My Personal Financial Odyssey – Using Quicken – Part 3

Quicken is more than just a means to get you financial statements.  If used properly, it can give you information that will assist you in keeping track of all of your financial and many of your life goals as well.  Assuming you need money to accomplish many of your life goals (and that you don’t have an unlimited amount of it), Quicken can help you keep track of your spending specifically along the lines you set up.  If you are interested in fixing up old cars, but couldn’t give a rip about traveling to foreign lands, you can tailor your financial reporting to precisely match what you value most in life through the disciplined setting up and use of ‘Categories’.   Then you can compare your actual spending to a budget you created to help you maximize those values.

Because Quicken lets you set up recurring payments (and incomes) you can make sure you keep track of everything you have obligated yourself to pay for, but more importantly you can plug in actual or estimates of these payments and incomes for a month or 2 months in advance.  With virtually all of your income and spending already posted into your cash account ahead of time, you can easily see how your money is holding out, or accumulating, for as many months into the future as you would like.  I have always done two months personally.

Accuracy is important and the reconciliation ability in Quicken lets you make sure you always have the right transaction amounts and balances in all of your cash, credit card and investment accounts.

Quicken can give you a meaningful income statement and balance sheet, but it can also give you reports on spending, income and capital gains that are extremely useful when it comes time to prepare your income taxes for the year.  If you are using it properly, preparing to either do your taxes or give your information to a tax preparer becomes about a 10 minute exercise instead of an all day affair.

Though it has some bugs when it comes to recording the sells of investments and the pricing of the investments, Quicken will do an excellent job of telling you precisely where you are right now and how you have been doing with your investments.  It is great for tracking and staying on top of an investment portfolio regularly.  In addition, it gives you the flexibility to track different kinds of investments so you can understand clearly how diversified your investment holdings are.  Again it allows you to align your financial tracking and reporting specifically with the values you hold when it comes to investing.  And as to the bugs I mentioned above- these are not every day occurrences.  In fact they happen once in a blue moon, which is why it is important to make sure you are reconciling your investments to brokerage statements on a regular basis.

So to summarize, if used properly Quicken can be the foundation of your financial tracking program by allowing you to do the following things:

    • Provide a Net Worth and Profit & Loss Statement on your personal finances
    • Meaningful categories to assist in budgeting
    • Recurring transactions that allow you to project months in advance
    • Reconciliation of accounts to ensure accuracy
    • Proper financial and tax reporting that eases the preparation of tax returns
    • Investment tracking that tells you how your investments are doing and that allows you to diversify your portfolio the way you want it.

In the next part of this series I will discuss how you can do your own income tax analysis throughout the year so you can minimize the taxes you have to pay, make sure you don’t pay in too much or have a big nasty surprise on April 15th.  I will explain how to do it yourself by using a spreadsheet.  But if you would prefer to have it done for you I will be happy to sell you the spreadsheet I have used for this purpose for years for a small fee.  And because most every person’s tax situation will be different from mine, I can also custom design the spreadsheet to work specifically for you for an additional amount.

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