Product Management Concepts for Better Personal Finance

The role of a Product Manager is, generally, to manage the development of a product, and then maximize the revenue and profit margins that product generates for the company.

As a product manager, I tend to approach a lot of things in life the same way I would managing a product. Things like maintaining a calendar, tracking my stats on hikes and backpacking trips, and even these articles I post every week — all governed by methodical organization and efficiency (at least in theory…).

So it’s no surprise that, overtime, I’ve implemented some tricks of the trade to better managing my personal finances. After years of managing products, my head’s geared this way – but you don’t have to be a Product Manager to apply these concepts to your own personal finances.

Below are the concepts and practices, used in my profession, that can make personal finance a more streamlined and successful endeavor.   

1. Understanding the user

The first and most important step in both areas — Product Management and Personal Finance — is understanding the user.

In Product Management, the better you understand the users and customers of your products and services, the more likely you are to create a product or service that they’ll pay for.

In Personal Finance, the better you understand your financial behaviors, the more likely you are to reach your financial goals. Clarifying what’s important to you and your family. Differentiating between “Needs” and “Wants”. Making sure your resources are being allocated towards the right places. Doing all of these things will increase your overall happiness and peace of mind when it comes to these matters.

The following steps all serve to accomplish these tasks, and achieve an overall understanding of your finances — better enabling you to reach your goals.

2. Performing quarterly KPI reviews

In Product Management, KPIs (key performance indicators) are used to measure how efficiently a product is achieving its business goals. Examples include Engagement, Profit, Cost, Customer Retention, etc. Companies regularly review these measurements to ensure their processes are going as planned, or, to make make strategic adjustments if the measurements seem to be off.

In Personal Finance, items like Income, Expenses, Assets, and Liabilities serve as useful KPIs — obvious. But simply having these measurements, without tracking their progress and comparing them quarter-to-quarter, year-to-year — undermines their potential to drive your finances in the right direction.  

I’ve been completing quarterly KPI reviews of my wife and I’s personal finances since 2002, after reading the book Rich Dad, Poor Dad. My wife isn’t always ecstatic when the time comes each quarter to sit down for 15-minutes and look over our finances. The same could be said occasionally of my product teams for our Product KPI reviews — these meetings can feel a bit repetitive and boring, but more times than not it’s a valuable use of time in both arenas.

Observing the long-term trends of Personal Finance KPIs (like the ones mentioned above) illuminates helpful insights, like the contributors (and hindrances) to Net Worth, or just how wide (or narrow) the current gap between Income and Expenses is. The more you keep track of these items, the more likely you are to foster them in the right direction. And oftentimes creating simple graphs of these measurements helps further, yet.

Quarterly Balance Sheet [Google Sheet Template]

To do this, I maintain a quarterly balance sheet which reports on Income, Expenses, Assets and Liabilities for our finances, and reveals our net worth as well as our QoQ indicators.

I shared a version of this 10 years ago that evolved a bit since then and became more streamlined into my personal reporting process (Latest version of spreadsheet I use). I’ve used Quicken, Mint, and Personal Capital to do categorization of spending over the years… and they all help get the raw numbers. But I found the only consistent tool that covers everything and presents in the way that I want is a spreadsheet I maintain myself (In G Sheet and previously Excel).

My Investment Portfolio (2002 – 2018)

3. Maintaining a big purchase backlog

In Product Management, backlogs are used like to-do lists. Often, the to-do items are features a business wants to add to a product. The backlogs provide brief descriptions of the features, and organize them by priority, so that the teams have a clear picture of the past, present, and future of what they’re working on.

In Personal Finance, backlogs can be a helpful way to keep track of your big purchases and projects. I define a big purchase as any Expenditure that falls outside and above the categories of your regular expenses (Food, Clothing, Transportation, …). This can include household renovations, vehicle purchases, gadgets and devices — anything that seems significant enough to record and document. Everyone will have their own definition of a significant purchase, but the more you track and record, the more mindful you’ll be about where your money is spent.

Example of my Big Purchases Board on Trello

4. Creating user stories

The quarterly KPI reviews and the big purchase backlog both help to understand your financial behaviors. To help clarify what’s important to you and your family — to differentiate between your wants and your needs — I’ve found creating simple user cases for our big purchases to be a useful tactic.

In Product Management, user stories are brief descriptions of how you intend for your target customer to interact with your product. Writing these scenarios out, or even sketching them onto a storyboard, can help to make your product better serve the user in the end, and thusly perform better in the market.

In Personal Finance, writing a brief user story for your big purchases can help to clarify whether the Expenditure is a “Want” or a “Need”, and allow you to make a more informed decision about it.

For each item entered into our backlog, I write a brief user story with this template:  As <user role>, I want <some goal> so that <some reason>.

For example:

As <the kids>, we want a < lego work station in playroom> so that <we have a better space to build and stay organized>

This example, which we actually did (and turned out great), was certainly a “Want” and not a “Need”. But, it was a feasible project, and it improved my families overall happiness. In this case I also insisted on an MVP first, which involved simply setting up a folding table in the room before purchasing more permanent workstation furniture.

