Achieving financial wellness can be a challenge, especially when the economy isn’t at its strongest. But careful financial planning can help you ensure you always have money set aside.
The key to financial health is to first take a look at how you’re spending. PocketSmith makes that easy by giving you an app that shows you your past, present, and future outlook in one easy-to-understand interface.
Recently, PocketSmith’s CEO, Jason Leong revealed the original inspiration for PocketSmith, as well as what financial health means to him. His tips and tricks for budgeting and saving may help you as you work hard to grow your bank account.
The Internet offers many cookie-cutter budgeting tools that are designed to be quick fixes. If you wanted a solution to suit you well, you would turn to a complex spreadsheet, or pay a professional financial planner to take control.
PocketSmith is making it easy for anyone to learn to manage their finances. In addition to the budgeting and reporting features, PocketSmith also offers a feature called Timeline. Timeline shows how far you’ve come over recent months and years, helps you better understand your spending behaviour, and how the decisions you’re currently making will affect your future financial health.
The best thing about PocketSmith, though, is that it saves you time. You connect to your various financial accounts – checking, savings, retirement, investment accounts, etc. – and PocketSmith helps you organise your money, your way. Instead of spending hours entering information and crunching numbers, you can instead get straight to work designing reports and getting insights from your data. It puts the power in your hands.
Meet PocketSmith’s CEO – Jason Leong
Jason Leong started his career at eMedia, where he quickly progressed from designer, to head of development, to CEO. His first leadership venture was a success, leading eMedia to capture the attention of BluePrint Media, which acquired the company in 2008.
In addition to joining PocketSmith in 2008, Jason also co-founded The Distiller, a group of technology entrepreneurs who help early-stage technology startups find their footing. That, combined with his work with PocketSmith, has given him the ability to be a part of the technology that will shape future generations of products and services.
As CEO of PocketSmith, Jason is always eager to talk about tackling the challenges of financial management. He opened up to us about PocketSmith’s vision and financial wellness in general.
Money Under 30’s interview with Jason Leong
What drew you to the personal finance sector?
Our users! The idea for PocketSmith began as a decision-making tool. I wanted a usable way to make good choices and plan ahead for things like travel and the occasional big expense.
Because of this, the original PocketSmith prototype was conceptually simple and focused on forecasting. It did not feature bank file imports nor spending reports, but when we started getting customer feedback, we began to understand the scope of the problem they faced.
We learned that people needed the best clarity over their money in order to make good choices. Many budgeting tools adopted a cookie-cutter approach that didn’t give the user the ability to dig in and get a deeper understanding of their finances. So what we actually needed to build was a financial productivity tool.
Today, PocketSmith is one of the most comprehensive PFMs on the market, still lovingly crafted from our many user stories. We all have a unique take on our money that is driven by who we are, and what we want to become. All of our financial situations are unique, because life is interesting!
So I ended up in the personal finance sector almost by chance. But I’m staying because our work connects us to people worldwide, and we’re privileged to be a part of their journeys.
What sets PocketSmith apart from other financial tools?
PocketSmith begins where simple budgeting apps meet their limit.
It comes with a wide range of interesting tools and features that lets you customize it to suit you. Best of all, it’s designed to adapt to change, so when you embark on a new adventure, or if life throws you a curveball, PocketSmith is there to help you figure it out.
Forecasting is still the jewel in our crown, and we’re the only product that supercharges your decision-making skills with projected bank balances and what-if scenarios, so you can test the outcomes of your decisions and see up to 30 years into the future.
We’re making this for people who are engaged in today’s financial ecosystem. There are now so many ways to earn and spend that it’s even more important to keep track of it all: the gig economy, side hustles, multiple currencies, retail investments, new mortgage structures.
COVID-19 now presents some of us with uncertain times, so many of our users are planning for a change or reduction in income.
We make it easy to make sense of it all and keep it under control, especially if you’re the family CFO.
What advice do you have for Millennials who are interested in getting started with investing?
Okay, so retail investing is hot right now and you’re armed with stock tips from Reddit. But before you jump in, please take a moment to consider your financial situation and risk appetite. Any investment advice should be related to your income, budget, and goals.
First up though, if you still have debts to service, and if the net returns from your investments don’t outperform the interest incurred on your debt, you’re wasting your time. It’s also generally a better idea to concentrate on paying down high-interest debts before shifting your focus to saving and investing.
If you are comfortable with setting aside some money to invest, and you’re doing it for a bit of fun and to learn about the stock market, then start small and learn without taking on too much risk. Take a curious approach towards investing, read up as much as you can, and engage online communities.
If you’re looking to build long-term wealth, then consider an index fund, which offers a degree of diversification at a low cost, and you benefit from the market’s overall gains over the years.
By now, you’ll be aware that we’re fans of forecasting and planning ahead. Run a few scenarios, both good and bad, to model potential outcomes. Then make the call.
For Millennials who want to buy a house or pay off their student loans or other debt, what budgeting advice would you give? How can an app help with that?
