Fallacies and Frustrations Inherent in Accounts

by Bob Clark

originally published March 2008; last updated July 2010

There are a lot of personal finance applications out there, with user interfaces from the geeky (like a spreadsheet) to the friendly, and with prices spanning the financial spectrum from a few dollars to hundreds of dollars.

One “feature” that most of these personal finance applications have in common is that from top to bottom, they are tied to the idiom of accounts.

Let’s face it: living in a digital era as modern homo sapiens, multiple accounts are a reality of personal finance. But part of the promise of the electronic age is that modern applications can handle complexities such as these behind the scenes, instead of forcing us to waste our precious (human!) brain space on stuff that computers should handle. Historically, Apple products are shining examples of letting the electronics handle the complexities, freeing up us humans to do what we want.

This leads to several frustrations that I’ve felt for ages; and the solution mentioned at the end of this article is truly a case of a developer scratching his own itch.

There are two drawbacks of personal finance applications that focus on accounts:

  • It can be difficult to see consolidated family finances.
  • A monthly payment from one of your accounts to another can lead to a subtle fallacy.

Consolidated Family Finances

It’s often very difficult, if not impossible, to see a simple view of your family’s expenditures if they’re spread across a few credit cards, a checking account, and maybe even a home equity line of credit.

If you’re like me, when it comes down to it, you don’t care whether dinner out was paid for using a credit card or a check: at the end of the day (or the month!) it’s your money that paid for that meal.

The account fixation of most personal finance applications implies that it is really hard to get a sense of overall personal or family finances. When the underlying assumption of application development is that The Account Is King, it’s no surprise that the end result is so fixated on accounts.

Despite my own frustrations, I don’t want to disparage account-based personal finance apps, because for many people they fit the niche perfectly.

But for me, the account-focused approach was never comfortable for me, and that’s why I ended up doing something about it.

Account Fallacy

It seems to me that this can cause a subtle fallacy when dealing with the month-to-month flow of a family’s finances.

Consider a credit card that you use for most purchases, and pay off — religiously — each month. So one day every month, you’ll have a payment of a few thousand dollars. If you’re stuck in an account-based personal finance application, you will also be stuck in an account-based mindset, and that’s a mindset that thinks about this huge payment once per month and, correspondingly, thinks less about that credit card’s purchases the other 29 or 30 days of the month.

What’s really happening in your family finances is, every day, a small set of expenditures; but account-based thinking, amplified by most personal finance applications, increases the monthly anxiety (which doesn’t matter) and decreases the small daily self-discipline (which is what matters).

If only there were a personal finance solution that focused on the finances of a person or family in a way that wasn’t overpowered by “The Account.”

If only there were a personal finance solution that let me focus on my complete set of personal finances, working with accounts, yet not being completely overwhelmed by ’em.

If only there were a personal finance solution that showed my finances in a single view, unobstructed by an unnecessary account fixation.

If only there were personal finance solution designed from the bottom up as a native OS X application aiming for the simplicity that is the hallmark of the Cocoa application.

If only there were a personal finance solution that was finally personal.

This trifle of an essay is a distillation of the motivation behind our latest product, Flowing Pennies.