By Teresa McUsic

Most of us can’t lose weight without first stepping on the scale.

In much the same way, understanding your own financial picture has to start with an honest look at where your dollars come and go each month.

Just how many lattes did you have in December? How much did you drop at Target, Kohl’s and Penney’s for holiday gifts? Did you spend more on fast food last week than groceries?

How bad was last month’s gasoline tab?

Fortunately the tedious, time-consuming job of catching up with your spending picture by looking at your bills and creating a budget has dramatically improved in recent months.
Whether it’s your favorite budgeting software like Quicken or an online service like Mint.com, seeing your budget in cold numbers and colorful graphs now takes a matter of minutes instead of hours of inputting data.

It comes down to something computer wonks call automatic account aggregation. Now, by one-time typing in a user name and password to your credit card and bank accounts, budgeting software can automatically download your most recent statements, categorize your expenses and spit out statements that look like a Fortune 500 company’s financial annual report.

(If you don’t bank online, it’s quick and painless to set up accounts with your cards and institutions. Recent studies show about 80 million Americans now bank online.)
Mint.com, a no-cost online budgeting service that launched in October, takes the process even further by analyzing your spending habits and then finding ways to save you money. One page of the online reports displays recommendations for credit cards with better terms or rewards that match what you buy, higher interest rate checking accounts or bundling telecommunication services.

Quicken, a popular budgeting software program by Intuit, is launching an online version of its desktop software, according to a company spokesperson. The company will charge $2.99 a month for the daily updates of your account information.

Mint.com has received strong praise among personal finance writers and recently received an award from PC World as one of 25 of the most innovative products at the Consumer Electronics Show in Las Vegas.

“When I started looking into this in 2006, it took way too much effort to bring all of your accounts together in one place,” said Aaron Patzer, founder and CEO of the company. “Mint was designed to be an effortless and elegant experience.”

In its first two months, Mint has signed up more than 100,000 people for the free service, he said. Mint makes its money by receiving around $30 for each customer it moves to another financial product it recommends.

Mint also will send you alerts either via e-mail or cell phone text when you have reached budget levels you design (mine should read “No more lattes this month!”). It will also send you a message if you need to pay a bill or are receiving a dreaded bank fee.

For those who are concerned about identity theft with such a product, Patzer said Mint is anonymous (it never asks for a name, address or Social Security number) and has the same encryption and security systems as banks. Also, the service is not capable of transactions on the accounts you enter, so an identity thief could not drain your account.
Jay Foley, executive director of the Identity Theft Resource Center in San Diego, says the budget programs have merit, but should be used with caution.

“They are good tools in concept, however they can provide an eventual access point for an identity thief,” he said. “There are still security weaknesses.”

The two ways identity thieves can break through have more to do with your online habits than the services. One is if you give away your user name and password through spam or phishing e-mails from the thieves that looks like they came from your budgeting service. The other is by having a key-logger or Trojan virus placed on your computer that would allow a thief to lift your account information off your computer.

With diligence and the proper software, these problems can be averted, however.
Both products can be a welcome answer to providing transparency to our spending habits.
Such budgeting exercises are among the first steps to financial planning, according to local financial planners.

Not many first-time clients come in to the office with a complete budget in hand, said Guy Cumbie, a certified financial planner with Cumbie Advisory Services.

“It’s close to zero,” he said. “Between 10 and 20 percent do something in Quicken, but very seldom is it broken down the way we want it broken down. They’ll show us a VISA bill for $1,200, but we want to know what you bought.”

Steve Blankenship, a CFP with Heritage Financial Planning in Grapevine, also recommends budgeting, but cautions that even though the budgeting software is easier to use, it’s only a step toward financial health.

“It’s a road map to what happened,” he said. “But what are you going to do about it next month?”

Cumbie said tracking spending often doesn’t change spending habits, but can be useful after setting up automatic monthly payments to savings accounts.

“Often anything left over at the end of the month is considered savings,” he said. “We recommend putting automatic processes into place to pay yourself first.”

Then you can spend the rest.