Personal finance software: Is it a good investment?

The troubling statistics on the level of savings and indebtedness in America have hit home, so you're taking positive steps toward better managing your finances. Along the way, you've heard good things about financial software products such as Microsoft's Money and Intuit's Quicken, and you'd really like to know whether either makes money management more, well, manageable.

Based on published reviews, both programs have the ability to transform that complicated and onerous process into a series of simple point-and-click operations. But these evaluations do not necessarily paint a complete picture of the ultimate success you might have tracking day-to-day financial transactions over the long term.

What software can do
"The use of this software forces you to discipline yourself with respect to your finances and the managing of your own money," says Clark Howard, nationally syndicated consumer-advice talk-show host and author of "Clark Smart Parents, Clark Smart Kids."

Chris Farrell, economics editor of American Public Media's "Marketplace Money" and author of "Deflation: What Happens When Prices Fall," has a generally high opinion of these programs.

"However, here's the drawback," he says. "If you are someone for whom the discipline of keeping detailed track of financial information is too much, this software might not ultimately work out."

For Farrell, erratic use of personal finance software brings to mind an old saying from the world of data processing: garbage in, garbage out.

Many software users initially approach the money-management task with the enthusiasm normally reserved for New Year's resolutions. They may keep track of all their expenses for an extended period, he says.

"Then, six weeks later, there's a choice of doing that record keeping or going to the movies, and old habits start re-emerging," says Farrell. "You stop inputting that data, then you feel guilty about it, you then go back to doing it -- but then you find that you can't find the receipts you need, and you start guessing -- and the numbers you get back from the software are no longer working. And, finally, in disgust, you just stop using it."

Even so, Farrell, like Howard, believes that those who stick with it can benefit greatly from tracking their personal finances on software: They will become fully aware of where their money is going, how it is growing, how it is being invested, and how it is being utilized to pay off outstanding debts.

Things to be aware of
Farrell says he uses Quicken and Money to keep track of his personal finances. Though both programs offer other comprehensive planning features and capabilities, he likes to use other tools for certain functions.

"For things like your classic asset allocation, for example, I prefer (online) programs like those offered by Financial Engines. They charge a fee for their service, but I like the way in which their program looks at the world, always in terms of probability. ... and (setting up an appropriate asset allocation) is one area in which people do seem to need lots of objective advice and help. Financial Engines does a much better job of this."

In addition, he finds that Quicken and Money debt calculators are no better than those found elsewhere on the Internet.

But when you use Web-based resources for financial help, be careful to discern between recommendations that are part of a site, and those of Web-based partners. This same caveat also applies to the links and recommendations that appear within the Money and Quicken software itself.

Quicken and Money are continually evolving Web-centric programs, which means that when you open a page inside the programs while connected to the Internet, you are presented with your financial data as well as with features, ads and hyperlinks found at the software makers' respective Web site. All of this can appear within Money and Quicken without opening up a Web browser, and it can be part-and-parcel of the banking, investing, credit or financial planning pages you open inside of the programs. So it's important to differentiate between paid advertisements and objective financial information.

"Even at my own Web site, people will assume that, because an advertiser is on that site, there is a direct or implied endorsement (of the goods or services)," says Howard. "It can be neither. It's just what happens to fund the Web site."

Focus on the forest
Amelia Warren Tyagi, coauthor of "All Your Worth: The Ultimate Lifetime Money Plan," reminds users of personal finance software to look at the big picture. They should not only monitor their financial transactions accurately over time, but also pay close attention to what that accumulated data is telling them.

"It's always good to be able to keep track of your money: to know where it's going, to know what it is and what it is not doing. But, ultimately, managing your money is not so much about keeping track as it is about making smart choices. You can keep track of dumb choices all you want, but ... plotting your finances as you're going off a cliff won't do you much good."

You need to fully recognize what's happening with your money as you're moving along in life so that you avoid a catastrophe in the first place, she says. And she emphasizes that you don't necessarily need a computer program to keep your financial affairs in order. All you really need is a plan.