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May 1996 Features

Top Features This Month… Stay on Top of Your Bottom Line

Features This Month…

Top Features This Month… Stay on Top of Your Bottom Line

Stay on Top of Your Bottom Line

Tired of chewing on pencils and sweating over bills?
These sticklers for organization take the drudgery
out of minding your finances.

By David Gabel, Senior Editor, Reviews

Do you despise paying monthly bills as much as I do? Do you hate to see the money flow out as fast as it flows in? Do you dread getting out the checkbook, reconciling the last statement, gathering the bills and writing the checks?

If you've answered Yes to any of these questions, I've got good news. It's possible to reduce the drudgery significantly and gain extra benefits. All it takes is your PC and personal finance software.

For instance, I can reconcile a bank account in 30 minutes, no matter how many checks come with the statement, or how many checks and deposits I have yet to record. I can pay my monthly bills in less than an hour, and the only time I pick up a pen is to sign my name. You can save that time and toil, too. But there's more.

I know where to economize, because I know where the money's going (at least the money I spend in checks or credit-card transactions-I don't keep track of cash transactions). Even better, I can do my income tax return in about two hours, because I've been gathering data all year long as I do my monthly bills.

Taxes in two hours? It's no pipe dream. And that two hours doesn't consist of stuffing receipts into a bag and carrying the bag to an accountant. I do my own taxes, and they're not simple; I own a twice-mortgaged house, make modest investments and maintain a sole proprietorship on which I sometimes generate income. On top of that, I live in New York, which has a state income tax system that has to be seen to be believed. The New York state taxes add some extra time to the process-maybe another half hour-but I still manage to meet that April 15 deadline in under three hours.

Everybody's (Not) Doin' It

Research indicates few people actively use personal finance software. In fact, only about 30 percent of those with PCs in their homes (which is about 30 percent of all American homes, and growing) actually use such software, according to research from Microsoft Corp. Most people don't use computers for their personal finances at all, eschewing high tech in favor of shoe boxes and desk drawers. Some think getting their financial house in order is too complicated, that using the software will be too data-intensive or that the software is unreliable.

If you're one of these folks, take heart. Using this software isn't tough at all, and new versions continually make it even easier. The major publishers all are simplifying their interfaces while adding more features. Examples: Microsoft (publisher of Money) and Intuit (publisher of market-leader Quicken) have forged agreements with major banks across the country for online banking. Quicken 5.0 Deluxe (on CD-ROM) has lots of multimedia help, including video clips from experts in various financial areas; Intuit also has a page on the World Wide Web called the Quicken Financial Network, which helps users gather financial information (stock quotes and so forth). The Intuit version of Netscape that comes on the Quicken Deluxe CD-ROM takes you to the page, where signup and logon are automatic. Of course, you can also use your own Web browser.

MECA's Managing Your Money (MYM) still uses a third party, CheckFree, which has been handling online check paying for a number of years. Consequently, online banking in MYM is not nearly the seamless affair that it is in the other two programs. However, MECA has signed pacts with a different string of banks for online services.

MYM has right-button "Flash Help" available to make things easier, and also offers a feature called Auto Budget, that lets you quickly import budget data from, for instance, an earlier year into the current year to set up your budget easily.

Features like these mean that personal finance on PCs is a lot different today than it was back when I started using MYM in 1982, when DOS dominated. At that time, money programs were all character-based and not very intuitive. You had to read the owner's manuals just to figure out how the darn things worked.

MYM, circa 1982, originated the idea of accounts. Today, all programs begin with this basic premise. When you start Microsoft Money, for example, the first thing you do is declare that you have some money accounts (cash, savings, checking, credit card and so forth). It's the same in Quicken, MYM and relative newcomer Kiplinger's Simply Money.

When you first set up accounts, you enter the balance of the account as of the last statement, the account number and the name of the financial institution. For example, the first time you start MYM, you're asked whether you're starting fresh, or want to import information from a different product. Choose the first option, and the program walks you through setting up your first account, prompting for account number, balance and so forth. Quicken and Money do the same thing, but also want to know if you plan to use the account for online banking and online bill payment. Click yes and those accounts will be earmarked for electronic transactions.

Once you've settled your accounts, you can enter the transactions that occurred since the last bank statement. As you enter transactions, you can allocate each to budget categories. All personal finance programs start you off with a basic set of categories, or (as accountants say) a chart of accounts, which includes the usual suspects (such as salary, income tax, rent, house payment and groceries). You can mark some of these categories as tax items for inclusion in tax-planning scenarios. MYM, for instance, asks during setup whether you're tracking home or business finances, and then installs the appropriate chart of accounts. When I was running a home business as my sole support, I had both business and home categories.

