Why use a computer to help manage your money? (Compute's Getting Started with Personal Money Management)
by David English

This may sound crass, but money is central to our lives. We worry we don't have enough of it and struggle to manage the little bit of it we do have. We use our computers for all kinds of activities, but like most people, we don't use our computers to help manage our financial affairs. That's too bad, because there are some excellent money-management programs for the PC that are relatively easy to use.

In COMPUTE's Getting Started With Personal Money Management, we'll look at three kinds of money-management programs: personal-finance software that lets you track and categorize your daily income and expenses, tax preparation software that eases the pain of filling out your federal and state income tax forms, and investment software that helps you establish a savings plan and choose the best investments for your particular needs.

I use all three kinds of software and would like to make a case for your using them as well. As computers have become more powerful, so have the money management programs. Think of the personal-finance programs as the daily money managers, the tax programs as the yearly money managers, and the investment programs as the lifetime money managers.

With a personal-finance package, you can track your daily expenses and finally get a handle on where you spend your money. You'll be amazed at how much you spend each year on such things as long distance phone calls, cable television, credit card interest, and gasoline. After studying the totals, you may decide to leave your levels of spending just where they are, but at least now you'll know what you're doing. Besides tracking your income and expenses, many personal-finance programs also can print your checks and let you pay your bills by modem.

Tax programs might seem to be appropriate only for those with highly complicated tax returns. The rest of us can simply take our returns to any store-fronttax-preparation service. In fact, you'll learn much more about what's deductible and what's not deductible by doing your own taxes, and that can save you money on next year's tax return. Some programs even let you plan your taxes over a two-, three-, or four-year period. No one likes to do taxes; a tax program simply makes it as painless as possible.

Finally, everyone should have some sort of savings or investment plan--and the sooner you start the faster your money can grow through the magic of compound interest. Investing just $1,000 each year with an annual return of 6 percent would give you $13,971.64 in 10 years, $38,992.73 in 20 years, and $83,801.68 in 30 years.

Investment programs can help you save for your retirement, first house, or children's college education. (You don't really expect to retire on your Social Security income or expect your kids to automatically earn full college scholarships, do you?) After assessing your goals and aversion to risk, some programs can suggest how much of your money should be put into various kinds of investments. Other programs can help you buy and sell those investments online.

Fortunately, all three kinds of money management programs can work together to form a powerful financial package. Most of the personal-finance programs can export your financial records in a format that can be read by many of the tax programs. (For example, you could export your Quicken data to Turbo Tax using the popular Tax Exchange Format.) And several of the personal-finance programs can double as simple investment programs--most notably Managing Your Money from MECA.

If you're like most of our readers, you use a computer for both personal productivity and home entertainment. Yet each year you spend countless hours manually balancing your checkbook, calculating your taxes, and planning for your retirement. Isn't it time you used the computer you already own to help you manage your money?