Want to live a happier life? You can start by accounting for how you spend your money, says Shashank Pandit, founder and CEO of Buxfer, a platform for monitoring your money.
"People are surrounded by gadgets and technologies that make it easy to spend on what they might not really need," he says. "That's money that could be used for their retirement, or children's education."
The team at Buxfer wants to help users make better spending decisions - and hopefully live happier, more fulfilling lives.
Here, Shashank discusses Buxfer, offers insight on why we struggle with making sound spending decisions, and what we can do to improve our habits. Read on:
Tell us about Buxfer ... how does it work?
Buxfer helps you understand and improve your spending decisions. Buxfer connects to your banks and lets you see all your accounts at one place. It provides intuitive, visual and customizable reports so you can easily understand where your money goes. It lets you set up per-category spending limits and alerts you when you exceed them, which helps you reduce unwanted spending. It forecasts your future spending patterns, letting you plan and save for future goals.
Who should be using Buxfer?
Buxfer is particularly well suited for young people who are starting out their careers and want to focus on building long-term savings. That said, we have all kinds of users on Buxfer (couples who just had a baby, people nearing retirement, etc.). So really, anyone anywhere in the world who wants to understand and get better with their spending can derive value from Buxfer.
What sets it apart from other personal finance apps?
Our philosophy is that making meaningful improvements in spending habits can only be achieved by being proactive, relevant and actionable.
When it comes to spending, the devil is in the details. It's not enough to look at automatically-enerated charts, which have some vague, generic and often-incorrect categorization (so called "automatic" categorization). For those charts to be truly actionable, they need to be in a form that is customized for you and makes sense to you.
To that end, we provide you immense control over how you want to paint your financial picture. That means you can report your expenses on the go using your mobile device, set up tag structures and automatic tagging rules tailored to your data, and handle nitty-gritty details like transfers, refunds and multiple currencies.
Second, we believe prevention is better than a cure. It's not enough to look at what has already happened; you need to be able to act now to prevent bad things from happening in the future. Isn't it a whole lot better to know your account balance will drop below zero next week, rather than being alerted about an overdraft fee? With our proprietary Forecast feature, Buxfer will help you preview your future and take the necessary steps to make sure it's nice and rosy - just the way you want it.
Last but not the least, we believe in enabling anyone anywhere in the world to get better with their spending. There is no technology or geographic barrier for anyone to be able to use Buxfer. It works with any bank anywhere in the world. For most major banks in the U.S., U.K., Canada, India and Australia, we support automatic data downloads. For the rest, we support manual file uploads. We also support manual expense reporting via smartphone apps, SMS and email. Our tagging and categorization can be tailored to work for anyone.
How can an app like Buxfer help people make smarter spending decisions?
Why do people make bad spending decisions?
1. They don't know or misunderstand where they stand financially.
2. They don't proactively think how their spending decisions will affect their future.
3. They know they can't afford a purchase and they know it's bad for them, but they do it anyway!
We solve 1. by making it easy to feed your financial data into Buxfer. We support automatic connections with banks worldwide, manual data uploads, and reporting expenses on the go via mobile devices, SMS and email. Once the data is aggregated, we help users visually understand their spending habits through category-wise breakdowns and spending trends over time. These reports are intuitive, visual, and more importantly, customized and relevant to the user.
We solve 2. by forecasting future cash flow and providing the user a preview of their financial future. Knowing where you are headed financially can have a big impact on how you make that next spending decision at the coffee shop.
But 3. is a really hard problem, and is unfortunately a result of an extreme focus on consumption coupled with blatant (often misleading and unethical) advertising. We are still working on that one.
How secure are apps like yours? What should personal finance app users be looking out for when it comes to the apps they use and the security of their accounts?
Buxfer employs bank-level security techniques such as using strictly HTTPS, high-grade encryption, third-party vulnerability scanning and audits from market-leading firms like Symantec and McAfee. Our server infrastructure is extremely secure and compliant with industry standards such as PCI and SOC3. We do not ask users for account numbers or social security numbers. When we connect to your bank, we only fetch your transaction data and do not move your money around. In other words, it's a "read-only" connection.
In short, to the best of our technical abilities, we safeguard our users' data. But sometimes, all that jargon is not enough for users to feel secure; not when big-name corporations are getting hacked into all the time. That's why we are the only financial app that provides the ability for users to save their sensitive financial information (like online banking credentials) on their computers instead of our servers. More than half of our users choose this option when allowing Buxfer to connect to their banks. This is a great example of how our philosophy of giving control to users is critical for them to feel they are in a trusted and secure environment.
What do you think are the biggest obstacles for individuals when it comes to deciding how to spend their money wisely? What are the most common mistakes you see people making?
The biggest obstacles are conquering the psychological thrill of buying something new that you don't really need and fighting the inertia of changing ingrained spending habits. As is well documented by behavioral economists, once you buy that Starbucks coffee, it suddenly becomes OK in your mind to keep buying it - or even upgrade once in a while to the fancier, more expensive version.
The key insight is that delayed gratification is hard, but guaranteed to lead you to a happier financial life. People need tools that are easily accessible at the time of making spending decisions, which encourage them to be proactive and think of longer term benefits of foregoing the short-term thrill of an unnecessary expense. In a world that bombards people with messages with increasing their consumption, how can they be vigilant, thoughtful and have a long-term approach towards their spending?
What are the smartest things you think someone can do to be more mindful about how they spend money?
For the vast majority of the people, the smartest thing they can do is just start tracking their spending! Small expenses add up, and you won't realize that unless you see all of them aggregated in a visual, easy-to-understand way.
Coupons, deals, and cash back cards are all great tools for people who know how to use them. If not used right, coupons can actually make you spend more on things you don't need. So instead of chasing down the next big sale at your favorite department store, start using a tool that helps you understand your spending better.
Once you cross that big hump, you want to focus on the spending categories that make up the bulk of your recurring spending (like rent, insurance, dining) and shop around to see if you can get better deals for those. Use a tool that lets you set up weekly or monthly spending limits per category and alerts you when you are getting close. Be proactive and think about your long-term goals. It might be more fun to let go of that new suit you want to buy, if you know that a year down the line it will let you save enough for a new car.
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