than one portfolio, particularly useful if you manage investments for the family for example.

This is what I use to track my stocks and funds from different brokers all in one place.

Next, we have the Performance screen which is where you can find your portfolio returns. More importantly, you can compare them to a benchmark during different time periods.

morningstar portfolio performance example

There’s too much on this screen so let’s break it down one by one.

The Personal Return is exactly that: What your portfolio returns are, taking into account the timing of your contributions.

You might own an investment that is up 200% year to date, but if you only bought at the top you might be losing money during the same time. To put it simply, you can actually outperform or underperform a fund’s performance if you bought low and sold high during that period.

This is also called the money-weighted rate of return and it’s mainly the metric I care about the most.

The (Ann.) in the 3-year or 5-year column stands for Annualised – yearly. So in the portfolio above, for the 3 year period, the Personal return was 24.66% per year.

Sometimes, people refer to the performance of their holdings alone, without considering the time they made their trades. This might be useful if you want to see how your portfolio would be doing if not distorted by money coming in and going out.

That’s the Total Return which simply is the return without considering your contributions.

In the industry, you might hear about it as the time-weighted rate of return or sometimes called unitised.

Index Return: This is the benchmark’s return you have selected.

Asset allocation

The free tool is good enough but lacks some important features. I would like to see what my asset allocation is, stocks vs bonds and perhaps property. I would also like to see my currency exposure. How much of my wealth is in GBP vs USD vs EUR?

Morningstar’s paid version (Premium) offers the XRAY tool with more advanced analytics.

morningstar xray tool example

Morningstar Premium might be worth the cost if you take a more active approach to investing. It might also be useful if you are a passive investor with too many different funds across different brokers, company pensions etc.

How much does Morningstar Xray cost?

Morningstar Premium costs £159.00 per year at the time of writing (Nov 2021).

Mornignstar Xray cost
Pro tip: If you use the AJ Bell online broker you can actually have all Morningstar Premium features as part of the platform, including XRAY. You can add external transactions from your other brokers. Basically, they whitelabel the Morningstar Premium version. Thanks, Martin for the tip ;) 

Morningstar disadvantages

  1. It’s a bit old-fashioned and slow. Developed using old tech and the interface kind of sucks.
  2. Morningstar has no support for some currencies. It only supports USD, GBP, EUR, JPY and CHF.
  3. Dividends require manual recording. Just go to Edit -> Dividends. It’s a bit frustrating that to record a dividend payment you need to report its reinvestment. What if I didn’t make one?
  4. Stock splits need manual recording. Just go to Edit -> Splits.
    A stock split is when a company will increase (or decrease) the number of shares while also decreasing (or increasing) the value per share. They can do it for a number of reasons, but for the end investor, the result is the same. You will still own the same value you owned before the split.

    When stock splits happen, Morningstar will just display the new share price without adjusting for the change in the number of shares. That’s bad! Easy to fix, though, just manually record the split.

Obsessive tracking can be counterproductive, so check responsibly.

3.2 TrackMyStack – Net worth tracker

This is a tool developed by George, a blog reader.

It’s a net worth tracker and it does what it says on the tin.

  • You add your assets like stocks, funds, crypto, home, cars, and even liabilities (like mortgage)
  • You can create different portfolios, like Kids portfolio, Loans only, Crypto portfolio, etc
  • Automatically updates the prices of securities
  • Full privacy
  • Supports both iOS and Android

I like the simplicity of the tool and the fact it is fully private. Not even an email required.

Not everything is perfect, though. It does not support dividend tracking – you need to enter the new shares or cash manually.

Then, the ‘sell’ functionality is not as intuitive as I would have liked. You can reduce your number of shares but if I’m selling everything I need to set it to zero, archive it or delete it. I reached out to George who confirmed this is ok, as you want to track your net worth, not necessarily your portfolio returns. Which is fine.

The pro version costs less than a latte (£2.59/month) and you real-time pricing and priority support while contributing to the app development.

When it comes to privacy and anonymity: No account is required to use the app and no syncing with other providers. Your wallet data belongs to you and can be exported or imported at any time. We don’t sell your data.

Moreover, you can export your data in XML format. If you ask me, owning your data is very important in case you want to do some manual charting, run tax calculations, switch to another tool etc.

Overall, I like TrackMyStack and use it for specific portfolios. My main net worth document is in an Excel spreadsheet.

And that’s about it! I have not been paid to write about any of the above apps.

Hope you liked the tools to help you stay on track and save time too.

With so many tools out there, I’m sure there are other options. What do you use? Please comment below.

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