Armed with these basic budget categories, you can start tracking your money. Each personal finance program lets you assign each transaction to one or more categories. Let's say you want to record your paycheck, including the figures for your gross pay, and some deductions for state and federal income tax, Social Security tax, employer-provided health and life insurance to which you contribute or a retirement account.

Entering this information is simple enough. Go to the transaction register for the account into which you deposit your check. Each account that you set up will have a register. On that page, you'll find a space to fill in a category for the transaction. Of course, in the case of a paycheck, you have many categories, so you need to split the transaction.

These programs let you split transactions into as many categories as you like. You can track your paycheck by gross pay and all the deductions, or gross pay and only those deductions you want to follow. Suppose you wanted to keep track of only the amount going into federal withholding. Press the split button, and a smaller register will pop up. Enter the amount of gross pay, and on the next line in the split register enter the category federal tax and its amount with a minus sign. If you try to exit this split register now, you'll get a warning that the transaction isn't fully allocated. The program will ask if you want to allocate the remainder to some innocuous category, such as miscellaneous income. Click yes, and you've entered a transaction and tracked how much of it goes to Uncle Sam.

Yeah, But That's a Lot of Work ...

Granted, setting up your system may take a little time. I have two checking accounts (one for the family and one for that sole proprietorship), too many credit cards, a savings account, a 401(k) plan at work and an IRA with a separate financial institution. I had to set up each individually, as well as a home inventory of personal assets (car, furniture, appliances and so forth). Any special budgetary categories would have to be set up, too. But all you need to start entering transactions (checks) is one account. Once you've done that, save each transaction and its allocations, so you never have to do it again. The next time you get paid, click on the saved transaction, execute it and you're done.

Simply Money makes it even easier. After setup, drag the saved transaction to the icon for the payee, which you set up to start paying that account in the first place, and bingo-the check is filled in and the amount subtracted from your checking account's balance. The same goes for all regular transactions you make: Record them once, save them, and never do anything with them again (except change the amount of the transaction, as with your monthly check to the phone company).

Using Quicken 5.0, in Windows 95, right-clicking on the transaction accesses a fly-out menu with the option to memorize the transaction. Managing Your Money for Windows gives you a button on a toolbar for memorizing transactions, while Microsoft Money has an item called Add to Payment Calendar on a right-click menu (that also houses the split option). Money's Add to Payment Calendar means the transaction will be executed when you've scheduled it.

Until recently, I used the Print Checks capability of MYM when I paid bills. (Now I pay bills electronically, as I'll explain shortly.) With any of the popular personal-finance programs, you can order checks and envelopes that work with the program (order forms are enclosed in the box). But in many cases, less expensive checks that work just as well are available from mail-order companies. Having preprinted checks reduces bill-paying hassles.

Next to bill paying, reconciling accounts is my least favorite activity. When all I used were pencil and brain power, I could never get it right. It's not that I don't have a good head for figures. I just don't have the patience to track down every last penny. My paper check registers were full of correcting entries, one per month, for every month that I balanced my checkbook. And, I must confess, some months it just didn't get done.

No more. Now when the statement arrives from the bank, I turn to the computer and MYM. All you have to do with any personal finance program is click on the checks listed on your statement. The computer program printed the checks, so there's no way the amount in the computer's check register is different from that on the check. Once you've clicked on all the transactions that appear on the statement (assuming you entered them all) you're done. Finis: Checkbook balanced. And it works for all your financial statements, too-savings accounts, credit-card bills or whatever. You'll always know exactly what your status is for all your accounts.

The regimen described above is one I've followed for most of the past 13 years. I really started before I had a PC, with an Apple II, and a check-writing program whose name escapes me. With the PC, I got MYM, which I have used for most of the time since. For a while, though, my bank had an online service it called Pronto. That was even better than having to enter checks and print them out, because with online banking I could just tell the bank's computer to pay a bill, and it happened. No need for envelopes, and I could keep my money in my account until the last minute. Alas, the bank deemed the service unprofitable and canceled it.

Online Banking Returns

Click Here to see a 187 KB bitmap image of artwork which goes with this article, entitled:
Lightning-Fast Bank Transfers

Today's banks are rethinking online banking. With the upsurge in popularity of the World Wide Web and the Internet, and the incredible increase in communications bandwidth, online banking is making a comeback in a big way. In fact, banks are falling all over themselves to announce partnerships with personal-finance publishers. My bank gives online banking customers a free copy of either Intuit's Quicken or Microsoft Money (if you're using Windows 95 you have to pay for Quicken). Other banks have signed up with MYM. For me, the downside is that, to take advantage of online banking again, I either have to change my bank or my software. Not wanting the hassle of switching institutions, I decided to switch to Quicken.

