As early as 2014, Fidelity Investments rolled out a budget and savings tool called Cinch. Located in the hard-to-find MyMoney section of their website, this “budgeting for beginners” web application seems to still be in beta phase two years later. If after reading this article you decide to try it out, be sure and submit feedback to the creators on the Cinch homepage.
As you read, keep in mind that Fidelity’s main goal with Cinch is to encourage you to save and help you decide whether your expenses are worth it. Let’s take a look at the functionality of our “newly discovered” budgeting tool.
If I had not been asked about Cinch, I would have never found it. Google “Fidelity Cinch” and your number one hit will be a gateway to this accounting device. Cinch is not advertised outside of the MyMoney branch of Fidelity’s website, which itself is mostly hidden from users. After a detailed search of the Fidelity home page and sitemap, I found no reference to Cinch or the MyMoney hub, home of Cinch.
Who Can Use Cinch?
If you’re already a Fidelity customer, like me, you can use Cinch without limitations. If you’re not yet a Fidelity account holder, you still have the option to use Cinch as a guest. Being a guest user will not obligate you to use Fidelity’s investment services.
I created a Cinch account as both a Fidelity customer and guest, and found no stark difference in capabilities between the two. This is unusual, and I’ll discuss why at the end of this article.
Not Another App – And Still in Beta
Nope, there is no mobile application for Cinch. The Fidelity Investment app family does not include the Cinch budgeting tool and likely won’t in the near future. Based on my research of the tool and FAQ, Cinch is still in the beta development phase.
The Basics of Budgeting
There are three elements to any budget: income, essential spending, and discretionary spending. Cinch wants to walk you through these three elements and build out a basic budget as if you’ve never done one before. It does not delve into as much detail as other tools, but it is suitable for those just starting out in personal finance.
In the three steps of Cinch, you’ll link accounts, verify your income, and then identify what is essential spending. By identifying essential spending, you’re also singling out what is not essential, aka discretionary spending.
Cinch needs to see inside your financial accounts to help create your budget. The worst part of using any online personal finance and budgeting tool is adding those accounts. I think Cinch makes this first step easy enough, though. I had no trouble or misfires while adding my multiple accounts. They also linked up properly on the first try.
If you like to test out different web and mobile tools to track your finances, it helps if you already have a way to quickly reference all of your usernames and passwords. My personal technique is to use an excel spreadsheet with separate columns for each account, username, password, and pin numbers or security question answers. I always seem to forget those.
You should encrypt this document with a separate, unique password that only you know. This ensures that if for some reason your computer is lost or stolen, that file is protected and can’t be used to raid your accounts. For those worried about the security of your account information inside Cinch, know that this information is encrypted, stored, and transmitted in a way that poses minimal risk to the user.
Another option is to use a tool such as LastPass. This is available in desktop or mobile format, and has a number of functionality tools. It can create encrypted passwords, auto-fill, and even categorize the usernames/passwords that you save, among other features.
Once you’re done linking each account into your Cinch budget, you’re ready to move on to the next step. Remember to include all of your banking, credit card, and loan accounts to paint an accurate picture of what you spend each month.
One thing to note, there is no refresh button to update your account data once you’ve completed this step. Your data will refresh on a user demand-based schedule, which you can find in the Cinch FAQ.
Verify Your Take-Home Pay
After you link all of your accounts, you will have to verify your Take-Home Pay. For this, Fidelity presents your previous month’s deposits – which can vary widely and come from multiple sources– and lets you identify which ones are really your income.
This is helpful, because there is a tendency for some automatic budgeting tools to double count things like retirement savings and other deposits, when those transactions are really just you moving money around in your accounts.
An example of this would be automatic savings and retirement contributions, especially if all of these accounts are held by the same bank. This is a common problem I see when I use online and mobile personal finance tools, and thankfully Cinch takes care of this issue. I had no trouble teaching Cinch my real take-home pay.
Talking About the Essentials
I selected my regular, income-related deposits and moved on. Here’s where Fidelity asked me about my essentials. Essentials are those things that “make your life livable”, like the big three: food, shelter, and clothing. They offer to let you throw Wi-Fi in there, too, if you’d like.
Your must-haves (essentials) are really up to you, and this tool can help you understand what’s really important in your budget. That which is important to you will show up on your bank statement quite often.
Common themes in this category for me were retirement savings, emergency fund savings, charitable donations, and things like food, fuel, loan payments, and housing costs. A new budgeteer might put those first three items in their discretionary spending, or non-essential category. That is perfectly fine and probably more appropriate for some. My way is how I prioritize giving and saving. Come up with your own essentials, but be sure to include the basic necessities of life.
Knowing all this, sorting out the essentials is not as easy as it sounds. I looked at dozens of transactions for the month of September, and I admit it was hard to exclude all of my non-essential purchases when organizing this category of spending.
There were two reasons for my struggle.
First, my internal bias showed up big time. Do I really want to admit that a purchase was non-essential? Or am I willing to lie to myself and call an unqualified acquisition absolutely necessary?
