How to Manage Personal Finances With Software

How do you balance your checkbook? How do you keep track of account balances? When it's tax time or when you apply for a mortgage, how do you sift through your transactions to find the ones that matter? 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. It’s the information age and everyone should have their personal finances 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. (For more, see: Best Budgeting Software of 2017.)

What should personal finance management software do for you?

Track Your Banking Transactions

The strength of PFM software is in the ability to categorize transactions and then search them. Here is a simple example: I give to charity throughout the year. 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.” Its then 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.

I enter my checking transactions as I write the checks but for 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 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

Net worth is simply what you have minus what you owe. PFM software does a great job at this. Just set up the PFM software to automatically download transactions and balances for all your accounts. You can do this daily, weekly or monthly. You will know your balance in every account including checking, savings, investments, mortgages and credit cards.

Budgeting

The trick with budgeting is that your starting point is your current spending. 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. (For more, see: Top-Ranked Personal Finance Software.)

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.

PC Software

Quicken: The granddaddy of the category is Quicken. Quicken comes in several versions ranging in price from about $30 to $120. I haven’t 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. Quicken also tends to promote other products by the same company within the software. Still, Quicken is the most fully-featured PFM and integrates with a mobile app so you can use it on your smartphone or tablet. Quicken runs on a 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 and supports using the Dropbox cloud service to sync between a 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 always free. Upgrades after that are 50% off. They only upgrade the software approximately once a year and upgrades are always optional. Moneydance runs on Mac, Windows or Linux platforms as well as IOS and Android for mobile.

Cloud-Based 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 owns Quicken. The thing about Mint is that it is free. Totally free. Intuit makes money by advertising to you while you are using it. Read the privacy policy before signing up. The product is a very useful PFM tool and should do everything I talked about. As web-based cloud software, Mint runs on any computer with a web browser and also has 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. 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).

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 saving more money because of it will sure be fun. (For more from this author, see: Storing and Discarding Important Documents.)