PocketSmith Basics
On one level PocketSmith is simple just bank feeds, transactions, categories, and budgets. But PocketSmith is also a super powerful tool, so the deeper you dig, the more complicated it gets.
Let's start with the basics.
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Connect bank accounts
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Categorising transactions
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Create a budget
a) Editing a budget
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Reading the reports
Connect Bank Accounts
You connect your bank accounts to PocketSmith from the feeds page by selecting and logging into your bank. You don't have to sync all your accounts, just the ones you choose.
Is it safe to connect my bank to PocketSmith? Yes, PocketSmith can only read transactions and balances from your account. It cannot make changes. Also, all data is encrypted. Your bank might discourage you from connecting to services such as PocketSmith, but PocketSmith’s entire reputation is defined by the security of your data.
When you connect your accounts, your bank typically provides PocketSmith with three months of past transactions. (It can take a few minutes for transactions to sync.)
TIP: If you want control over categorisation of your transactions should turn off automatic categorisation. If you leave this on you can still control some aspects of how transactions are categorised but you’re likely to have new categories appearing at random, which can get a little confusing.
Categorising Transactions
Head to the categories page where you can create new categories and edit and delete existing ones.
TIP: Everyone has different categories. Some like death by category, others like to keep it simple. I recommend having the fewest categories you can, whilst still getting good information for budgeting. For example, automotive expenses could be broken down into registration, insurance, and repairs but that’s probably unnecessary. But you also don’t want to throw gasoline/petrol into the automotive expenses category because most of us like to see what we’re spending at the pump.
Here are some base categories you can use as a starting point:
Automotive Expenses
Clothing/Shoes
Donations
Entertainment
Cafes & Restaurants
Sports & Fitness
Gasoline/Petrol
Gifts
Groceries
Healthcare
Home Improvement
Home Maintenance
Cleaning
Income
Insurance
Mortgage
Other Loans
Miscellaneous Expenses
Personal Care
Property Rates
Pocket Money
Rent
Mobile Phone
Travel
TRANSFERS
Utilities
Work Expenses
Categories can be added in bulk from the “+ Add new” button.
On the transactions page you’ll see transactions imported automatically from your bank feeds. The process of categorising transactions is simple – select a transaction and select the category. You’re also going to want to setup category rules as you go.
TIP: PocketSmith populates the text of the category rule with the merchant name. This is a narrow rule that will likely only apply to transactions from that specific merchant. Consider editing the text of the rule to make it more broad, but not so broad that it will match transactions you want in other categories. E.g. “Café” might be an ok category but “Store” is too broad. All sorts of merchants have “store” in their name.
Your new rule will automatically apply to any uncategorised transactions. But if ever you need to apply a category to transactions in bulk, there are two ways:
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From the Manage menu, select Category rules, saved searches and filters. When editing a category rule, you can opt to “Manually apply this category rule to all transactions containing the above merchant keywords.”
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Edit transactions in bulk from the Transactions page. Select one or more rows and additional options appear at the top – Category, Label and More.
Most of us have more than one bank account so we need to use a category called “Transfers” that is configured as a transfer category from the category options page. This category can be excluded from each of the reports so the pluses and minuses of money moving between accounts don’t confuse your reports.
Now that you have connected your bank accounts, created some categories, and categorised your transactions you’re ready to create a budget.
Create a Budget
Before you create a budget – you're probably going to want to use rollovers to capture the underspent and overspent amounts for each budget period. Rollovers are currently a beta feature in PocketSmith. You can join the beta program in User Preferences > Beta settings.
From the Budget page add a new budget. You can toggle between advanced options and the simple budget form. I like to use the advanced options so I can set a start date for the budget.
TIP: I like to start my budget on the first day of the tax year and review the budget each year around that time. It is a tidy formula that keeps my budgets easier to follow.
Budgets can be complex but in their simplest form you select a category, enter the amount, the start date, whether this is income or expenses, and how often you want it to repeat. You can also link out to rollover options for your selected category.
