Budgeting Made Easy

BudgetingI recently researched and tested 3 different personal budget applications: HomeBudget, YNAB, and Expensify.  The goal was to find an app that clients and I personally could use for budgeting. Budgeting is much different than saving.  Saving is income not spent, or deferred consumption, e.g. money set aside to grow and eventually spend during retirement. On the other hand, budgeting is managing expenses to fit a given income. Each application has their advantages and disadvantages but they are all great when it comes to keeping monthly finances in order.

YNAB:

YNAB, or “You Need a Budget” is the first app I reviewed. For starters, YNAB links to a checking account, which is a plus because income does not need to be updated manually, it is done in real time. After monthly income has been set, every dollar of the previous month’s income is assigned to a specific category within the app. Categories are: Immediate Obligations, True Expenses, Debt Payments, Quality of Life Goals, and Just for Fun.  This app is different in the idea its goal is to use the previous month’s income to pay for the following months expenses, rather than most budgeting applications that use any funds available to pay off expenses. This app also stresses the importance for having cash on hand for emergencies or unusual expenses. Rather than only paying off the expenses you planned on having, YNAB makes sure a predetermined amount of cash is set aside for a rainy day. A fallback to YNAB is it is not the simplest app to navigate through and takes some time to get used to. It takes about 2 weeks to get totally comfortable, which is most likely the reason for the 34-day free trial. After 34 days, the cost is $5/month or $50/year.

Expensify:

What first caught my eye about Expensify was the price. It is free. Expensify links to individual credit and debit cards to keep track of expenses so you do not need to enter them manually. This way you will be able to keep track of expenses without having to hang on to every receipt. At any time you can export expense reports or send invoices directly off of the mobile app. Expensify can also keep track of things like “Distance” for people who need to expense travel costs and “Time” for people who are paid on hourly wages. A fallback, however, is Expensify is not a true budgeting tool. So, while you will have a better idea and an easier time keeping track of expenses, you cannot pre-set a budget for individual categories.

HomeBudget:

This is my favorite application from what I tested. It is very simple to read, colorful, and easy to navigate. When first entering the app, five sections appear: Expenses, Income, Budget, Accounts, and Bills; along with the dollar amounts of each (once you enter them). Below the sections, you see a gauge showing how much of your monthly budget you have spent and a month by month trend for expenses. It is like a condensed expense report summary right on the home screen. This app is very flexible and allows you to enter income in a variety of ways. Within the income tab, you select the add button and an “add income” tab pops. Whether you have a steady paycheck and title each check as “bi-weekly paycheck,” or you are a free-lancer and title it as “John Smith” because a client made a payment, you will be able to utilize a detailed description of income and what account it is going to. The same detail is available within the Expense section of the home screen. There are seven categories (Utilities, Food/Grocery, Departmental, Entertainment, Car/Auto, Insurance/Medical, and Misc/One-Time) all with subcategories. This allows you to keep a detailed record of all expenses.  Within the budgeting section, you can either take a broad approach, or an extremely detailed one. A broad approach would be selecting the “One-Budget” option within the Budget section of the home screen. This is for anyone who doesn’t mind where they spend a monthly budget, so long as they stay under the predetermined amount. Other people, who prefer to be more detailed, can go in and set individual budgets for each category or even sub-category. With this approach, you can see how much of a category budget has been spent for the month and if you click on a category, you can see how much has been spent on each sub-category. HomeBudget is by far the most hands on, detailed and efficient application I reviewed. However, there are a few drawbacks, the application costs $4.99 on iPhone/$5.99 on Android and does not connect to a card or bank account to easily keep track of expenses.

In my opinion, the HomeBudget app in conjunction with your banking app that keeps track of expenses is the best solution. Personally, I utilize my bank’s mobile app for tracking all the expenses against my checking account. If you don’t have something like this for your checking account, you may consider downloading something like Expensify and linking your credit/debit card. This way it will be much easier to enter expenses into a budgeting application like HomeBudget.

