Know yourself, know your financial data

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This is a guest article from our friends at PocketSmith, about how we can use our financial data for good and get to know ourselves better in the process.

Here at PocketSmith, we make personal finance software for all walks of life. Our customers live in over 190 countries, and like you, have lives that are too unique and interesting to be constrained by cookie-cutter budgeting apps. We see you, and we make it possible for you to manage your money, your way.

A common response to people hearing about PocketSmith for the first time is “Oh, that sounds like a great idea — but I’m too afraid to look at my finances!”. We all have friends who feel this way, and we totally get it. We may be personal finance nerds, but we’re human too!

But let’s examine how — if cast in a different light — the fear of our financial data could lead to curiosity. We start with the fact that through today’s app economy, many of us are already comfortable with similar forms of introspection.

Living in the age of apps and data

In most other facets of our lives, we’re highly engaged with data that helps us better understand who we are. We use apps to be productive, express ourselves, and fulfil our desires. Every app we use collects data about us, in part to personalise and enhance our experiences.

Netflix and Spotify offer recommendations on what to watch and listen to next, based on our tastes. 

Photo apps from Google and Facebook compile memories for us based on where we’ve been and the people we’ve been with. 

Additionally, we volunteer our preferences to the apps we use by making playlists of things we like to watch and listen to, following people we want to hear from, and tagging the content we like.

We tailor images and stories of ourselves for social media, and in return, we receive — for better or for worse — curated perspectives on the world.

Over time, these apps become stores of our identity and shortcuts for describing our personalities. Consequently, losing access to an app would feel like losing a definition, or a memory, of who we are.

The reality is though, that it’s entirely possible for this memory loss to happen because we’re often just renting access to our own data through the use of these apps. 

Think about it: if you’re an active Spotify user, would it be an easy decision to retire your Spotify account along with all your playlists and saved albums? What would you stand to lose by deleting your networks from Facebook or Instagram?

Put another way, we live in a world where we rent insights into our own identities. It can be argued that we rarely own our data, much less the lens through which we see it.

Seeing ourselves through our financial data

Now let’s think about another activity that generates volumes of data about ourselves: paying for stuff.

Every purchase we make has a date, a location, an amount and a category. In the span of a month, we generate enough data to create a remarkably well-formed picture of what we have, where we were, how much we spent, and how often we spent it.

Where the apps described above require a degree of curation, apps that reveal our spending reflect an immediate and honest record of our behaviour. And perhaps this is why financial data is undervalued by consumers: it has the potential to betray truths about ourselves that we don’t want to know.

The phrase “know thyself”, often attributed to the ancient wise-person and dapper beard-wearer Socrates, can be interpreted to mean that an essential part of knowing yourself is in recognising the limits of your own wisdom and understanding. 

Put another way: it’s okay to be afraid, but it’s also important to be curious, because our finances contain potent information that can have a material impact on our futures and overall wellbeing. 

Over a third of Australian households experience financial stress, and financial clarity is a start to solving this problem. For those of us fortunate enough to be in the other two-thirds, we’re closer to being able to use this data to help us better understand what we value, and to prioritise our spending to better achieve happiness

Given this, it’s ironic that so many of us who engage in the app economy aren’t clamouring to learn as much about our financial behaviour as we do about our fondness for folk music or an edgy TV series. As we’re well-practiced in many aspects of digital curation and organisation, why not turn our skills to organising our finances?

If we need another reason, then consider this. If we’re not trying to understand our financial personalities, the financial institutions that hold this data about us are already doing so, and certainly not for our benefit alone. We do not want to live in a world where organisations that profit from us know more about ourselves than we do.

And guess what — we rent this access to our data too. So if we change banks and move our credit cards and mortgages, we lose the use of their apps as well as the ability to retain and retrieve our data.

The Consumer Data Right

The Australian Government understands that the idea of renting access to your financial data is problematic, which is why it has introduced the Consumer Data Right, or CDR. New Zealand is following suit and sorting their own plans for a CDR.  

The CDR is a law that aims to give you, the consumer, greater access and control of your data. As more banks and financial institutions are accredited, you will have a greater ability to do things like tell your bank to send your data to another bank to reduce paperwork, share your data with third-party apps to find a better deal, and choose the money management tools you’d like to use.

This is a strong signal about the value and importance of our financial data which we should not take for granted. Moreover, it’s a vote of confidence in our vision here at PocketSmith — a world where people can establish a safe home for their financial data that exists for them regardless of where they bank. 

Starting with a money app

For those of us overcoming that fear for the first time — where do we begin? 

You may have noticed that I’ve avoided the word “budgeting” so far, because, well, it’s not what money management is about.

Starting a budget without a purpose is a lot like going on a diet without a purpose.

Let’s instead tap into those curation skills of ours and take a page from Spotify playlists. Just as we would sort music into lists by genre or mood, the first thing to do with our financial data is to categorise it

Categorisation lets you see your spending trends in different ways: over time, by amount, by volume. You could, if you would excuse this tired example, know how much you’ve been spending on coffee each week, and where. 

Some apps, like ours, will do a degree of automatic categorisation for you, so all you need to do is link your bank and credit card accounts to get instant insights. 

Maybe you don’t want to start by tracking it all. Focus your curiosity on one aspect of your life — perhaps a hobby, or a particular area that’s mysterious or stressful. Learn one thing new about yourself, and then work from there.

The insights have an even better payoff when you take a little more care with these categories by customising them so they’re more meaningful to you. Here are some of the things that our users have learned about themselves: 

  • That giving gifts makes them happy.
  • That their partner had been diligently paying down their mortgage quicker than expected.
  • That they valued good meals and experiences more than buying things.
  • That they have an oversized sneaker collection.

You could go one step further and add notes to your transactions to further enhance your memories. I love adding context to my transactions from trips I’ve been on (oh those were the days), turning my financial data into a searchable diary.

And yes, of course, you’d be able to better understand if you’re earning more than you’re spending, and identify some areas in which you could better save money, and plan ahead.

All in good time, because you deserve a chance to know yourself better before you start being productive.

Thanks for reading! If you would like to try PocketSmith, we’re offering all Rask Education readers 50% off their first two months of PocketSmith’s Premium plan. Claim your deal now and supercharge your financial productivity today 🚀

Guest Author: Jason Leong

Jason is the CEO and co-founder at PocketSmith. He is fascinated by our unique relationships with our money, and is passionate about making peoples’ lives better through the technologies we craft. He’s been a sneakerhead since the 80’s, and loves gardening on sunny days while listening to Planet Money.”

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