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Have you ever heard of Personal Capital? This wealth management software is taking the personal finance world by storm. Their goal is to help you feel confident in investing and to help you figure out what steps you need to take today for a financially confident tomorrow.
They were founded in 2009 and have raised over 200 million dollars in funding. Personal Capital has built their services around technology to give clients real-time overviews of their finances. As of July 2019, they have $10 billion in assets under management, 21,000 investment clients in all 50 states, and over 2 million users using the software to plan their financial lives.
It’s nice to be able to see all of your accounts in one place. My friend Tori from HerFirst100k says that tracking her net worth this way was integral to reaching her $100k net worth goal. Plus, Personal Capital has a ton of unique features that help you maximize your investments and limit the fees you pay on your accounts over time.
What is Personal Capital?
Personal Capital is wealth management software that allows you to track and manage your net worth. With the free plan, you can also track your cash flow, bills, and budget all in one place.
They combine robo-advisors, powerful algorithms, and real human advisors to help you manage your wealth and growth to reach your financial goals.
There are two different levels to Personal Capital: the free Financial Dashboard and their Personal Capital Wealth Management services.
The free Financial Dashboard syncs all of your account information in one place and gives you access to many of the features I list below. The technology the company uses allows you to utilize the most recent data on your investments to make smarter choices when it comes to your finances.
The revolutionary dashboard also allows you to see changes in real time as well as how these changes impact your future finances by showing you projections based on your changes. For example, if you want to see how much more you would have in retirement if you increased your savings rate by 5%, you can do that!
This ability to model your future finances based on changes you make today is game-changing.
Additionally, Wealth Management, the paid financial advisory service offered by Personal Capital, includes things like portfolio management, estate planning, and income expenses. If you do choose to use their Wealth Management services, you’ll pay fees in the following structure:
- $100,000 – $1M: 0.89%/year
- $1-3M: 0.79%/year
- $3-5M: 0.69%/year
- $5-10M: 0.59%/year
- $10M+: 0.49%/year
One caveat is that you have to have at least $100,000 invested with them to use the wealth management service.
Whether you are interested in the free dashboard (which I highly recommend signing up just for this!) or their Wealth Management services, you can do so here.
Features of Personal Capital:
Personal Capital has several award-winning financial tools that really make the service stand out.
First, you’ll link all of your accounts (including your retirement, checking, savings, investment, credit cards, and retirement accounts) to see your net worth and figure out where you currently stand.
They will also help you analyze your investments and spot hidden fees (perhaps one of the best features they offer). You’ll also learn how different scenarios both now and in the future can impact your portfolio growth. This financial modeling is truly powerful tool in analyzing the big picture of your spending and savings habits.
Let’s dive a little deeper into the features Personal Capital offers. You can find all of these under the “Planning” dropdown on your dashboard.
1. Retirement Planner
The retirement planner helps you to build, manage, and forecast your retirement goals. It allows you to adjust various targets such as your target retirement age. You can also adjust your savings rate and create various scenarios to see how they compare.
The Retirement Planner also has a premium feature called Smart Withdrawal that helps you optimize your retirement plan by “extend[ing] the life of your portfolio, generat[ing] cashflow, or leav[ing] your loved ones a larger legacy.”
2. Retirement Fee Analyzer
The Retirement Fee Analyzer is a special tool that allows you to see how much you will pay in fees for your retirement accounts over the course of your lifetime.
Here’s a snapshot of what my projections look like:
3. Investment Checkup
This feature compares your investment account allocations to your ideal targets and timeline.
I’ll share a little bit more about this in the “pros” section below, but one thing to note is that Personal Capital uses real-time data to show you how your investments are performing at any given time.
They look at your current allocation and after running your data through their algorithms, will make suggestions based on your Target Allocations.
For example, this is what is says when I run the Investment Checkup Tool:
“Your Current Allocation is based on the assets you now hold in your portfolio. Your Target Allocation is a recommended Asset Allocation driven by the profile questions you answered. It seeks to find the greatest expected return, balanced with your need, desire and ability to take risk. This table compares the two across the six major liquid asset classes. Stocks provide great growth potential but can be the most risky. Bonds tend to be more stable than stocks, but are subject to price swings as interest rates change. Alternatives, such as Real Estate, Gold and other Commodities, provide additional diversification and can act as a hedge against inflation. Cash is the most stable asset class but typically has low returns.”
4. Savings Planner
One of the nice aspects of Personal Capital is that they acknowledge that different people have different goals. Under their Savings Planner you can see how you are doing for your goals for your Retirement, Emergency Fund, and Debt Paydown.
They’ll also make recommendations for how much you’ll need to have in your emergency fund and in your retirement accounts to meet your goals.
Unfortunately, I can’t offer any insight into what the Debt Paydown tab looks like because I don’t have any outstanding debt. But, I would bet that it is incredibly insightful for creating a debt payoff plan.
The Good and The Bad
These pros and cons are based on my opinion. Something that is a pro for me might be a con for you and vice versa! These aren’t necessarily “good” things and “bad” things, just things I’ve noted that may or may not work for you depending on your personal finance needs.
