Tools for Tracking Your Finances

In my Keep Score by Tracking Your Net Worth blog post, I talked about the benefits of keeping score if you want to improve in a specific area of your life. Tracking your results, especially in numerical terms, focuses your attention on the impact that your actions are having in objective terms. In the area of finances, I recommended focusing on your net worth and its components. Your net worth represents your financial position at any point in time. Just as weighing yourself regularly will tell you if your diet or exercise program is helping you lose weight, reviewing your net worth regularly will tell you if your decisions that impact your finances are making you stronger or weaker financially.

One way to track your finances that has been used successfully for many centuries is the “old school” method of using a pen or pencil and some paper. However, although this method gets the job done, most people find that this method is far too tedious. Luckily, software comes to our rescue and makes our job much simpler.

Spreadsheets

One solution is to use spreadsheets to track finances. Spreadsheets have the benefit of being extremely flexible and incredibly powerful, not to mention that there are free spreadsheet programs available. I find that spreadsheets are useful when your needs are either very simple or very complex. If your needs are very simple, then you won’t want to bother getting specialized software. If your needs are very complex, then specialized software might not have all the functionality that you need, so spreadsheets might be helpful in providing additional functionality to better satisfy your specific needs.

I have created a spreadsheet that you can use for free if you just want to keep things simple and you have at least a rudimentary understanding of spreadsheets. It’s called the Monthly Net Worth Tracker. You simply update it each month with the current values of your assets and liabilities. The instructions are included in the spreadsheet. If you don’t have Excel, the spreadsheet appears to work fine on OpenOffice.org Calc, which is part of the free office productivity suite that can be downloaded from the OpenOffice.org website.

Personal Finance Software

If you are intimidated by spreadsheets, or if you want something that is much more automated and has built-in functionality to help you track spending and easily create reports and graphs (among other functions), then you will probably be interested in using personal finance software. You might have heard of Quicken and Microsoft Money, which are the leaders in the industry. I have been using Quicken since 1995, and I’m amazed at what it can do. They keep adding features and improving the product, and the level of automation keeps getting better and better. Here are some of the things that personal finance software can do for you:

1) Download all of your account activity over the Internet. I use the Internet to download transactions for all of my financial accounts (checking, savings, investment accounts, credit cards, etc.) except for one account that doesn’t offer it. Some of the accounts can be downloaded automatically by Quicken. For other accounts, I simply go to the website for that account and click a button to download my transactions, which are automatically loaded into Quicken.

2) Automatically reconcile your accounts. Many accounts, such as checking accounts and credit card accounts, can be automatically reconciled if you download your activity over the Internet. The software will automatically match up the cleared transactions and reconcile the account for you. This is an amazing feature and a great timesaver. The software even makes manual reconciliations so much easier.

3) Easily track your spending. After you download your transactions, you assign an expense category and “accept” the transaction to be entered into the software. For transactions that are recurring, the software will remember the category you used last time, making it even easier. For example, the software will learn the name of your electric company and automatically assign it to “Utilities Expense” if that is how you track it.

4) Automatically update your portfolio values. The software can automatically download securities prices over the Internet and adjust your daily portfolio values.

5) Generate numerous pre-programmed reports and graphs. The software includes reports and graphs that tell you your net worth, income & spending, portfolio allocation, and all sorts of information, and they are easily customizable. For me, the Net Worth and Income & Expense reports are critical to my understanding of my financial situation.

6) Much, much more. Personal finance software has so many functions these days that I don’t come close to using all of them. For me, the most valuable aspect of personal finance software is the automation that it allows. I can get an update of my financial situation in a matter of minutes.

What Software Should You Choose?

If you decided that you are interested in trying personal finance software, there are three main personal finance solutions that I’m aware of (although there are certainly other lesser known solutions out there). The first two I already mentioned: Quicken and Microsoft Money, which have been around since at least the early 90s. However, there is also a relative newcomer called Mint that has been generating a lot of attention. Mint offers free online personal finance software.

From my own research, Quicken appears to get the best reviews. Microsoft Money’s reviews seem to be slightly worse, although my guess is that it would probably still do a pretty decent job. Both Quicken and Money get horrible reviews from Amazon.com (see the links to reviews below), although reviews elsewhere seem to be relatively positive. The two main complaints seem to be a requirement to buy an upgrade every few years and poor technical support. Mint’s reviews seem to be pretty positive, although the reviews suggest that Mint’s features are more limited than those of Quicken or Money.

As I mentioned earlier, I have been using Quicken since 1995, and I have been very happy with it. I have had occasional challenges in setting up accounts to automatically update, but overall the issues have been pretty minor. My guess is that most people would be pretty happy with any of the three programs. They appear to have most of the same functions. You don’t have much to lose in trying them out. Quicken offers a 60-day 100% satisfaction guaranteed return policy, Microsoft Money offers a 60-day free trial, and Mint is completely free.

At the very least, you can try one of the programs, set up your checking account in it, and play around with it for a while. It’s worth a shot. And if you like it, you can set up the rest of your accounts.

Jun

9

Tools for Tracking Your Finances

Spreadsheets

Personal Finance Software

What Software Should You Choose?

The About.com reviews

The cnet reviews

AOL Shopping customer reviews

Amazon customer reviews

Webware reviews

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