In the future, you’ll never open up your wallet at the end of the weekend wondering where it all went. Piecing together a night out in reverse after finding your wallet empty simply won’t happen — supposedly. You’ll just log into Mint or LearnVest or HelloWallet, or whatever personal finance management software is popular at that time and it will show you where every single dollar went — broken down by merchant, category, whatever. You’ll know if you’ve overspent based on budgets you’ve set for yourself. You’ll meet goals. You’ll save for retirement.
But not yet. No matter how much certain geeks cheerlead the end of cash as we know it, we still need cash for our day-to-day life. They can hail the end of cash all they like, but there’s objective evidence for cash’s popularity everywhere you look: everyone has a wallet, there are ATMs everywhere, stores have cash registers. It’s absurd to even argue this point, but when the end of cash is celebrated on the cover of Fortune, it becomes worthwhile to point out the obvious: not today, champ.
And cash absolutely confounds the promise of personal finance software like Mint. I spent a great deal of time with a number of these PFMs, trying to sort out which is the best, and I kept running into the same problem: aside from my rent, I spend the bulk of my money in cash. Groceries and the like are on debit or credit. When I travel, that’s on my credit card typically. Clothes, same.
And most PFMs, to their credit, file these things away for me in neat categories. I spend very little on clothes. I spend too much at restaurants. Some months, my travel budget is out of control; others, it is nonexistent. And about half of my money is “Uncategorized” — cash, useless to the otherwise all-seeing Mint.
Staring at a pinwheel of my spending over the past months, I can gain nothing from it when half of it escaped the scrutiny of my bank and my PFM. Where does it go? Maybe a haircut. Maybe a round of beers. Maybe tacos. Maybe the halal food cart. All of these things, really. This is how cash works, after all. It’s a means of storing value to trade for goods and services. It’s very good at its job.
By being good at its job, cash makes PFMs bad at their job. How can I trim the fat from my budget when half of it is invisible to me? In theory, all PFMs allow you to take all of your “Uncategorized” spending and split it into actual purchases, but this added labor would negate what PFMs promise us: an effortless, data-driven look into the underbelly of our personal finances.
Supposedly, this software can see what we cannot. But cash puts blindfolds on it. Of course, it puts no blindfolds on us, which brings us back to the point here: no matter what technology promises us, common sense prevails. If you’re anything like me, and you still use cash — a lot — then you’ll need to rely on this simple formula: spend less money than you make, and save the rest. The real problem with my useless PFMs is this: I probably spend too much money. I bet I could have avoided spending half of the cash I spend by going home earlier, by buying in bulk, whatever. But there’s no way for a PFM to teach me to buy cereal from drug stores, or how to cook cheap cuts of meat, or when to stay in on a Saturday night. This is real life and your computer can’t solve these problems for you (and hopefully you wouldn’t want it to).
Technology is incredible, but it can’t teach us the basics, and until we actually do away with cash entirely, software isn’t going to find the fat in our budgets. That’s something we have to do for ourselves.