TIP: In the Cashflows report, budgets appear according to the start date and frequency of the budget period. Therefore, an annual budget starting on March 1st will appear wholly in the March period in the Cashflows report. This leads to the Cashflows report looking deceptive and is another great reason to use rollover budgets and spread an annual budget across the year, if it’s appropriate to do so.
Editing a budget
If you ever edit a budget and change something like the amount, frequency or start date and click ‘Save’, PocketSmith will present you with three choices that I have always found difficult to interpret.
Hopefully this explanation helps:
Only this budget event on X date
PocketSmith sees budget “events” as one instance of whatever frequency you have set for that budget. If you edit a monthly budget and select “Only this budget event” PocketSmith will look at the budget start date and only make the change for the month this date falls within. If you change the start date, then the month the new date falls within will change but the other months will not. If you change the amount but not the date, the date will be showing the original budget start date, so the change will only apply to the first month of this budget. In any scenario, selecting “Only this budget event” will always result in a new one-off budget for the date entered.
This and future budget events from X date forward
When you make a change to a budget and select “This and future budget events”, PocketSmith will apply the change to the budget from whatever date was set when you clicked “Save”. The original budget up to that date won’t change. For example, you have a budget that started on the 1st of January for $100. You change the budget amount to $120 and the start date to the 1st of July and select “This and future budget events”. You’ll end up with two budgets, one from January 1st until June 30th for $100, and the other from July 1st onwards for $120.
All budget events in this series from X date
This is the easiest option to understand. When you select “All budget events in this series” the change applies to the whole budget going right back to the start. The only tricky thing is that if you change the start date that’s precisely what you have done. The budget will now show as starting from whatever date you chose. For example, you have a budget that started on the 1st of January for $100. You change the budget amount to $120 and the start date to the 1st of July and select “All budget events in this series”. Your budget will now show as starting from the 1st of July for $120. There will be no mention of the original 1st of January start date or $100 amount.
Reading the reports
Now you have categorised transactions and budgets in place, you’re ready to discover one of the joys of PocketSmith – the reports. There are three great reports to help you understand your finances:
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Cashflows
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Income and Expenses
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Trends
Cashflows
The Cashflows Statement is one of PocketSmith’s superpowers. It allows you to see into the future. If your income doesn’t change and you stick to your budget, you will know exactly how much money you’ll have next year, in five years, in ten years (paid plans only). If you want to know when you’ll have your mortgage paid off, or when you’ll hit your savings goal, PocketSmith will tell you the exact month that will happen. It’s quite inspiring.
Income and Expenses
If you want to take a step back to understand your total income and total expenses for a whole year, the Incomes and Expenses report is the perfect tool. It helps you look at a defined period, like a year, and quickly see if you have enough income to meet your budgeted expenses and how much surplus (or deficit) you have planned to achieve, if you stick to your budget. The Income and Expenses report is the right place to review whether or not your budget is realistic.
TIP: I like to start my budget on the first day of the tax year and review the budget each year around that time. I set the budget and expect it to operate with very few changes until the next review in one year’s time. A one year period is something I can commit to, and a length of time that feels right for my savings goals.
Trends
The only place to keep on top of your rollover budgets and the best place to see how your individual budget categories are performing month by month, is via the Trends report. This will show you how your overspent and underspent budget periods are smoothed out across the year. And when you way overspend, how long it will take you to get back into the black.
TIP: Use the Trends report to assess what changes you could make to each budget. The trend line shows your actual spending relative to your budget.
TIP: If you operate an annual budget and want any accumulated rollover to start from zero at the start of the next year, you reset the rollover surplus/deficit on the Trends report.
Where to next?
That was the basics of PocketSmith from one perspective. Depending on your personal financial circumstance your PocketSmith setup could vary wildly from what I have described above. There are both broader capabilities than what I have described, and deeper, more complicated configurations of the areas I have described. You might invest time and effort understanding and configuring a particular area of PocketSmith that someone else might never use. The golden rule with PocketSmith is to invest the time understand how it can work for you and it will turn a challenging area of financial management into a real joy.
Other than diving deeper into the basics described above, here are some other areas of PocketSmith you might like to investigate further:
