Using your PC to manage your finances: here's how your family can get a better handle on its income - includes a related article on software - Software Review - Evaluation

Black Enterprise, July, 1997 by Carolyn M. Brown

NOWADAYS, NEARLY EVERYONE IS performing some sort of high-wire financial balancing act--from juggling household bills to paying off debt to financing college costs. Granted, wages have increased slightly for most workers--averaging $342-$1,083 a week for middle- and high-end earners. Still, most professional families find themselves stretching hard-earned dollars to the breaking point. They all desire the same thing: to improve their financial well-being.

Today's realities demand that you not only work harder to bring home a paycheck but that you also pull out all stops to grow your money. To this end, we offer three simple words of advice: budget, save and invest. To help you get started, BLACK ENTERPRISE takes a look at how two families are using financial software programs to get a better handle on their assets.

A "QUICK-EN" EASY WAY TO ORGANIZE YOUR MONEY

Like most couples, Victor and Gail Farwell's top financial goals were to reduce debt and increase income. They started using Quicken Deluxe 6 ($59.95) from Intuit Corp., in Mountain View, California. "We were spending more money than we were bringing in," says Victor, 45, a psychotherapist. "By using Quicken to track our monthly household accounts, we were able to cut back on a lot of expenses and make better use of our [$90,000 annual household] income."

The Farwells were able to create useful reports, budgets and graphs of their expenditures by inputting each and every transaction and assigning it to an expense field.

"It takes me about an hour, once a week, to input our expenses--everything from payments for medical bills to food to entertainment," says Gail. "This way, I can get an accurate picture of when, where and how we spend our money." Quicken lets the Farwells compare actual expenses with budgeted expenses, and computes the discrepancy.

After reviewing their budget, the Farwells realized that for a family of three--the couple has a 16-year-old son, Jaggen--they were spending too much money, especially on dining out. They quickly reduced their spending from $450 a month to $250 by cooking more meals at home and directing funds toward grocery expenditures, which included buying items in bulk to cut costs

Quicken also allowed them to do reports on specific bills by listing and analyzing all payments made, say, to utility companies or creditors over a given time period. Using this feature, the Farwells discovered that they were paying too much to heat their one-family home in St. Louis. "We went from spending $250 in heating costs in the winter to $150, by using a thermostat controller with a timer to regulate the temperature," adds Victor.

The Farwells are now considering using Quicken's built-in CheckFree program to automatically pay their bills. The program would enable the computer to send electronic "ready-made checks" to creditors each month by linking their computer to their bank. With fixed amounts, such as a mortgage, a check is already filled in, predated and signed for online delivery. With flexible expenses (i.e., utilities) it's a simple matter of putting in the right amount and pushing a button.

However, not every financial institution is set up to do electronic banking. Right now, the Farwells are using a savings and loan that doesn't offer online payment. "We are in the process of shopping for a link that supports accounts and check writing online," says Gail, 45. But this will mean additional services and fees that must be included in their budget.

The Farwells have been using the latest versions of Quicken for the last five years. To date, they have been able to reduce their overall household expenditures by 30%--or a grand total of about $2,700 annually.

They also try to pay cash for miscellaneous expenses whenever they can. And they make sure to pay off the two credit cards owned between them each month. Quicken's debt reduction feature searches files for debts such as loans and credit card accounts. It sorts them and puts the most expensive debt--the one with the highest interest rate--at the top of the list. When you enter your current payment and the balance, Quicken looks at ways to increase the amount you apply to pay down your debts.

Gail is now eyeing the program's investment feature to track her savings and retirement accounts online. A registered nurse, she oversees the couple's two stock accounts--one with Merrill Lynch and the other with the discount brokerage firm Charles Schwab. The Farwells also own two retirement mutual fund accounts through TIAA-CREF of New York.

Quicken can show price and performance data for the user's investment, organized by account. It can also show transaction and price data for every single security. Using a feature called Investor Insight (via a modem), users can download information on any stock's activity, including high, low and closing prices, trading volume and splits.

To get a perspective on another money management software program, we asked the Farwells to review Microsoft Money 97 ($34.95). "The two programs are pretty much the same. However, it's easier to group things with Money," says Victor. Money has long had the edge in ease of use, although Quicken's latest version seems to have significantly closed the gap. "You have more choices of how you can categorize certain expenses and liabilities," adds Victor. So, under housing expenditures, you can specify payments made for rent, mortgage, property taxes, insurance, utilities, maintenance, etc.