Ask Stacy: How Safe Are Budgeting Sites Like Mint and PowerWallet?

After the data breaches at Home Depot, Target and others too numerous to mention, it’s safe to assume that at least some of your personal information, including the financial kind, may now already be in the hands of hackers.

Mom was right. You really can’t trust strangers.

Among the strangers we’re supposed to trust are those that do our budgeting for us. Sites such as Mint, PowerWallet and others offer free expense tracking, allowing us to easily budget and keep track of our expenses. As with online shopping and banking, these services afford a vast improvement over past methods.

But are they safe?

Here’s this week’s reader question:

Time and again I’ve seen you recommend PowerWallet as a useful tool to manage a budget. However, I’m really nervous providing my user names and passwords for all my financial accounts to a third party (and online). What if my PowerWallet account gets hacked? Hacking seems to be happening more and more these days. What can I do then if someone gets my account information and steals my identity? Thanks for any information you may have to ease my mind. — Lisa

Before we get to Lisa’s question, here’s a video we produced a few months ago about the latest ways to protect yourself from identity theft.

Now we’ll explore the safety of online budgeting sites and apps. But first, let’s talk about what these things are and why you should use them.

Why you should use a budget

From General Motors to the corner store, every business tracks its income, expenses and profits. You should, too.

Knowing what’s coming in, going out and left over is critical, for a simple reason. It’s the money that’s left over that allows you to reach your financial goals. Whether it’s a comfortable retirement, a home of your own or college for your kids, the only way to get there is to find the money you’ll need. And the best way to do that is with a spending plan, also known as a budget.

A budget allows you to establish goals and deadlines for reaching them. It allows you to make adjustments to your expenses, and by doing so, increase the amount you save.

Working without goals and a spending plan is like aimlessly driving around, hoping to somehow arrive at a desirable destination. Working with them means saying exactly where you’re going and mapping out the shortest path to get there.

Why you should use a budgeting app or site

In the old days, and by that I mean before 2006, there were two ways to track your expenses. The first was by hand. You’d write down everything you spent, then keep track of it, perhaps with a budgeting spreadsheet. The second was to buy software, install it in a computer, then manually type in your income and expenses.Both techniques work, but are time-consuming. And when it comes to things like budgeting, the less hassle, the better.

Finally, someone came up with an idea to automate the process. You give a site or app your checking and savings account numbers, and based on what’s happening in those accounts, it automatically tracks and categorizes your income and expenses for you. You provide a budget, including your goals and spending limits; it tells you instantly if you’re on track.

Just as online shopping can beat traditional trips to the store, these services beat the pants off traditional budgeting methods. They’re simply easier.

Why we partnered with PowerWallet

There are several sources for online budgeting sites and apps, any of which will get the job done. Here’s why we chose to partner with PowerWallet.

I’m nearly 60, which puts me at a disadvantage tech-wise to many in the online world. But as many of you reading this can verify, being older also has its advantages. One is experience. Another is connections.

Long before there was an Internet, I was doing personal finance stories on TV. As a result, I came to know the owners and managers of many financial companies, from banks to credit counseling agencies. One example? PowerWallet. Bob Sullivan (not the Bob Sullivan whose articles appear on MTN) and Howard Dvorkin are the principal owners of PowerWallet, and I know them both very well. In fact, when PowerWallet was still on the drawing board, our team provided input to theirs. This website was their first partner.

That’s the kind of relationship I prefer. Does it mean I have an inside track on every detail of their business? No. I can only guarantee the results of businesses I directly control, and I don’t control PowerWallet. But when it comes to recommending someone else’s business, I vastly prefer those whose principals I know personally.

That’s why we partnered with PowerWallet.

How safe are sites like Mint and PowerWallet?

As I explained earlier, sites like Mint and PowerWallet are able to track your expenses because you’re allowing them access to information from your bank, credit card, savings, investment and other accounts. That means giving them the user names and passwords to all of those accounts.

Scary stuff.

It will come as no surprise that these companies say they’re safe. You can read Mint’s security page here, and PowerWallet’s here. A few bullet points from PowerWallet’s security page:

• PowerWallet is a read-only product, which means we don’t store your data. No one can transfer or remove funds.
• Our site goes through rigorous testing every day to provide the highest level of security and ensure the maximum level of protection against identity theft, viruses, spyware and other online threats.
• PowerWallet will not sell or distribute your personal and confidential information at any time, for any reason. We safeguard your online privacy and are 100 percent committed to protecting your personal information.

Of course, as Home Depot and Target will attest, no store or site is totally safe. But it’s important to remember that even if a crook broke into Mint or PowerWallet, they can’t steal your money because you can’t make cash withdrawals or transfers on these sites.

Then there’s the final layer of protection. At the end of the day, you’re typically not liable for fraudulent transactions, whether they arise from a hack to your bank’s website, malware planted on your computer or a stolen credit card. Big hassle? You bet. But it shouldn’t be a big loss.

What’s the alternative?

Unfortunately, the same feature that makes budgeting sites handy makes them scary to some people. I joined Mint years ago, and joined PowerWallet before I suggested it. I feel confident in the security they employ. But, as I said earlier, while I know the people behind the site, I can’t absolutely guarantee anything.

One way to reduce the chances of having your accounts breached or your identity stolen is to avoid being online entirely. In my opinion, that’s too high a price to pay. But if online budgeting is too scary, there’s a simple solution. Don’t do it. Budgeting spreadsheets, or just a simple piece of paper, have worked for generations and will still work just fine today.

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The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’ve earned a CPA (now inactive), and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate. Got some time to kill? You can learn more about me here.

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