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 When
it comes to saving money, your computer could be your best
friend.
Personal finance software can track your
spending and give you a breakdown of exactly where every penny
goes. It supplies you with the numbers you need to begin budgeting
better and saving more of every dollar you earn.
The software clearly shows you your spending
reality -- step one on the road to savings recovery.
Let's use the two major players in personal
finance software, Microsoft Money 2000 and Quicken 2000 to
show how it works.
Quicken
2000 doesn't spend a lot of time holding your hand in
its account set-up process. If you're new to using this sort
of software you may run into the frustration blues.
Then there's Bill Gates' product. After
you answer a few questions -- it feels like your marital status,
your blood type and maybe your first born could soon be subject
to some probing -- Microsoft
Money 2000 walks you step by step through creating an
account.
Getting
to know your numbers
With both applications you enter checks and deposits as you
would with a paper checkbook. You then assign each check a
specific category, and that's what allows you to track expenses
and income. The categories aren't cast in stone. You can always
go back and change the category any time, or set up your own.
Each of the categories is assigned a type
-- Income or Expense (or Bank in Quicken) and the categories
are broken down into subcategories.
For example, the category Auto, an expense
type, contains fuel, insurance, registration and service subcategories.
Microsoft Money has "AutoCategorization", which
automatically records transactions into their correct categories.
Quicken assigns transactions to a group, such as income, business
income, discretionary or mandatory expenses.
Maybe now is a good time to mention that
you can benefit tremendously by taking the time to understand
how to analyze financial statements. Fortunately, this is
something that both Microsoft Money and Quicken will teach
you.
After all of this nit-picky accounting
categorization, you will be rewarded for your efforts. In
accountant-speak you will have what is known as a "chart
of accounts." Now you can figure out where your cash
is going by setting up a cash management account. Don't be
surprised if you are surprised to see what is being spent
on things you don't need.
You can also now get a complete look at
what you are buying with your credit card. Will you be surprised?
If you are, that's a good thing, because it can spur you to
get back on track.
These two programs also can help you discover
your net worth, something you figure by contrasting what you
own against what you owe. You can ask Quicken or Microsoft
Money to calculate it for you with a "net worth statement."
What you have then is another figure to give you a much clearer
picture of your financial reality, and that is key to improving
your savings.
"Spending Reports," such as
a budget report, allow you to see the difference between actual
and budgeted spending. If you have dutifully completed your
check registry, you'll see the difference between the amount
you budgeted in a category, such as Meals and Entertainment,
and the amount you actually spent. An income-and-expense statement,
a cheerfully colorful pie chart or a graph show the amount
you are spending in the various categories.
Now you know the difference between what
you think you are spending, and what you are actually shelling
out!
Keep
feeding numbers in to get numbers out
The programs also let you keep track of what you are saving.
Microsoft Money has 13 types of savings accounts, heavily
integrated with day-to-day savings and your lifetime savings
plan.
Entering and categorizing your finances
regularly and properly is essential to obtaining an income
statement, or for that matter an accurate budget. Get into
the habit of regularly asking yourself how you want to spend
and save money. With these pieces of software you can immediately
find the actual figures and reshape your budget consistently.
The best time to start using Quicken or
Money is at the beginning of your fiscal year, but don't make
that an excuse. You can start tracking income and expenses
at any time. But whenever you start, stay with it. If your
information is not entered consistently, the data you create
cannot be used to accurately track spending and saving. You
must keep feeding it in to be accurate.
Other
ways to save
Some people, especially those who feel their money situation
is uncomplicated, prefer to use the old paper-and-pencil check
registry. Some even make up their own spreadsheets with a
few simple formulas.
As long as you don't mind all the pencil
work, it works!
A gaggle of shareware and freeware is
out there as well -- such as Account Express version 1.0 and
Budgeteer 1.5a which offer basic account management and a
few financial statements. Kiplinger.com
can also help you track personal finances with its tools and
calculators.
See for yourself which method best suits
your needs. Start with the free trials of Microsoft
Money 2000 and Quicken
2000. Microsoft Money runs from $34.95 for Standard to
$64.95 for Money Deluxe. Quicken Basic 2000 starts at $34.95,
and runs from $49.95 for Deluxe 2000, to $89.95 for Suite
2000.
-- Posted: Feb. 8, 2000
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