Using Personal Financial Management Software

Here is a question for you: How do you balance your checkbook? Do you balance your checkbook at all? How do you keep track of account balances? When its tax time or when you apply for a mortgage, how do you sift through your transactions to find the ones that matter? For instance, finding out how much you spent on electricity for the year. How do you avoid over-drafting your checking account and paying fees?

I don’t know how YOU do all these things, but I can tell you how I do it: Personal Financial Management Software or PFM for short. This is the information age and everyone should have the information on their own personal finance at their fingertips instantly. That means knowing how much cash you have in each account, the checks or expenses upcoming, and how much you can spend on your debit card without overdrawing your account. I have used PFM software over 25 years to do all these things and more. Trust me, it works.

What should Personal Finance Management software do for you?

I believe good PFM software should have certain basic functionality:

  • Track your banking transactions
  • Track your net worth and balance in all your accounts
  • Budgeting
  • Reporting

Tracking your banking transactions

You can use PFM software to simulate a checkbook register. But the strength of PFM software is in the ability to categorize each transaction and then to be able to search those transactions. Here is a simple example: I give to charity throughout the year. I am pretty charitably inclined and give to many different charities. At tax time, I want to very quickly know how much I gave and to which charities. Every time I enter a charity donation transaction in my PFM, I categorize the transaction as  “charity”. It is then very easy for me to create a report or search the transactions and see what I gave to each charity each year and what the total is. It also saves me from giving multiple times to the same charity that keeps sending me letters every two weeks.

I usually enter my checking transactions as I write the checks, but for my credit cards, I just download the transactions from my bank’s website and the PFM allows me to categorize the transactions before saving them. For my checking account, the PFM software matches the downloaded transactions with the ones I entered, merging them and marking them as cleared. One look at my PFM’s checkbook register and I know not only my current balance, but I know all the checks I wrote on the account which haven’t cleared yet. This way I never bounce a check, since I know exactly how much money is still available.

Track your net worth

Some people want to know how much they are worth. Net worth is simply what you have minus what you owe.  Personal Financial Management Software does this, although for investment accounts it varies how accurate it might be. Still, it gives you a good idea of where you are at any moment in time. Just set up the PFM software to automatically download transactions and balances for all your accounts. You can do this daily, weekly, or monthly. I happen to do it weekly, but I think monthly might be enough for most people. You will know your balance in every account including checking, savings, investments, mortgages, and credit cards.

Budgeting

The trick with budgeting is that you need to start with how much you are spending now. By entering and categorizing all your transactions, you can figure that out pretty easily. Did you really spend THAT MUCH on eating out last month? A simple report on the “Dining Out” category will tell you. Some PFM software will allow you to set up a budget for each category and measure where you are in relation to that budget. This is a useful feature if you need a gentle reminder when you’re exceeding your budget.

Reporting

The previous three functions would not work too well without reporting. Reporting allows you to search categories and create reports that give you useful information. Most PFM software will allow you to highly customize reports, but at the very least you need to be able to filter on category and time.

Choices in Personal Financial Management Software

There are really two broad categories in PFM software: Cloud/Web based, and software you run on your PC. Some of the PC software has some cloud capability. I will cover both categories.

PC Software

This is software that you download or get on a disk and load on a single computer. Sometimes there are mobile apps you can also use. One of the features of this kind of software is that your personal information stays on your home computer. This might have some security benefits, although with today’s interconnected computers I’m not so sure your home computer is actually safer than a cloud-based computer run by professionals.

Quicken

The granddaddy of the category is Quicken. Quicken comes in several versions ranging in price from about $30 to $120. I have not used Quicken in a while, but it is generally thought to be easy to use and most banks will support quicken downloads directly (although other software supports Quicken download format). One of the reasons I moved away from Quicken some time ago is that they force you to upgrade by purchasing a new version every few years. The company that owns Quicken, Intuit, tends to advertise heavily to you while you are using Quicken. They have other products and are always trying to up-sell you. Still Quicken works great and integrates with a mobile app so you can use it on your smartphone or tablet. Quicken runs on the MAC or Windows.

Moneydance

This is the PFM software I use. Moneydance is fairly fully featured, but probably does not do quite as much as Quicken. It is also a bit harder to set up, but it supports downloads in Quicken format and tracks transactions, investments, and budgets. They have a mobile app which I have never used and supports using the Dropbox cloud service to sync between the desktop and mobile app. I have used their tech support and they are responsive and helpful. The software costs $49 and the next upgrade is free. Upgrades after that are 50% off. They only upgrade the software approximately once a year and upgrades are optional. Moneydance runs on the MAC, Windows, or Linux platforms as well as IOS and Android for mobile.

Other PC-based PFM software

There is other software out there. GNUCash is free open-source software which runs on virtually any platform. But since it is not sold by a for-profit company, support is only via online forum and it is definitely hard to use and set up. I am told it is very fully featured. Other alternatives include Moneyspire and Banktivity 6.

Cloud-based PFM software

Mint

Mint is the leader in cloud-based Personal Financial Management software and guess what? It’s owned by Intuit, the same company that brought you Quicken. The thing about Mint is that it is free. Totally free! Intuit makes money by advertising to you while you are using it. If you read Intuit’s privacy policy, they can use your email, phone number, Facebook, etc. etc. to advertise to you. You are allowed to opt-out of at least some of the advertising. Read the privacy policy before signing up. The product is a very useful PFM tool and should do everything I talked about. As cloud-software it will work on every platform with a browser, but they have mobile apps for Android and IOS.

YNAB

YNAB stands for You Need a Budget. YNAB is all about budgeting, so I recommend it if you want to create a budget and need help keeping to it. It probably does this better than most of the other tools I mentioned, but YNAB does not track your investments, so it is not quite a full-featured PFM. The software costs $50 per year, which is similar to some of the other software, but not as cheap as Mint (free).

Other Cloud-based PFM Software

Other choices include Count-About, Clearcheckbook, and Buxfer.

Stop Guessing about Your Spending

The idea with Personal Financial Management Software is to keep track of how you are spending your money in an easy way. Online banking is a wonderful modern invention, but unfortunately none of the bank websites I have seen take the place of PFM software. Stop guessing what your real available checking balance is! Use an app or software to help you budget! It’s easy and it may not be the most fun you ever had, but tracking your spending and saving more money because of it will sure be fun!

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