Our kids love their Lego Workstation (even at its MVP stage)

By making these decisions after a brief, methodical reflection, you avoid the habit of making purchases based on random impulses. Which is especially helpful for the lesser purchases we don’t normally think much about — the ones that add up overtime and eat away at our cash flow.

In any case, whether a purchase is deemed as a “Want” or a “Need”, it helps to reflect on the “Why”, and avoid impulse purchasing.

5. Estimating with T-shirt sizes

In Product Management, T-shirt size estimation is used to gauge the scope of a project or task when it’s entered into a backlog, so that it’s resource allocation requirements (time, money, team members) can be readily understood. To avoid spending too much time and energy measuring the gauging the scope of a project or task, general measurement levels (like T-shirt sizes) are applied as a basic estimation. A low intensity task is would be labeled with “S” for “small”, while a more complex project might be labeled with “XL” for “extra-large”.

In Personal Finance, when entering a future expenditure into your big purchase backlog, it helps to visualize the scope of that project or task. Before it becomes necessary to get a formal bid for things like renovations, or an exact price for items like the purchase of a new device, decide on a scale to use for your expenditures and use it to make general estimations of their resource requirements.

T-shirt sizes: S, M, L, XL

Dollar signs: $, $$, $$$, $$$$

Choose whatever works for you, and then add these to the items in your big purchase backlog so that you can quickly visualize the scope of your past, present, and future expenditures.   

6. Planning for the unexpected

In Product Management, “operational hygiene” is embedded into a product to best ensure it operates the way it’s intended to. These can come in the form of staging environments, backups, monitoring, etc.

In Personal Finance, it is paramount that precautionary measures be taken early on, to ensure your overall, short and long term financial security. Items like Life Insurance, Establishing a Trust. You can’t wait until you need these types of things to secure them because it will then be too late — and not having them in place can be the most damaging mistakes of your financial life. I’ve also added likely replacement items to my backlog for things like our aging Air Conditioner or Backyard Fence.

7. Competitive benchmarking

In Product Management, competitive benchmarking is the process of periodically measuring a product or business against its competitors, in order to gauge performance.

In Personal Finance, it’s important periodically reevaluate your financial tools and decisions. A solid investment decision you 10 years ago may appear to become a poor position in the coming year, and it would be wise to then seek out the more competitive options currently available. Now this isn’t to say you should be emotional, or reactionary in your investments, but you should be responsive and proactive about your positions. Whether with insurance plans, investments, or your advisors.  

Keep tabs on each your financial vehicles and assets as frequently as befits the item itself.

Net Worth from Quarterly Balance Sheet (2002 – 2018)

8. Clarifying roles and avoiding buildup

In Product Management, it’s extremely important that each team member has a clear definition and understanding of their role within a project. It is also important to avoid “Technical debt” — the cost of choosing the easy way out when approaching a task, and then having to go back and fix it later — slowing down the development process. And often, these practices — clarifying roles and avoiding technical debt — go hand in hand.

In Personal Finance, clarifying financial roles within a household can help to avoid actual, financial debt. When my wife and I were first married, and our finances were merging together, it was often unclear who was supposed to be doing what. Household bills would get lost in our tiny apartment. I would think she had paid them, while she, meanwhile, was thinking that I had paid them. In the end, we started racking up late-payment fees for bills we had the money to pay for, but just weren’t because of disorganization.

With personal finance you want to limit the amount of debt residing in your quarterly statements. The less debt buildup you have, the more free cash flow you have to repurpose into investments or purchases.

By getting more organized and clarifying our roles and processes we avoided further debt buildups and made our overall process more efficient – which brings me to my next and final point…

9. Leveraging cloud services

In Product Management, leveraging cloud services like Trello and Google Docs can help teams to collaborate more efficiently.

In Personal Finance, leveraging cloud services can help members of a household manage their finances more efficiently.

To improve our bill-paying process, we turned to Paytrust, which virtualizes your billing address so that ALL bills are sent to a personalized PO BOX that the services manages for you. This way Paytrust handles paper bills for you as well as your eBills (by scanning to a PDF and extracting the key bits of data like biller name, payment amount and due date). Rules can be set up to automatically pay bills, and an online queue is shown for those you have yet to pay. They handle payments again thru EFT, or cutting an old-fashioned paper check and mailing it to the biller. Everything is tracked and stored online so when you have a dispute with a biller, you can easily pull it up whether your home, at work, or traveling. Well worth the $10/mth we pay to avoid late fees and have peace of mind.

This helped manage the bills for my wife and I’s first tiny apartment and it’s still helping managing the bills of our family’s household today.

PayTrust Bill Payment Service [$10/mth]

Product Managers before me have also drawn insights from their professions to try and improve the experience of personal finance for others.