Online banking allows you to reconcile your accounts faster than before. For example, I just used Quicken's online banking for the first time and found the reconciliation process relatively simple.

My bank provided me with a PIN and instructions for getting online. Quicken asked for my area code when I first set up online banking. Once I had the bank's information, all I had to do was click on Online Banking in Quicken, and then click on Get Online Data. Quicken dialed its local access number, connected to the bank, and downloaded all the information the bank had for the checking account I had entered into the program's database (I still have to enter my other accounts and will, when I get the time). Once the download is complete, Quicken breaks the connection-very little is left to you, probably for security reasons.

Next, I clicked on Update Register, which would add the transactions I had just downloaded from the bank to the local transaction register. I hadn't entered any transactions into Quicken, so the program informed me that I could now enter categories and payees for these transactions. Initially, the entire process took about an hour, but Quicken automatically remembers transactions the first time they're entered (it's an option in the Register window), so you won't have to enter any transactions to these payees again. Rather, you open the Memorized Transaction list and click on the Use button. Quicken puts the transaction into the transaction register and allows you to edit it if the amount has changed.

You can also enter transactions as online payments by putting Send in the number field. Select Online Bill Paying from the Online menu in Quicken, and the bills are paid.

Well, it's not quite that simple. Intuit's service provider handles such information. The service provider prepares the appropriate documents to pay the payee, either electronically or, if the payee isn't set up to receive electronic funds transfers, by actually printing a check and mailing it. You just have to make sure you've allowed enough time for the service bureau to do its work, so your payment isn't late. Your transaction generates a payment to your payee and a debit to your account; all the paperwork is then handled automatically.

It works the same way with Money. Just call the special line for your bank (for Money, it's provided through the CompuServe network, so it's the same number you would use to access the online service, while Quicken's number is provided through the Concentric Network) and connect. But before you can dial in, there are a couple of things you have to do.

First, you have to tell the program which accounts you want to use, since the bank has to know which accounts are being queried for information. Follow the on-screen instructions and be sure your bank's routing number (located on the bottom left-hand side of your checks) is correct. Next, you have to make sure you have the correct access number, which you should get in the instructions from your bank when you sign up for online banking. Finally, you have to contact the bank to sign up. The institution will give you an initial password to use. (Some banks prompt you to change that password on your first connect.)

Once connected, you can download your account information, which means you no longer have to enter any information about bank transactions into your computer. Obviously you need to record checks you write in your pocket checkbook register, but never again do you have to manually transfer them to the PC; the bank will do it for you.

And you can reconcile statements automatically, because all the information the bank has, you have. Better still, you can now transfer funds from your computer, simply by telling your program you want to make the transfer, and then telling the computer to contact the bank. Finally, you can pay bills, either automatically at the same time each month or manually as the bills come in.

But What About Taxes?

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Managing Your Money

Click Here to see a 137 KB bitmap image of artwork which goes with this article, entitled:
Make Tax Time Less Taxing

I said I could do my income taxes in less than three hours, counting both state and federal returns. That's no idle boast. I do it every year.

And it's getting easier all the time, just as record keeping is. The latest editions of tax programs are chock-full of features that simplify tax handling. Each has what it calls an interview, a guided tour of tax land where you fill in the answers that are applicable to you: what kind of W-2 form you have, how many deductions, what was your income, do you own a business and so forth. Believe it or not, once you finish this interview, your tax form is filled out (if you don't import data from your personal-finance program, as I'll explain later). All you have to do is print the form and mail it. Today's tax programs even have multimedia help (sound and video) from experts to guide you if you get stuck. They also offer options for electronic filing and explain in detail if that applies to you.

If you've been using a personal finance program all year, the relatively easy process of filling out tax forms by PC gets even simpler. MYM has a companion program called H&R Block's TaxCut. TaxCut knows all about MYM, where the tax-relevant data is and what to do with it. When I fire up TaxCut, the program asks if I want to import data, and when I say yes and tell it where the tax data is, it retrieves it. I don't have to enter data into an electronic tax form, nor do I have to fill out the interview.

