5 steps to total financial control

The software advantage

In case you've never encountered financial software, download a free trial of Microsoft Money or any other program that suits you. Briefly, here's an overview of what financial software does. It can:

• Download all of your bank, credit card and investment transactions straight from your financial institution (so you don't have to enter anything manually, ever).

• Help you create spending categories and automatically assign many of your transactions to the correct one, so you can better monitor where the heck your money is going.

• Help you pay bills.

• Create saving, budget, debt-reduction and retirement plans.

• Generate pie charts, graphs, bar charts and other whirligigs that help you visually track your financial progress.

The REAL software advantage

But the reason I like money software is because it lays out the Bigger Financial Picture for you. And thus it forces certain issues to the surface, where you must face them. Or die trying.

When Carole was using the software to track her holiday spending a year ago, she was horrified to find that by mid-December she had spent $1,200. "And more is still coming in. I thought I spent about $750 during the holidays."

If you're trying to stick to a spending plan, software keeps you focused on what the real numbers are, so you are better able to control where your money goes.

It also helps you track your goals. About a year ago, when I used Microsoft Money's Debt Reduction Planner, I was rewarded with a huge graph that illustrated how long it would take me to pay down my $6,300 in debt at $500 a month -- about 14 months.

Now, I could have done that math myself. But seeing the graph map out that looooong year-plus of debt payment was irritating. So I had to adjust my timetable or pay $600 a month.

Facing the big questions

With the numbers, graphs and charts telling you the real story about your money, you are forced to make decisions. Brice, for example, knew that paying $2,370 in rent was unmanageable, but seeing both income and outflow in one place helped her to decide to take on a roommate. And Carole decided to reduce her biggest uncharted expenditure: eating out, a real hazard for a single working woman.

"And I find I have a new consciousness about spending in general," she says.

The software disadvantage

After being wowed initially by seeing all her transactions in one place, Jill, in her mid-30s, became frustrated. "I find software abstract," she said. "It gives you the numbers, but what does that mean? It's really just a tool -- and you need to learn how to use it. Just because you have a hammer and a drill doesn't mean you know how to build a house." Using financial software of any stripe takes some work, I agree. There's no magical solution. It takes time to set it up and to understand the different functions. It helps to have a friend or computer-geek pal to help you figure things out (or you can join the Women in Red and cry on our strong shoulders).

But although using a financial program has its challenges, so did learning the ins and outs of e-mail, Google or any other high-tech convenience we now can't imagine life without.

Besides, it's all for the greater good: TTFC.

Updated Jan. 18, 2008

< previous |  1 | 2 |