We can change how we think of budgeting.  In the end, it is not about spending as little as possible.  It is about having a plan for wisely spending what we have to meet all of our goals.  These applications are a great tool to help us make sure we don’t overspend and, more importantly, to make sure we continue to enjoy living the life we want to live.

*Other budgeting applications with good reputations I did not get a chance to review: Mint.com, GoodBudget, Mvelopes, Simply Planning, BillGuard, and Pocket Expense

Learning New Technology… Benefits Worth The Learning Curve

635956588092585447-6090119_social-mediaWhether you are as green as me to workplace tech, a 30 year vet required to attend a seminar, or a retiree simply learning a new function on a smart phone- at some point we have all been through the grind of learning new technology.  Having started with DWM in mid-April, I am still learning, but also making some significant progress.  Prior to starting, I thought this stuff would be a piece of cake.  After all, I’m 23 and kids are always helping older generations with technology- so how hard could workplace tech really be? I figured I’d have this stuff down in a couple of days.

I was so wrong…

My first week was about as overwhelming as finals week just before graduation.  I quickly realized how much time I had to dedicate to fully understand the software at DWM before I could even think about wealth management.  The success of any business begins with efficient and consistent internal practices; and in today’s age, efficiency starts with utilizing technological advances.

Day-to-day processes are a little different at a boutique firm compared to a large business.  A small company doesn’t have the luxury of calling the IT department when something is off, making it very tempting to ignore certain problems and just send an email, or make a quick phone call- it’s easy and on the surface seems harmless.  This is where firms focused on having well-defined processes separate themselves.

OptimizingYourCRMPowerPoint_CE Slidesv20131130_Page_1

If you take a look at the image above, you will see four levels of how to optimize a CRM (Contact Relationship Manager), and thus, the client experience overall.  Firms interested in continuous improvement look for ways to further optimize the yellow areas shown above, this means no shortcuts because we have seen what a difference it can make for clients.  In general, a firm cannot get to the 4th level (yellow) until the first three levels have been mastered.  DWM is proud to be a member of the “yellow club.”

Junxure, our CRM, is one of five major software systems we utilize, the others include Schwab (investments, research & trading), MoneyGuide Pro (financial planning), Orion (portfolio management), and of course- Outlook (email). So as you can imagine, there are many complicated/time-consuming projects we deal with on a weekly basis.  A single project may involve multiple email exchanges and all 5 systems!

Not to worry.  All five systems are integrated within one another at DWM.  To go along with this, we also make use of a process within Junxure known as “workflows.”  There are two types of workflows utilized at DWM, systematic and recurring.  The first type, the systematic workflow, is a step by step checklist of tasks.  Within this workflow, a team member activates a specific action which triggers a chain of events.  As one task is complete, the next is automatically assigned.  Systematic workflows can consist of just one team member or everyone at the firm.  The second type, the recurring workflow, is only entered once and assigned to specific team members at predetermined dates. An example of a recurring workflow, is something most clients will eventually utilize: money links.  This is an automatic withdrawal from a client’s Schwab investment account into their bank account.  Mostly utilized by retirees to replace income received during employment, money links are a great way to keep the appropriate amount of cash on hand while the rest of your portfolio compounds and grows in diversified investments.  For example, let’s say a client wants $1,000 withdrawn from their account every month.  We would then set up a money link with Schwab and record a workflow within Junxure.  Now, before every automatic withdrawal, a specific team member will get an action to ensure the account has sufficient cash to complete the money link.  If it does not, the team member will give our Portfolio Manager a due date and instructions within Junxure to raise cash before the money link is executed.  As the due date approaches, the action automatically moves further up on his/her to-do list.

DWM has shown me how important utilizing technology is and how much more efficient it makes everything.  I now get excited when I hear about a new update within one of our five systems because I know it is created to benefit not only our job, but more importantly, the overall client experience.