Product Manager-turned-CEO, Adam Nash teaches a class on the subject at Stanford University: Personal Finance for Engineers. The class educates and prepares budding Engineers for the financial decisions that await them in their competitive careers. Nash’s perspective is invaluable to young professionals and certainly benefits from his industry-specific, professional experiences.  

In the end, it’s simple concepts, really, that seem to make big differences in personal finance: clarity, organization, comparative analysis. Once these habits get formed and it all becomes second nature, the more nuanced tricks and practices make the whole process more painless and enjoyable. I’ve found this to be true for myself, after adding in elements from my profession, but I’d be curious to know if any others have found applications from their trades — or fellow Product Managers that have found any useful parallels that I’ve so far missed — always happy to gain a new edge.


Preston Smalley produced in collaboration with Mark Mizera

Recommended Resources:

How I organize my personal finances

UPDATE: I revisited this topic in Nov 2018 with a new article
Product Management Concepts for Better Personal Finance.
A decade later many of my practices have continued but I’ve also added a few more you ought check out. 

Maia Garau recently visited eBay as part of our “principal in residence” program and discussed with us the growing field of service design (which she teaches at RISD). My favorite line she quoted was from the Economist which defined a service as “…anything you can’t drop on your foot.”

It got me to thinking about some great end-to-end “services” that I use to manage my finances and yet what’s still missing.

Bill Management

I hate getting bills in the mail and my wife hates how they clutter up our house. So when we were first married I didn’t want to look at the bills and she’d stuff them away out of site–not a good combo for our FICO score.

logo-paytrust

Then I discovered Paytrust which goes far beyond the other bill payment services available in that they actually receive your bills. When you sign up Paytrust, they give you a personal PO Box in Sioux Falls which you use as your mailing address meaning for example my PG&E (power & gas) bill gets mails to them and not my home. They scan, OCR, and post the bill online as a PDF with all the appropriate metadata (amount due, due date, etc). Bill payment is easy either by EFT or by having Paytrust mail a check on your behalf (meaning I can even pay my gardener and dentist).

There are several benefits to having Paytrust handle your bills this way:

  • It’s safer as you don’t have to worry about someone stealing bills out of your mailbox (and you don’t have to worry about organizing and storing them).
  • It’s a great papertrail. I can’t tell you how many arguments I’ve won with Customer Service agents over the years since I know exactly when I paid each bill and for how much.
  • They mail you a DVD at the end of each year with all your bills PDF’d for your tax records.
  • Whether I’m at work or at home or my wife wants to view the bills–we can do it from anywhere.

You can tell that this service was thought thru E2E from bill receipt, to payment, to auditing later–which sets it apart from the competition. The only drawbacks is that the service costs $12.95/mth (vs. many banks offer pure payment services for free) and Intuit (who bought Paytrust about 5 years ago) hasn’t made any major improvements in a few years–but at least they haven’t messed it up. 🙂

Daily Account Monitoring

As a big Scott Cook fan, I always wanted to love Quicken over the years but just never did. It always felt like work to keep it’s register in sync with all my accounts and payments. It also didn’t help me during the week when I wanted to know just how much money I had at any given moment and what was coming in and going out.

Mint Money Management

Then a few years ago a board member for Mint visited a class of mine at Berkeley as a guest speaker. I tried the service out the next day and have really been pleased with it ever since. Since it’s a web service, it’s always up-to-date, synced with my accounts and I can access it from anywhere. It alerts you if you have any irregular behavior such as large deposits or withdrawls. It leverages crowd sourcing to learn how to better categorize transactions. However my favorite feature is how it learns over time what you usually spent in a given category and establishes a “budget” for that amount (letting you know if you’re over or under it later).

Finally the Mint iPhone App connects me to this rich set of data on a daily basis in a simple way. Of course it could be improved such as I’d like to be able to dig into changes in my 401K (chart of how it’s trending, which holdings are up/down), be able to re-categorize transactions, and “predict” my cash flow out a couple months based on past data and budgets.

Quarterly Lookbacks

Download Excel Financial Statement

I read Rich Dad, Poor Dad around 2001 and quickly understood the value of regularly assessing our income/expenses and balance sheet. Yet nothing at the time met my needs (Quicken, MS Money, etc) so I looked to Excel to do the work for me in the way that I found most intuitive. It puts all of our monthly income and expenses, assets and liabilities onto one sheet of paper. Simple, visual, straightforward. We update it every 3 months and graph our progress over time.

Download Financial Statement Template
[Google Sheet]

I imagine that perhaps someday, Mint could replace this manual aspect of my E2E experience but just not yet–however it does make filling out the statement way easier.

In summary I have incredible brand loyalty to both Paytrust and Mint due to their well thought out service design (I’m a NPS promoter) and see how powerful a differentiator it can be in what is a crowded field.

What services do you find most useful and why?

With Intuit acquiring Mint they now own two of the services I mentioned above. I hope they do a better job continuing development of Mint than they have done with Paytrust and would love an integration of the two services. If anyone on those teams would like to chat I’ve got a number of ideas… 🙂

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