Buyer’s remorse hit Scott Schulthess minutes after he flipped open his laptop at a Cambridge coffee shop to review his spending habits last year on PearBudget.com.
“This makes me feel bad,” said the 26-year-old computer programmer, focusing in on his June purchase of an iPhone, displayed in his online account on the budget-tracking website. On impulse, he bought the new phone rather than repairing his old one. “Basically, a waste of $400.”
In tough economic times, more and more people are flocking to budget-tracking websites - Pear Budget, Mint.com, money.Strands.com, Wesabe.com, and JustThrive.com - that give users a sense of where they’re actually spending their money each month. Some budget-tracking sites are even rolling out new features such as iPhone applications, Twitter alerts, and Spanish-language options as they compete more fiercely for customers. Personal finance websites, ranging from budget trackers to financial blogs, are becoming increasingly popular and now attract one in four people who use the Internet, according to Comscore.com, which tracks Web traffic.
“There’s been a profusion of these things, in part because of what’s going on in the broader economy,” said Paul Kedrosky, who writes an economics blog in San Diego called Infectious Greed. “People feel they have to be more frugal, so budgeting’s in vogue.”
These budget-tracking websites are becoming so popular that banks are now purchasing the software for their online customers so they can preserve crucial banking relationships. Budgeting software “is the future of online banking,” said Peter Glyman, a founder of Geezio, which sells the software to banks and credit unions.
The theory behind budget-tracking websites is that people often know their money disappears fast but they don’t know precisely where it goes. Seeing, in detail, where spending occurs is the first step to curbing it. To help users budget, these sites sort each expense into a fixed or customized category - rent, utilities, clothing, Starbucks, gym membership - and then compare actual spending to that category’s budget amount, specified by the user in advance. The sites’ colorful charts display whether users are under- or over-budget every month in each category.
A common realization by users of budgeting websites is how much they spend every month eating out, said Aaron Patzer, Mint’s founder and chief executive. Indeed, in a recent survey of Mint users, 90 percent said they changed their spending habits after using the budgeting software, and 40 percent said they cut back on dining out.
“Having the feedback and the awareness that you went to Starbucks 30 times last month changes peoples’ habits,” Patzer said.
Schulthess, the Cambridge resident, said he and his girlfriend started taking cooking classes so they could cut their food budget after Pear Budget showed he was spending $500 a month on dining out. Despite lapses like the iPhone splurge, he said Pear Budget helps him stick to his goal of saving 10 percent of his income. Schulthess said he’s saved about $200 per month on food alone.
“If you get laid off or wanted to change your job, you need financial security to be comfortable,” he said.
Budgeting websites are free to users, but some earn revenues each time they successfully direct users to financial products, such as credit cards, offered by advertisers, which some say implicitly encourages the use of credit to someone who may instead need to curb their spending.
The sites also differ in how they collect data. Some sites are automated budget trackers, which require users to provide their bank, credit card, IRA, and other account numbers and their online passwords. The budgeting site then uses this information as permission to receive a download of their spending and income data from the financial institution.
Mint, which extracts the data automatically, has emerged as the giant among the sites. With more than 1 million unique visitors per month, according to Compete.com, a website that tracks Internet traffic, Mint became so successful that it was purchased by financial software maker Intuit in September for $170 million. Intuit plans to replace the online version of its famous Quicken software with Mint’s more modern technology, the companies said. Wesabe, which also extracts data automatically, is the second-most-popular site for individuals, with more than 35,000 unique visitors per month.
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