Pros of Personal Capital:
- The Retirement Fee Analyzer is a very useful tool. You can see how how much in investments you are losing due to fees. (In my opinion, it would also be very useful if they did the same for taxes but that’s kind of a different ballgame.)
- It offers a high-level overview of your finances. You can see all of your balances, your debts, investments, etc. all in one place. This essentially rules out the need for using a spreadsheet which can save you so much time on a month-to-month basis. You can also view your assets in a convenient pie chart and also see the historical progression of your net worth data.
- You get a weekly update email. Personal Capital sends you a weekly email with a snap shot of your updated net worth, market recap, any upcoming bills you have, their blog posts, and anything that needs your attention via the dashboard or their services. This is really helpful in my opinion because you don’t have to remind yourself to check in on your accounts.
- Access to a person. This is one of the best features about Personal Capital. You get access to a financial advisor! Even with the free account, you are able to schedule a call and ask detailed questions that will help you react more effectively to your own financial situation. You can schedule a complimentary call even if you don’t use the Wealth Management service.
- Track your cash flow. This may or may not matter much to you, but I like to see how much money I made every month versus how much I spent. This is helpful to me in both my personal finances and my business finances to make sure I am staying on track with my goals.
- Analyze your portfolio with the Investment Checkup Tool. One thing about Personal Capital that is unique is the real-time data. At any given time you can see how your investments are doing based on your risk assessment. They will look at your current allocation and after running your data through their algorithms, will make suggestions based on your Target Allocations.
- They give you personalized tips. On the side of my dashboard when I log in, I have personalized tips and suggestions to help me save money on fees and have more money saved by the time I retire.
Cons of Personal Capital:
- The budget feature doesn’t go in-depth. You’ll find that Personal Capital focuses more on high-level budgeting. It doesn’t go deep into categories and only supports setting a target monthly expense value, not a per category expense value. I’ve also run into some issues with the software not categorizing transfers correctly on auto-import. You also can’t split up expenses into different categories (for instance, some of my Target purchases include groceries, home supplies and personal care). This may or may not be a big deal to you depending on your budgeting style, though.
- After you sign up for your free account, they try to upsell you. This isn’t a bad thing, necessarily. It is how they make money, after all! But almost every day since I signed up for Personal Capital, I’ve gotten some kind of email or notification on the dashboard that I can talk with an advisor for free with no commitment. (I’ll also note that I have over $100k in my linked accounts and because their Wealth Management service starts at this amount, that might be why I’m getting so many emails).
- Not very detailed day-to-day finances. If you were looking for software to help you adjust your budget, this might not be the tool for you. I wouldn’t say it’s a good starter-budget tool. But if you’ve been budgeting for awhile and are looking more for a service to track your net worth growth and your investments, I think it’s a good way to go.
There’s not really too many things I count as a “con” here. While there are some little things that I wish were different, overall I think the service is excellent.
The Role of Your Credit In Your Net Worth
Overall, I think Personal Capital is an extremely useful personal finance tool. One thing, though, that I would be remiss to not mention that is worth including is your credit score.
Have a higher credit score means that you are less risky to lend money to. Saving up money to buy a home, a car or reach your retirement goals is great. However, what if you need to open a line of credit up in the future? I like to think of managing my credit and keeping my credit score up as part of my financial emergency plan.
While your credit does not directly impact your net worth, it’s still an extremely important aspect of your finances that should be prioritized.
If you haven’t already this year, I recommend checking your credit reports at annualcreditreport.com. Then, if you find any inaccuracies or unfair negative items on your credit report, I recommend reaching out to the credit repair professionals at Lexington Law for a free consultation. You can read more here about how the credit repair process with Lexington Law works.
I also highly recommend signing up for a credit monitoring service like Lex OnTrack as a complement to tracking your net worth. Lex OnTrack will notify you of changes to your credit report, give you your FICO® Score, provide a credit score analysis, offers basic credit repair, and includes $1,000,000 in identity insurance. It gives peace of mind to know that you have this available to you just in case something happens like having your identity stolen.
Additionally, here are a few credit, retirement, and investing resources for further reading:
- How To Budget To Improve Your Credit
- 7 Steps In 7 Days To Better Finances (FREE Email Series!)
- How To Do An Annual Financial Audit
- What You Need To Know About Credit and Credit Utilization
- 4 Habits To Practice Regularly To Improve Your Credit Score
- Financial Literacy Month: How Your Credit Impacts Your Life
- 5 Credit Facts That Work In Your Financial Favor
- What You Need To Know About The F.I.R.E Movement In Your 20s
- 5 Reasons To Retire Early (And 5 Reasons Not To)
- What You Need To Know About Saving For Retirement in Your 20s
- Investing 101: A Beginner’s Guide To Investing For Wealth
- 6 Things To Do Before You Start Investing
Overall, I really like Personal Capital as a wealth tracker and management tool. It’s very handy to be able to track your income, expenses, and net worth in one place. The special features and tools that Personal Capital has (like the Retirement Planner) are unmatched by other software.
If you haven’t already, I recommend checking it out! You can do so here.