For the past several months my wife and I have been using the free, easy-to-use, web-based software called Wesabe. Many of you have been asking me about it lately so I decided to give a brief overview of what it is and why I like it.

First, I’m a firm believer in the importance of spending your money intentionally, rather than being surprised by your purchases at the end of each month. In order to do this a detailed budget must not only be created, it must be constantly maintained. There are many different programs out there to help you in this endeavor like Quicken and MS Money, but Wesabe is free and it adds the community element which I’ll explain later. Before I forget, here’s the link to a quick 3-minute video tour of Wesabe if you’re more of a visual learner: VIDEO TOUR

Some of the highlights of Wesabe:

All Your Accounts in One Place - Wesabe is nice because it allows you to view all of your bank and credit card accounts in one place making it easy to budget, categorize and view all of your spending rather than having to skip from site to site.

Creating Spending Categories - When you first upload an account (checking, savings,
credit card, etc.) with Wesabe it displays the transaction exactly like it reads on your financial statement, often meaning pointless numbers and codes with no relevance to you. Wesabe then allows you to edit the transactions individually changing the bank code into something you can use like, “McDonald’s” or “Apple Store”. What makes Wesabe great is that from that point on it will recognize if a similar transaction comes though and will assign it the name you chose automatically; meaning, if you receive a paycheck on the 1st and 15th of each month from the same place Wesabe will recognize this and call the transaction “Paycheck” (or whatever you assign).

Also, as part of the editing process Wesabe enables you to “tag” each transaction, putting it in a specific category like “Restaurant” or “Entertainment.” This ability to create spending categories is obviously key in creating and maintaining a detailed budget. The tag process also “learns” as you use Wesabe more, automatically assigning repeat transactions the right tag. For example, if you go to Chili’s every week you will only have to assign the first transaction a name and tag, after that it will do this for you as it recognizes the same purchase item or place.

Creating Spending Limits - Another handy tool Wesabe offers its users is the ability to create spending limits. Users can assign each “tag” or spending category a certain spending limit for the month and Wesabe automatically keeps track of where you are as you make your purchases. If you set a “Restaurant” limit of $150 for the month, Wesabe will let you know that you only have $50 left for the month if you go out one night and spend $100 on a meal. This is probably my favorite feature as it eliminates the guessing of where you are at any given point in time in regards to your budget…helping you spend intentionally

The Community Element: Tips and Goals - Wesabe is unique from traditional budgeting software in that it relies on its community of users to provide guidance and tips on how to successfully manage your money. The “Tips” section of Wesabe looks at common themes in your spending and automatically provides user-generated tips specific to you. So, if you’re a single-person with no kids you won’t be receiving advice on saving money on diapers or budgeting for your kids’ college tuition.

The community also comes into play in the “Goals” section of Wesabe, a place where you can create and monitor your personal financial goals. The wife and I currently have goals including buying our first house and maximizing our yearly Roth IRA contributions. Wesabe allows you to connect with other users with the same goals giving you an opportunity to discuss, share and learn.

Overall, we’ve been very pleased with Wesabe. Every once and a while it mis-tags a purchase, but that is rare and easy to fix. The only other problem we ran into was having one transaction come up twice in “Bills” and “Payments”…we fixed this using the filter feature, filtering out the “Payments” from our spending and earning summaries. Finally, many have questioned the security aspect of uploading financial accounts onto the web…understandable, but Wesabe takes security just as seriously as any of your financial institutions that you bank with daily. Check out there security policies here: https://www.wesabe.com/page/security.html

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It amazes me the amount of financial advice available today. Books, seminars, blogs, dvds, etc. with the sole purpose of showing you how to make money. I’m all for it to be honest, the more information available the better….although there are a lot of crooks and idiots out there as well. So, you have to be careful who’s advice you take.

I found a blog yesterday entitled I Will Teach You To Be Rich by Ramit Sethi, a young Silicon Valley entrepreneur. While I admit I haven’t had the time yet to read through all of his articles, I was in agreement with his general views on creating wealth. The principles below are from his blog with some extra info added in by yours truly. I post these because they are, in large part, the same principles that I have come up with as I’ve attempted to hack my way through the jungle of financial plans, solutions and gimmicks in my own life. Nothing cosmic…THERE ARE NO SECRETS…but sound advice to any college/twentysomething wanting to create a stable financial base:

– Create and Maintain a detailed budget. Wesabe is an excellent site I use that helps you do this…best part, completely free! Upload your accounts, label transactions, set spending limits and you’re on your way.

– Get your credit report. A recent amendment to the federal Fair Credit Reporting Act requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. To get these reports go to www.annualcreditreport.com

– Make sure you’re not paying fees on your bank accounts or credit cards.

– Open a high-interest bank account. www.bankrate.com will give you a comparison of all the different banks and their interest rates.

– Establish a savings goal of 20 to 30 percent of your income, if possible.

– Open an investment account at a discount brokerage. Most of my friends that I talk to about this look at me with horror saying they just don’t know what to do…believe me, brokerage houses don’t get rich by making it hard for you to open an account with them. Call, ask questions, don’t make any quick decisions. If you already use USAA they do a good job, I’m also a fan of American Funds…if you go the mutual fund route.

– Fully fund 401(k)s and Roth IRAs. If you are over the age of 22 and do not have a Roth IRA set up, even if you don’t contribute much yet, you are flushing money down the toilet. It takes literally a few minutes to set up an account that will allow you to grow money throughout your life TAX-FREE.