Career Crossroads: The Right Path for My Future in Wealth Management

Fork roads in steppe on sunset background

I’d like to start by introducing myself.  My name is Nick Schiavi and I recently joined the Detterbeck Wealth Management team in the hopes of learning wealth management and becoming a Certified Financial Planner.  As I approached the end of my college days, I thought I had everything figured out.  I was about to graduate from Northern Illinois University with a Bachelor’s degree in Finance, Marketing Minor, and a Professional Sales Certificate.  I studied these subjects with the intent of pursuing a career in wealth management.  This seemed like a fairly straight forward career path at the time with the thinking that strong advisors are good with numbers, comfortable with communication and receive the proper training.  I had no idea there were so many different routes this career path offers.

Out of school, I accepted a job with an insurance company and thought I was on my way to becoming a financial planner.  On the first day of training, we were required to cold call and set up meetings with the goal to sell life insurance.  The company did a great job selling the in-training representatives on the idea a whole-life insurance policy is the best place to put your money for retirement.  The other trainees and I were impressed when learning a policy and reinvested dividends grow tax free and can (somewhat) diversify a portfolio.  It made me wonder how many other/better approaches there are in the field.  If a whole life insurance policy is the answer to everyone’s long term financial needs, then why doesn’t everyone just do that?  Why is the field so complex and difficult?  Why do hundreds of books and dozens of TV shows analyze this topic to no end?  I knew there was more to it and I wanted to learn.  So… I decided on a new path and set out to interview at as many financial services companies as possible, and this time, do as much due diligence as I could before making a decision.

I started my search by applying to all of the major wirehouse and brokerage firms with the assumption they were the best at what they do and train their employees to be the best in the industry.  That is what I had heard and believed.   However, the more I interviewed, the more it dawned on me all of these companies are similar in practice to the insurance company that first employed me.  The business model they use is to have their employees pass the licensing test, start selling the products and achieve required sales goals to keep their job.  Many times I was told I could give it a shot, but it would be better to get a sales job for a couple of years and come back when I was ready.  Why would I get a random sales job to become a better financial advisor?  If anything, it seemed I might forget most of what I just spent four years studying in school.

What I really felt was most important was to find someone to mentor me in the industry. I was ready to work long and hard to learn the complexities of investing, planning and overall comprehensive wealth management.  I wanted to believe there are advisors who succeed by being investment experts and wealth managers, instead of being great salesmen.  Don’t get me wrong, sales is great and arguably the most important aspect to any business.  I just felt a financial planners’ best skill should be financial planning, not sales.  The tides turned when I received the advice to look on NAPFA.com and search fee-only advisors in my area, ultimately leading me to exactly what I had been looking for at Detterbeck Wealth Management.

Since starting at DWM, I have learned a lot and now respect how many different hats a strong wealth management team must wear in order to best serve clients.  One of the first things I learned is how little people know about the industry and how easy it is to believe that the big firms are the best place to invest your money.  It reminds me of golf, it is a game of opposites; if you swing left, the ball curves right- swing right, the ball curves left.  Wealth management is similar.  It is normal to think having your money with a big firm is a good idea, it makes sense to think they are the best at what they do (given all the marketing dollars they have to convey that message).  In reality, it is the RIA (Fee-Only Advising) firms who typically have the best client-centric culture rather than a company-centric mentality.  At DWM, it’s about providing value to customers.  These are the advisors who place their clients’ interests first in a fiduciary manner and do not make commissions on sales.  RIA firms like DWM bring clients on slowly to fully understand their needs and create the best possible plan.

All in all, the start to my career has been great.  Coming out of school I wanted to learn this industry and had no interest in “faking it until making it.”  There is no faking at DWM; every time I am given an increase in responsibility it is because I have been trained and fully understand what I am doing.  I’m new to the real world, but this seems like the proper way to run a business – especially one focused on helping people achieve their personal and financial goals.

Nickolas SchiaviEditor’s Note:  Please join us in welcoming Nick Schiavi to our DWM team.  Nick joined our firm in late April as a service associate and is training/learning/working toward becoming a junior advisor. Welcome aboard, Nick!