The first thing you should do is to take a deep breath and confront the debt. And by that, I mean really understand your net worth – that being the total sums of what you own and what you owe.
This is empowering because it sets the foundation for how you choose to tackle that debt. Too many people look at loans and mortgages as “just another bill to pay” on the regular. Sure, you’ve agreed on a repayment plan, and as long as you make those payments, you’re square, right?
Well, the thing is, unless your debts are interest-free, they cost you more the longer you take to pay them off. You know this! But lenders make it easier to segment this out of your thinking in an easy-to-manage solution, so they make more money off you. So it’s important to do the math.
A home loan is a prime example of this due to its size. Say you have a $350,000 home loan to pay off in 30 years at 3%, and you have $15,000 in a savings account. Repayments are about $1,400 a month.
You could stick to convention, make the $1,400 monthly repayments over 30 years, and stash the leftover money in your savings account, and hope to grow the latter over time. The hope here is that interest rates won’t go up while you’re still paying off your loan, resulting in higher monthly repayments.
Or you could confront the debt, which means realizing that in totality, you owe $335,000, because even though you technically have savings, you currently owe more than you have (equity on the house notwithstanding). It may be initially scary, but you got this!
When you see your debt this way, you start to gain control over your situation and may see the motivation to pay your debt down faster.
An additional $230/month cuts five years off the mortgage and saves you about $33,000 in interest. But you may not want to pony up the additional monthly repayment because it’s good to have cash available for emergencies and well, living.
So add that as a factor to your debt repayment plan and there are still many options available that offer flexibility, like all-in-one mortgages (or in some other parts of the world, offset mortgages and revolving credit accounts).
For multiple, smaller loans, like crushing an outstanding credit card debt – consider a debt consolidation option at a lower interest rate. These solutions are a little bit out-of-the-box, but if you do your research and can stick to a plan, you stand to save a lot of money.
An app can help you by getting all your information in one place so you have complete clarity over your financial situation. This allows you to start asking the right questions about your debt. And when it comes to implementing a plan, an app can help you set budgets so that you keep control over your spending. An app that can help you visualize your progress will keep you motivated over the long term.
Millennials are always hearing about the importance of setting up a retirement savings account. What advice do you have for Millennials who want to do this but simply don’t have extra funds left over at the end of each month?
This is a tough one to answer without making assumptions about why someone simply doesn’t have extra funds left over, and I don’t want to sound trite. But broadly, these steps here are a good place to start.
Examine your current spending habits to see if you can make changes in order to put aside a little something extra to invest. Most people we work with realize that they’re overestimating how much they spend – so you could very likely find some savings here.
It’s important to have a clear idea of how much you’re earning and spending each month.
You can start by using an app like ours to pull in your spending data from your banks and credit cards.
Categorize at least the last three months’ transactions to get a clear picture of where your money is going. Can you spot areas of improvement? Anything you’d like to change or to try out for a month?
Maybe “Coffee” goes from $60/month to $40/month, giving you $20/month to sock away or invest. Perhaps you’re ending a couple of subscriptions you’re not using, or shifting providers to get the same value for less money.
When you’ve made a decision, set budgets for these categories and work with them to see how it feels. Then re-evaluate.
Don’t forget to identify your non-negotiables. If that Friday catch-up with your squad keeps you sane, make sure it keeps happening!
Budgets aren’t meant to make you unhappy. Keep the “why” in mind. A well-designed budget will reward you as well as keep you on track towards achieving your longer-term goals.
If you’re already on a tight budget and a fixed income, you may need to get creative with a side hustle. Perhaps there’s something you enjoy doing that could earn you a bit of money? A quick search for side hustling tips could be the start of a rewarding journey!
Looking at past and present spending behaviors can be very helpful in predicting future financial health. What habits do you think are most indicative that someone is headed in the right direction?
In the era of COVID, it’s probably important to preface this by distinguishing financial health from financial circumstances, as the latter sometimes cannot be avoided.
Poor financial health is often a result of poor decision-making, and so the most indicative habits I can think of here are mindfulness and frugality.
Being mindful is, in part, about distinguishing between needs and wants. Being frugal is about maximizing the value you get for what you spend (as opposed to being cheap, which is simply about spending less).
Someone who understands value also has a better understanding of self. They know what’s important to them, and what makes them happy. As a consequence, they also tend to make better decisions when it comes to buying or investing.
One way to know if you’re headed in the right direction is to see how you feel about some of your past spending behaviors, and PocketSmith has a feature specifically for that. It’s called the Timeline, and it surfaces your historical transactions that have a note, and/or picture attached, all in a pretty social-media style scroller – just for you.
It allows you to create a diary of your spending and reflect on it down the line. I use it, and it’s a lot of fun revisiting memories of places I’ve eaten at, things I’ve bought, regrets and triumphs. It helps me see how I’ve changed over time, and hopefully for the better!
When you add pictures and notes to your transactions in PocketSmith, you learn more about your financial habits and health.
What advice would you have for someone who is already on their path to saving, but isn’t saving quite enough?
