FAMILY FINANCES: Help for Family Financial Planners - includes related article on high yield money-market mutual funds

Kiplinger's Personal Finance Magazine, Jan, 1999 by Stephanie Gallagher

* How to use money-management software to start the year off right.

There's nothing like holiday-season excess to get you in the mood for the annual exercise of taking stock of your finances and making sure you're on track toward your financial goals. Software can take a lot of drudgery out of the task--and this year, the latest versions of Quicken and Microsoft Money have added plenty of financial-planning muscle.

In fact, the programs have become so all-encompassing that it can be intimidating to get started. But you don't need to put every aspect of your financial life online. Just dive in wherever you need to.

PLAN FOR COLLEGE AND RETIREMENT. Both Microsoft Money 99 Financial Suite and Intuit's Quicken Deluxe 99 can help you plan for life's biggest financial goals. For instance, both programs include college-savings calculators that project how much college will cost when your Harvard-bound genius is ready (at which point you may decide that she'd do just fine at, say, the University of Michigan). Then you can determine how much to plow into the college fund based on your current income, the number of years until your child enters college, the amount you've already saved and your expected annual return. To delve into even more detail--such as how much your child might receive in financial aid or how to balance college and retirement saving at the same time--you can work through Money's Lifetime Planner, a full-fledged financial guide that's included in the Financial Suite version of the software (which sells for $64.95 minus a $25 rebate). Although Quicken ($59.95 minus a $20 rebate for previous users) includes some financial-planning tools, to get a comprehensive financial guide you have to spend an additional $19 for Quicken Financial Planner.

If you know you're on target with your financial goals, you probably want to go straight to the program's investing tools, which help you track your investment transactions, compute your returns, and keep tabs on how your assets are allocated. Quicken, for instance, will recommend an asset allocation based on your time horizon, investment experience and how much you say you're willing to lose.

CREATE A BUDGET. Budgeting isn't fun, but at least Quicken and Money make it relatively easy. Click on "Budget Planner" in Money and you'll be asked about your sources of income, long-term savings goals and typical expenses, and even if you want to set up an "occasional-expense fund" for irregular expenses--like a major car repair or news that Junior needs braces. Quicken will even help with sleight-of-hand savings tricks--by automatically "contributing" to a phantom account.

If you're already tracking your spending, both Money and Quicken can create an AutoBudget based on data from your check register. Budgeted expenses will be an average of what you've spent in the past, which you'll probably have to tinker with.

Once you begin tracking expenses, both programs can slice and dice the data like a Veg-O-Matic to see whether you're saving more or less than last year or how much you spent at a particular establishment in the past six months.

SLASH DEBT. Quicken and Money can also help you figure out how to pay off your debts in the smartest way possible. With Money, you enter your debts and how much you want to allocate to repayment. Money then determines which loans you should pay off first, how much you'll save in interest and when you'll be out of debt. Especially enlightening is a before-and-after look at how much a $100 purchase will end up costing you, including interest.

Quicken's debt-reduction planner is a little more sophisticated because it requires that you think about where you're getting the money you plan to use to pay off your debt, such as from savings or by cutting from your budget categories. As you go, you'll see how each change reduces the total interest you'll pay on your debts and how soon you can be debt-free.

SIMPLIFY. Beyond financial planning, budgeting and tracking expenses, both programs are rich with other features meant to simplify your financial life, such as "alerts" that remind you of important dates or changes in your financial picture. For example, you can have Quicken notify you when it spots a mortgage rate (on the Internet) that's lower than your current rate. Both programs will notify you when a stock reaches a certain price and when a particular category of spending gets out of control. Luckily, you can turn off the alerts if you get tired of being nagged that your dining expenses are over budget.

If you tend not to keep close tabs on your checking-account balance, a cash-flow manager in both programs can look at your regular bills and deposits and give you a running estimate of your account balance. You can also use electronic bill-paying to select the date on which payments will be drawn from your checking account.

SHOULD YOU SWITCH? If you're buying financial software for the first time, Quicken is better at helping you determine the capital-gains implications of selling various investments, while Money has an edge in integrating financial planning with the other aspects of the program and is a bit more user-friendly. Other than that, both programs have similar capabilities, including online bill payment, tax sorting and investment tracking.