Second, it was difficult to remember every purchase and what it was for. This reveals a need to do a detailed analysis of my spending to see where exactly our money goes. Cinch doesn’t necessarily do that, but other online budgeting tools like Personal Capital will. Personal Capital will use an algorithm to automatically categorize spending into areas like grocery stores, restaurants, and entertainment venues.
In the end, it was helpful to look at each line item and see how quickly I ran out of room in my essential budget. Here is where Cinch does set a positive example for its users: your essential spending cannot exceed your take home pay. You are literally blocked from adding more essential items if they will take you over your monthly income. Cinch enforces the smart budget principle of spending less than you earn!
Leftovers Into Savings
Whatever is left over from your essential budget is what you’ll want to start saving for a rainy day or your next big purchase. Cinch keeps you honest here: you are not allowed to set your savings target any higher than what you actually say you’ll have left over. If the difference between your monthly take-home pay and essentials is $21, that is all you can set aside.
The thing I like about this feature is that it makes math easy. Since I still count on my fingers, that’s a plus. Going with my $21 example, users get a pre-made chart showing they will save $21 this month, $248 in one year, and $1,239 in five years. Everyone gets this same time horizon break down: short, medium, and long term.
You can adjust this number lower if you want to make room for discretionary spending. Remember it can’t be higher because you don’t earn any more. After you’re done adjusting, you’ll be directed back to the Cinch main page. And that’s pretty much it. You’ve completed your first budget.
Painting the Picture
Once you complete the budgeting steps, Cinch will give you a graph of your current spending and saving. The “My Progress” tab for the month charts out your total amount spent this month, and what is leftover. You’ll see your essential budget level and an automatic calculation of how much you’ve spent that month. Your monthly income will make up the entirety of the chart, and each subsection (spending, savings) will populate inside the chart. All of this together will visually break down how you’re doing.
If you have set your essentials category correctly, the leftover amount will be what you can dedicate to saving for the future or use for occasional, discretionary spending. You can also review the history of previous months’ spending and earnings in a separate chart. Use this to identify trends in your financial picture.
Next Steps and My Money
You’ve now completed an overall, basic budget, but you haven’t broken it down by category. You should take that next step, but Cinch stops at overall numbers. There are four generic tips to help you stay on track with your savings plan, listed next to your budget chart. However, that’s all the additional detail you’ll get from the application.
Fidelity somewhat makes up for this budgeting shortfall with the MyMoney knowledge base, also the home of Cinch. Interestingly enough, though, I had a difficult time navigating to MyMoney and found no mention of it on the main Fidelity Investments page. I only found myself in the MyMoney district of Fidelity because I went directly to the Cinch tool from the Google search I mentioned above. Had I not used Cinch, I would not have found MyMoney.
The MyMoney section, when coupled with Cinch, is another building block on your journey to financial freedom. There are five sub-topics with multiple articles in each category: Money 101, Investing & Retirement, Debt & Credit, Milestones, and Career Advice. Here, you can access articles, videos, and even a retirement score calculator. Use these to give yourself a check up on your retirement progress.
Knowing what we’ve discussed, your personal next steps after completing the Cinch budget process are pretty straightforward. Follow and fine tune your budget until you are spending less than you earn. Also try saving as much as you can afford. When you look hard at those essential spending items, the non-essentials should fade away. And your ability to reduce those types of purchases will grow.
The “So What?”
I mentioned earlier that I created a guest account to examine the difference between the two customer experiences. I thought the creators might use the Cinch tool to promote opening an Independent Retirement Account (IRA) or a brokerage account with Fidelity Investments. They didn’t.
Knowing this, I’m not sure Fidelity has figured out the full “so-what” of the Cinch tool. You can get the same kind of budgeting and savings tracker from other companies, like Albert and Benjamin, and then open accounts with partner banks and investment firms. Ironically, Albert chose Fidelity as a recommended investment firm to use when customers want to open an investment account.
Check Out Our Comparison of Albert and Benjamin
The MyMoney resource may be enough to keep you using Cinch, but there is nothing stopping you from budgeting elsewhere and browsing the resources on that website.
Cinch has been around since at least October 2014, so I’m not sure what further progress the company will devote to this application. Considering they don’t advertise it on their homepage or make it easy to find, I’m wondering if Fidelity has written off this seemingly experimental program.
Should You Use it or Not?
Cinch is indeed a relatively painless tool to use. Plus, it will keep a budgeting newbie honest about what he or she can actually spend and save. But, Cinch is not ground breaking or unique, and I would not recommend a personal finance veteran take the time to use this product. There simply is not a compelling reason to invest your effort into another budgeting and savings tool unless you have never done so before.
In the end, I don’t think it provides the seasoned budget enthusiast new insight into their financial life. There is not a processing of data into knowledge beyond the simple math of spending vs. income. However, when coupled with MyMoney, it is a great jump-off point for the newly knighted personal finance warrior. Check it out and let us (and Fidelity) know what you think.
Related: 10 Best Online Budgeting Tools