The Future of Personal Finance Record Keeping

The other day, I was looking (longingly) at a new laptop at the store.  I keep my personal finance records totally separate (as much as possible these days) from the internet, to attempt to avoid data or identity theft.  Today those records exist soley on the hard drive and diskette backup of my 2000 era desktop computer in a very old version of Quicken.

As I looked around the electronics department, I wondered, why not go to a tablet.  It would be easier to use.  In researching the applications I could use to track my finances, though, it quickly became apparent that I would need to store my data on a third party server or even ‘in the cloud’ – something I’m not totally comfortable with today.

That made me wonder, what will the future of personal finance record keeping be?

But first, a look back.

The past.

Picture the Christmas movie: Scrooge (aka A Christmas Carol) where Bob Cratchet bent over hand written ledgers, inking in the latest information. In the 1920’s and 1930’s folks (and banks) used ledger books to track their accounts and inflows and outflows. Net worth was tracked via paper and pencil (if at all). On to my youth in the 1950’s when banks issued passbooks showing your transactions (which were stamped in while you stood there and watched); parents kept checkbooks handy for bill paying and hardly anyone used a credit card (and there were no credit scores as we know them today the FICO scoring system having been developed – according to Bank Rate  – in the late 1980’s)

Now look at what many are doing today to track their finances – pictures of receipts going into software which automatically classifies it; check pictures snapped and automatically deposited, online automated bill paying, direct deposit of payrolls and benefits, confirmations of transactions sent out automatically (and posted online for you to see), even taxes being calculated and filed by software and services offering cloud based data storage of your financial data along with a multitude of tools to help you manage it.

Until the advent of the personal computer, most people (if they tracked at all) kept their records on paper, using hand written or typed (yes on a typewriter) accounts.

Introduction of the personal computer changed that. Since 1985, Intuit has offered software to track your personal finances. Allowing the software to bear part of the burden of keeping track of things.

Still, even with the expanding use of computers, the information was personal and private. Money was (and still is in many ways) a taboo subject. You didn’t talk about how much you made, how much you had or how much you spent on what.

With the spread of internet usage in the mid-1990s multiple new tools to simplify personal finance tracking were introduced as well as the possibility for your data to become less than private.

Some of these tools required that you basically gave up some control over your personal data, allowing it to be stored in databases in the cloud or on servers where the company controls who has access to it (hopefully in such a fashion that no hackers were able to get it), how much you had to pay to use it and what services you actually got.

In April 2015, PC Magazine article: What Is Cloud Computing? acknowledged some of these issues, saying:

“Cloud computing—like so much about the Internet—is a little bit like the Wild West, where the rules are made up as you go, and you hope for the best.

The ISPs, telcos, and media companies control your access. Putting all your faith in the cloud means you’re also putting all your faith in continued, unfettered access. You might get this level of access, but it’ll cost you. And it will continue to cost more and more as companies find ways to make you pay by doing things like metering your service: the more bandwidth you use, the more it costs.

Apple co-founder Steve Wozniak decried cloud computing in 2012: “I think it’s going to be horrendous. I think there are going to be a lot of horrible problems in the next five years,” he said.

But Wozniak was concerned more about the intellectual property issues. Who owns the data you store online? Is it you or the company storing it?

That said, of the approximately 256 million people aged 15 and over living in the United States, estimates of the numbers of people storing and accessing their personal financial data over the internet exceed at least 15 million (estimated number of Mint.com users). This doesn’t even count everyone using online brokers, bill paying, banking and other private data center vs. ‘the cloud’ (what is the difference?) type storage and services. Heck, even if you don’t sign up for online accounts, your data is still out there, and can possibly be hacked. Financial institutions don’t typically segregate accounts prior to loading it to their private servers – its usually all there in these data centers, whether or not you use it via the online functionality.

In just a few short years, more and more people seem to be willing to lose that degree of control over their data, so that their record keeping can be simplified. Why is that?

Because record keeping is a drag, always has been. That, according to some sources, is, after all the reason Scott Cook and Tom Proulx started Quicken – Cook’s wife’s loathing of her monthly bill paying chores. I myself have lamented the increasing amounts of record keeping required as we have become more affluent.

What will the future of personal finance record keeping look like?

As we move forward in time, how will it change, how will it become less of a drag?

