Finance: Letting Your Computer Do the Work
In this article, you will find:
- Page 1
- Page 2
Finance: Letting Your Computer Do the WorkRemember that happy moment back in school when you were finally allowed to use a calculator? Until then, you had to show your work, performing all of your calculations with paper and pencil. Eventually, after years of doing it all by hand, you earned the privilege of punching it all into a calculator and letting the machine do the grunt work.
That day has arrived once again. Now that you know how to balance your checkbook by hand, you've earned the right to let your computer do it for you. (If you've skipped the previous section, let me again encourage you to at least familiarize yourself with the process. It really does help when problems crop up with electronic balancing.)
You'll need list
- The software you've chosen and its instructions
- Account numbers, recent statements, and balances for each of the accounts you want to track in the software
- Your income and expense tracking document
If you want to computerize your finances, you have a lot of software choices so many that you might find it difficult to determine the best one for you. The choice is further complicated by the ongoing revisions and improvements software manufacturers make to their products, meaning that whatever you buy today will probably be reincarnated by next year.
Because so many software options are available, it's beyond the scope of this book to explore each of them in detail. Instead, let's consider the basic components that make up most of these products and then determine which of those components you need so you can make a more educated buying decision.
This is one of the best features of any financial management software. The program walks you through the reconciliation of your accounts, prompting you to fill in certain information (the closing balance from your statement, any interest or fees, and so on); then it allows you to check off cleared transactions and performs all of the calculations for you. The reconciliation process is much quicker and more accurate this way, and this feature alone makes the software worth the price for many people.
Along with assisted reconciliation, the ability to label your transactions with categories such as Utilities, Entertainment, and Medical Expenses makes financial software invaluable for budgeting and tracking your income and spending. With most programs, you can sort your expenditures by category and see at a glance how much of your income is going to any of your categories. You can also use subcategories for example, putting Water, Gas, and Electric all under Utilities so you can then see totals for each of the utilities as well as a total for the group.
You can even split a single transaction across multiple categories. For example, if you spend $22 at the gas station but only $20 was for gas, you can record the purchase as a single transaction and categorize $20 of it as Gas and the other $2 as Snacks or Lottery Tickets, all in one step. You can even separate the sales tax on a purchase if you want to track it separately. Categorizing saves innumerable hours of on-paper analysis and allows you to see the big picture of your bills and spending habits.
Most finance-management software offers a range of other options and features, including
- Reports and budgeting Most programs offer the ability to create a budget and generate reports to see your data in a variety of ways. It might take some effort to figure out how to create a report that tells you exactly what you want to know in the exact way you want to see it, but in many cases it's easier and more accurate than doing it manually.
- Recurring transactions Most programs allow you to set up recurring transactions, so you don't have to enter each instance of a payment that is taken out automatically each month. You can also set reminders for yourself to pay items on a certain date or frequency.
- Online services Some programs can be used in conjunction with online services offered by your bank, such as online bill-paying, automatic bill-paying, and downloading of account statements directly into your financial software. The most advanced software products can make managing your accounts almost completely automated (not necessarily desirable if your goal is to be more familiar with the details of your finances).
- Investment functions The advanced versions of software such as Quicken and Microsoft Money offer the ability to track your investments, improve your investing skills and knowledge, and generate tax reports.
- Business-related functions Certain products, such as Quicken Premier Home & Business, any of the QuickBooks products, and Microsoft Money Small Business, are geared toward small business owners. These products can also be used to manage your personal finances, but if you are not a business owner, they're probably more than you need.
Was this article helpful?