Quicken also offers a companion tax program, market-leader TurboTax. If you don't use Quicken, but do have TurboTax, your financial-management program will let you export your data in the .TXF (Tax Exchange) format, which Quicken can use. Any personal-finance program will export or import data to any of the tax programs using .TXF.

With personal-finance software, filing my tax returns has been reduced to an auditing activity. I check the information and I fill in or change anything where necessary.

I look at the electronic form early, with what TaxCut calls the Head Start edition of the program (the name varies with the publisher). It has most of the final package's capabilities, although you can't print IRS-acceptable forms. When you buy an early-bird version of one of these packages, you get a mail-in card (as well as an electronic option in 1996) that signs you up for the free final version, so you can print the finished form.

Once I'm sure my return is correct and I have all the information I need, I store the form and wait until filing time, which, for me, means about April 10. Then I pull up the form, review it once more with the program's final version (tax law changes are incorporated into final versions, so a final check is a must), and then print, sign and file the return, along with my check. At the same time, I get the New York state program (state programs usually cost about $20), which imports the pertinent information from my federal form. The state process is really simple: Install the program, answer some simple questions, select Print Return and mail the form.

As the IRS becomes even more computerized, you'll be able to file your tax returns electronically from your PC. At present, you can file electronically if you're willing to pay a service provider.

Were it not for personal-finance software, my financial life would be much more harried. Having a PC and this software frees me up to do many more things, like write this account of how I found happiness and fulfillment in my financial life. You can save your time and nerves, too. Good luck.

Quick Tips for Quicken

by Donna Tapellini

That's Unprintable! To add a note (visible only to yourself) to a check, complete the check, then enter the note inside curly brackets ({}) on the payee line. You'll see the information on screen, but it won't print.

Pay Highly Interesting Credit Cards If you have several credit cards with different interest rates, you may want to send an extra payment to the one with the highest rate if you have extra money at month's end. When you create a credit card account, enter the interest rate in the description field. When you're ready to make that extra payment, choose Lists/Account and find the highest interest rate in the description column. That's the one you'll want to make an extra payment on.

Iconize It! Add icons for frequent actions to Quicken's iconbar. Memorize the transaction you want to add, then choose Edit/Options. Click on the Iconbar button. Select New from the Customize Iconbar dialog box. In the Icon Action list, select Use a Specific Memorized Txn, then click on Next. When Quicken displays the Assign Memorized Transaction to Icon window, select your memorized transaction from the Memorized Item drop-down list. In the Target Account drop-down list, select the account in which you usually enter this transaction. Click on OK and then Done.

Tackled Your Checkbook? It's Time to Move On

By Donna Tapellini and Eileen McCooey

Your checkbook's reconciled, your bills are paid, and your taxes are done. Now what? You're ready to move on. The software described here will help you do everything from developing a personal financial plan to building a winning stock portfolio.

Make a Plan Ernst & Young's Prosper helps you set goals for retirement, education and home purchase. (You can add custom goals as well.) Start by telling the software about your assets, liabilities, budget and cash flow, then set your risk factor. A moderate risk factor, for example, means you are willing to take some short-term risks, while a very high risk factor means you are willing to lose 20 percent or more of your investment in hopes of making larger gains later. Then start setting your goals and calculating your options with the program's 28 investment tools. The 401(k) Calculator, for example, uses an easy-to-understand pie chart to tell you how to allocate your funds for the greatest growth. When you're ready for some serious investing, you can pick up track records of more than 17,000 stocks, bonds, CDs and money market funds.

$44.95. Ernst & Young, 800-277-6773, 610-278-6170.

Take Stock It takes a lot of research-and education-to make an intelligent stock purchase. Windows on WallStreet Deluxe may not be the simplest program to start with, but publisher MarketArts arms you with the information you need to learn as you go. Download security information using one of several services (CompuServe, Dow Jones or Dial Data), then chart the stock with L. Regression Trendline, Fibonacci Arcs, Cycle Lines, Andrews' Pitchfork and other trend indicators. Don't worry if the names sound like gobbledygook-the manual explains how to read any stock chart. Grab the latest news stories on companies you're tracking from MarketArts' Wall Street Money Journal. You can also set up your own trading system and test its efficiency, or use one of the systems provided with the program. When you've got all your methods down pat, set up the Personal Investment Assistant to automate daily investment tasks.

$100 (street). MarketArts, 800-998-8439, 214-783-6792.