I believe it will be a combination of the influences of technical advances, changes in our psychology around money and of the fight against hackers. Among those, I believe the psychological changes will be the hardest to effect and the most important influencer.

Technical advances.

In 2014, Pew Research Center’s Internet Project, and Elon University’s Imagining the Internet Project cam up with 15 projections about the future of the internet.  One of them was:

 “Augmented reality and wearable devices will be implemented to monitor and give quick feedback on daily life, especially in regard to personal health.”

With respect to our finances, these could (perhaps in combination with bio-metric security applications) be used to record our financial transactions as we go about our day to day business of living – keeping track automatically of spending (including savings and investments), payments made and received and their impact on our net worth and goals planning. You won’t even have to take a picture of your check or receipt to capture it.

Taxes (I believe) will be simplified (eventually) and automatically calculated and filed for you. Records will be stored online instead of in your filing cabinet at home, by the organization that cares most about you paying them (ahem, the IRS for the most part). Just as doctors offices long ago took over our interactions with our own health insurance companies to file a claim, the government will lose patience with our record keeping and reporting and take over the process.

Cash (or some equivalent non traceable form of exchange) will continue to exist, but fewer people will use it and those that do will probably be tracked by the NSA because it will be assumed that since you don’t want to be tracked, you must be up to something bad.

Fees will be reduced or eliminated (such as transaction fees on credit cards or Paypal accounts) only if some other means of reward can be introduced to entice companies to offer these services.

There will be more and more financial interactions that cross national boundaries because the technology will make those transactions easier and cheaper.

If you are interested in the latest and greatest, there is a conference dedicated to exploring the latest and greatest finance innovations – called Finovate.

Changes in our psychology of money.

A percentage of our populations are becoming more open to the sharing of things and information – evidenced by ride and home sharing applications as well as social networking and personal finances in the cloud products and services. Our psychology of money is changing from being one of private, secret, none of your business to one where we trade privacy for convenience.

Among those 15 predictions of the future of the internet, another was made which validated the above, saying:

“People will continue – sometimes grudgingly – to make tradeoffs favoring convenience and perceived immediate gains over privacy; and privacy will be something only the upscale will enjoy.”

There will be more personal style interaction, made possible by a backlash against the isolation of the internet and by the advancement of technology that allows cross-distance face to face human interactions. These interactions will address more foundational (and trust related) personal finance issues than mere record keeping – offering financial therapy, planning and non-trivial conversations.

The fight against hackers.

Biometrics may become the gold standard in security in the nearer future. Starting now, with the finger print scanning available to lock or unlock your cell phone, progressing to voice recognition in phone calls to verify your identity all the way into the more distant future where payment devices will sense your unique body or genetic characteristics, access your pre-stated preferences on payment and automatically deduct the purchase amount from your preferred account. Back in 2013, PBS NOVA article The Boring and Exciting World of Biometrics validated that, stating:

“Before long, physical driver’s licenses will be obsolete and credit card purchases won’t require signatures, just a wave of our hands over a sensor.”

Until and unless our computer applications become smarter and more creative than human brains (which I hope never happens!), hackers will find ways around security devices.

There is a degree of risk in all human endeavors. We accept a very large degree of risk today in using the internet, hopefully that risk will be reduced by a better hardware, software and regulatory infrastructure going forward.

The future depends on how well our trust issues are addressed – both within ourselves and by our service providers.

On a broader front, Kiplingers, in The Future of Personal Finance predicts:

“The future will be all about simplification. The financial-services industry has created a dizzying set of products and services for dealing with household risk and responsibilities. From now on, the innovation mantra will be managing these risks comprehensively, from hedging against a drop in income to making sure you’ll never run out of money to monitoring household finances with a tap of a finger.”

What does this mean to us?

For me, it means an uncomfortable personal finance record keeping future. Fewer and fewer products or services will cater to people like me (who prefer to keep their money issues to themselves).

It means that I may be stuck in the past using out dated and unsupported software to centralize and track my accounts, debts, net worth and trnasactions.

It also means that I won’t be using personal finance needs to justify buying myself a tablet!

For the rest of you, it means less time and effort spent on the mundane and boring tasks of tracking your money and more time available to actually form goals and strategies to move your finances to a more affluent state.

What do you envision in the personal finance future world?