I’d offer the same advice as in Question #5, but on top of that, a wave of encouragement! Making a start is the biggest, and oftentimes the hardest step to take. Remember that it’s a marathon and not a sprint, and that every little bit counts.
Don’t be disheartened, and when your circumstances change and you earn a bit more, remember to also set aside a bit more for your savings!
How do you approach setting your own financial goals? What habits do you have that could inspire Millennials?
I tend to take a long time to set personal goals, mostly because I spend a lot of time learning about what it means to succeed at them, and how to go about achieving them. I find that the process of learning puts me naturally on the path towards planning, and then doing. Like a series of soft launches towards the goal. I know that being better informed gives me a higher chance of success.
A recent example was a goal to own and run an Airbnb. The thought had been percolating for a while, and though I didn’t have a clear idea yet how the project would pan out, I started thinking about the logistics of running one: funding, location, furnishings, cleaning, bookings, reviews, rate of return, etc.
I needed to know more about each of these topics, and so I started doing my research and matching that up with a corresponding financial plan. And when the opportunity presented itself, I was ready to take the next step. I felt comfortable throughout the entire process because I was as prepared as I could be.
I’m rarely impulsive when it comes to financial goals, and wouldn’t choose to throw myself in the deep end. If only because the level of uncertainty would make the process a lot more stressful, and a lot less fun.
What have you learned in working in the finance field over the past decade?
The PocketSmith team
I’ve learned that the best thing anyone can do for their finances is to take the time to understand them. I don’t mean getting a Ph.D. in finance and economics – instead, just knowing the ins and outs of your financial commitments, as well as being in tune with your financial values. That is, being financially mindful.
This is so important because the financial system is designed to tax the unwitting, and in the age of fast commerce, it’s never been so easy to spend your money.
Unfortunately, there’s no silver bullet or quick fix to achieving financial mindfulness. Be curious and dig in. Your finances deserve your time, and you’ll be much happier for it, too.
There’s never been a better time in history to learn about personal finances and connect with communities who share your values. Life’s too short to have financial demons!
What has been your greatest career disappointment and what did you learn from it?
The first time I was appointed to run a company, some 14 years ago now, I wasn’t well-enough equipped to make the most of the opportunity. At that point in time, I was the Head of Development and had little experience with corporate turnarounds.
I put myself through business school during the process, and we did ultimately turn a profit from a loss-making company in 18 months. But when I look back on that journey today, I see many missed opportunities that if taken, could’ve resulted in an even better outcome. I should have asked for more help and advice on finance and strategy.
I’ve learned that inexperience is not something to be ashamed of. If you seek help as and when needed, you give yourself the opportunity to unlock more of your potential.
Who in your life has been the most instrumental in teaching you about money management?
My folks have always been sensible with their finances, and I’m fortunate to have had positive and balanced associations with money growing up.
Dad and his siblings grew up dirt poor, and my grandmother was a single mum. He put himself through university, ultimately winning a scholarship which led to a fruitful career at a global bank.
He really had to forge his own financial mindset from an early age, and by his early 20s, had already set a plan in place for his kids’ education and retirement! Spoiler alert: I had no such plans in my 20s.
My parents taught me how to value a dollar, and beyond that, the importance of empathy and compassion, both insights gained from being close to the poverty line.
What’s the best advice you’ve received (not necessarily money-related) that has shaped how you lead your life?
There’s always money in the banana stand.
What’s your top personal finance tip?
Watch out for lifestyle creep! Investopedia has a very good definition of it. Yes of course you deserve to reap the rewards of your hard work, but when what used to be wants become needs, you’ve effectively raised your own cost of living. This is problematic if you’re looking to save, and a change in circumstances – like a job loss or decrease in income – will be harder to bear.
For some life lessons, check out some of the answers on Quora from the people who have flirted with the upper echelons of lifestyle creep: internet millionaires.
The stories typically go like this: after banking a ton of money, they bought the supercar and mansion, flew first class, and stayed in fancy hotel rooms – only to realize after a few months that the novelty wore off, and that luxury was the new normal. And worse – the old normal became kind of crap.
In other words, it cost a lot more to be pretty much as happy as they used to be. One doesn’t deny that money buys convenience and experiences. Just don’t get trapped into a lifestyle that costs you other opportunities down the line – like a comfortable retirement!
What is the financial book/website/podcast that has most influenced you?
That’ll be Planet Money on NPR. The show really needs no introduction, but if you want a place to start, try Episode 674: We Cooked A Peacock.
What piece of wisdom would you give your 20-year-old self about managing money?
It would be the same thing I’ve learned working in personal finance over the past decade.
Learn to be financially mindful. Take the time to know the ins and outs of your financial commitments, and be in tune with your financial values.
And buy Amazon at $1.73.
Good financial habits are built over time. But having the right tools in place to measure how you’re doing will give you a solid head start. Whatever solution you choose to budget and measure your success, make sure it’s one that motivates and inspires you even when progress seems slow.
Money Under 30 thanks Jason Leong for taking the time to offer his helpful advice. PocketSmith is a financial tool that can help you take control of your financial life, all in one place.