Get an Eyeful Can't get enough financial statistics? Then Monocle is right up your alley. This mutual fund analysis system gives you the scoop on 1,000 mutual funds, with daily pricing updates available by download. (Monocle Plus covers 2,500 funds.) The raw data is only the beginning. The program enables you to perform all manner of quantitative and technical analyses using sophisticated screening, ranking and charting tools and scads of statistical indicators. Much of this information is within the reach of the average investor, but some of it is likely to go over your head unless you've mastered both financial and statistical esoterica.

$249; $240 a year for daily updates. Manhattan Analytics, 800-251-FUND, 310-374-2142.

For Fund Fanatics Mutual-fund mavens and wannabes will revel in Principia for Mutual Funds, investment analysis software from Morningstar, the leading name in mutual fund information. This exhaustive database is crammed with facts, figures and statistics on 7,000 funds. You'll find more than 98 information categories on each fund, along with a broad array of tools that enable you to search, sort and organize information. Analyze fund returns and volatility, generate graphs, create customized scenarios to screen funds for certain criteria ... there's virtually no limit to what you can do. The broad scope and sophisticated capabilities make this a powerful tool geared to professionals, so it may challenge users not well-versed in mutual-fund minutiae. A simpler program called Morningstar Ascent, designed for typical investors, is due out this year.

$95 for database; $195 database plus one year of quarterly updates; $395 database plus one year of monthly updates. Morningstar, 800-735-0700, 312-696-6000.

A Taxing Situation Mutual funds seem like the easy way out for investors. You pick a fund, pay up and let the manager worry about the market's ups and downs. That's true, but you're the one on the hook, all by your lonesome, when the tax man cometh. And if you can't tell short-term capital gains from long, or taxable dividends from the tax-free variety ... well, you can just cry Uncle Sam and take your financial lumps. Or you can get some expert advice. TaxTracker: The Consumer's Mutual Fund Portfolio Manager can help you understand your tax liabilities and plot a tax-saving strategy. The program helps organize and update your mutual-fund records, and suggests various techniques that can trim your taxes. For example, it shows you how to avoid the dreaded unearned distributions and tells you exactly what shares you should sell to minimize the tax damage. A detailed, easy-to-follow tutorial gets you going. TaxTracker will also calculate the return you're getting on each fund-which can otherwise be surprisingly tricky to determine-and monitor your asset allocation among types of funds.

$48. No-Load Fund Shareholders Association, 800-Y-NOLOAD, 612-456-0106.

Loan Ranger In hock or about to be? MoneySuite can help you get a handle on your money matters. This "financial analysis toolbox" has modules covering mortgages, loans, leases and bonds, among other things. Worksheets walk you through numerous calculations: See whether you qualify for a loan, figure out mortgage payments at various interest rates and terms, or determine the effect of extra payments. The program will also calculate bond yields, compare different loans side by side and structure a debt repayment plan. MoneySuite isn't as warm and fuzzy as some of the more general personal-finance programs, but a little trial and error should help you get to the bottom line.

$99.95. Littoral Software, 800-565-2662, 902-835-6060.

Don't Sell This Program Short One of the biggest assets of investing by computer is easy access to invaluable research. Charles Schwab StreetSmart is a great example of this capability. You can pick up information from Dow Jones, Reuters MoneyNetwork and the S&P MarketScope. The latter, for example, provides information on current and historical statistics, market trends and economic views, descriptions of 6,200-plus companies, and earnings and dividend forecasts. If mutual funds are your specialty, you can filter reports in countless ways-by total assets, average maturity, operating expense ratio and more. The program automatically downloads your existing Schwab portfolio, if you want it to. From there, you can follow your track record, buy and sell, create performance charts and get "quick quotes."

$39. Charles Schwab & Co., 800-334-4455, 415-627-7000.

Quick Tips for Money

By Donna Tapellini

A Moving Transaction Move a transaction from one account to another by right-clicking on it, and then clicking on Move To.

History Lesson View a history of all the transactions for a particular payee or category. In the Payee or Category Details area, highlight the one you're interested in and click on Go to Details.

One-Two Switch Quickly switch among accounts in the Account Register by using the triangle drop-down menu found left of the account name in the navigation bar.

It's Addressable Include the address on your printed checks. Go to Payee Details by right-clicking on the transaction in the register, choose Go to Payee, then enter the information in the address fields.

Take Inventory To inventory the value of your household items, use an Asset account. Enter one transaction for each item you want to track.

Check Out

Kiplinger's Simply Money,
4Home Productions,
800-773-5445, 516-342-2000.

Managing Your Money,
MECA Software,
800-288-MECA, 203-256-5000.

Microsoft Money,
Microsoft Corp.

Intuit Corp.
800-624-8742, 415-322-0573.
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