We all know we should prepare a budget and stick with it. But it’s such a pain in the neck. Suppose you have a whole bunch of goals, like saving for retirement, college, a new car and a vacation. How do you know much to put into each?
A new service from Mint.com, the free online financial-management site run by the people who produce Quicken, aims to make the process easier. It does have shortcomings, but even if you don’t end up using it for real, playing with it points to the tradeoffs required to achieve multiple goals.
From the Mint.com home page, the user clicks the Goals tab and either creates a goal or picks one of the eight provided: get out of debt, save for an emergency, save for retirement, buy a home, buy a car, save for college, take a trip and improve my home.
If you want to buy a car, for instance, you’re led to a screen that asks if you know the cost or want help estimating it. Successive screens ask if you will pay cash or finance, the value of any trade-in vehicle and your deadline. The program then figures how much you will have to save every month. Finally, it asks if saving for this goal will be done within an existing account already being tracked in Mint, or whether you want to set up a new account or decide later.
When all this is done, the program uses a thermometer graphic to track your progress.
Now suppose you also want to save for a child’s college education. The program walks you through a similar set of screens that estimate costs and show how much you’ll have to set aside every month. Now there are two thermometers on the home page.
The goal-setting program is not without shortcomings. Once an account is dedicated to one savings goal, it cannot be used for any others. That’s too bad because it might be perfectly sensible to use the same money-market or savings account to save for a car, an emergency fund and a vacation.
In the same way, you might use a retirement fund to build a down payment on a retirement home as well as for accumulating money for living expenses. If you cannot match your goals with the accounts you want, Mint’s progress-tracking function is less useful.