planning Archives - Personal Finance For Beginners In 30 Minutes

Should I use Quicken, Mint, or other software to manage personal finances?

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Quicken, Mint, Check, and other services offer the ability to aggregate and track all of your financial and spending information in one place.

The basic idea behind these services is similar. After registering, provide the login details for various accounts — banking, credit card, loans, bills, etc. The software connects to these accounts, downloads the data, and adds everything up. It makes it a lot easier to manage personal finances. The software interfaces can display the following data:

  • Total cash available, across all accounts
  • Total credit available
  • Monthly budgets and expenditures, by category
  • Investment performance (stocks, mutual funds, retirement accounts, etc.)
  • Alerts (for instance, a spike in spending in a certain category, or an upcoming bill)
  • Advanced features such as investment analysis and online payments

If you complete the setup process and link up all of your primary bank, credit card, and financial services accounts, these tools can provide some fascinating insights into your assets, investments, and spending levels. One of the most eye-opening pieces of information for me was a chart on Mint.com that showed my overall assets, including the total value of my house and retirement accounts.

But the services have some fundamental differences:

Quicken vs Mint vs Check

(Note: Mint.com is now owned by Intuit, which also sells Quicken as well as other financial software packages including TurboTax and Quickbooks.)

Many people would choose one of the free money management tools. However, there are a lot of people who will gladly pay for Quicken because it is PC-based software. Data you enter into Quicken is not uploaded to the Internet. This means users have more control over their data, and feel reassured that all of their sensitive personal and financial information won’t reside on a remote server or in the cloud.

In addition, users of Mint and Check have reported issues with third-party bank and billing accounts that may become inaccessible or fail to update. Being unable to access certain data makes for flawed planning and analysis. For instance, how can you accurately track and plan for debt reduction if you can’t connect to all of your credit card accounts?

Lastly, the services can be complicated. Besides the hassles associated with connecting all of your accounts, setting up budgets, targets, and alerts is a lengthy process. Some people have complained that the tools aren’t flexible enough to handle real-world budgeting or planning situations that might be thrown off by an emergency or unexpected expense.

This post was excerpted from Personal Finance For Beginners In 30 Minutes, Vol. 1, by Ian Lamont. All rights reserved.

Jordan’s credit card problem

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A sobering experience for me occurred a few years ago, when I happened to see the docket at the local small-claims court. It was filled with a long list of banks that had filed suit against people who had stopped paying their credit card bills altogether. Those defendants who showed up had two options: Negotiate with the lender, or watch the magistrate rule in favor of the banks.

Jordan, a fictional character with a credit card problem. If she's not careful she may end up in small claims court.Jordan may end up on the docket if she doesn’t make some changes in her spending habits. She has luxury tastes, but can’t fund them through her middle-class income. She’s resorted to using three credit cards to fund luxury purchases such as fancy shoes and high-end appliances. She hasn’t been able to pay off the amount owed for more than a year.

Now she’s watching things snowball, as unpaid interest and further spending leads to ever-increasing bills and a big credit card problem. Jordan owes $15,500 now, and it’s still climbing. Eventually she won’t be able to meet her minimum monthly payments, which will cause additional penalties to kick in. Failure to make payments will also make it hard to get credit from other sources, including bank loans. If things get particularly bad, she could find herself dealing with the situations described in “What Happens When You Don’t Pay Your Bills” in Chapter 3 of Personal Finance For Beginners In 30 Minutes, Volume 1.

Jordan’s experience is not an uncommon one. According to estimates based on Federal Reserve data and other sources, nearly half (about 60 million) of American households carry a credit card balance that averages over $15,000 per household.

We’ll return to Jordan’s credit card problem in Chapter 3, when I give a big-picture view of debt and discuss practical ways to deal with it.

This post was excerpted from Personal Finance For Beginners In 30 Minutes, Volume 1:
How to cut expenses, reduce debt, and better align spending & priorities
. “Jordan” is a fictional character used to illustrate personal finance concepts and spending patterns.

Rethinking life priorities as a first step to financial planning

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The following post was excerpted from Personal Finance For Beginners In 30 Minutes, Vol. 1, by Ian Lamont. All rights reserved.

The first step in planning for your financial future is seeing where you stand.

But don’t whip out your latest bank statement and pay stub yet. Instead, I’m going to ask you a simple question:

What matters to you and your family?

Oh no,” you say to yourself. “I bought a personal finance guide, but instead of getting down to dollars and cents, the author is one of these touchy-feely types who wants to know about my inner child.”

Not so! By asking you what matters to you, we’ll be able to better align financial decisions with your lifestyle. Practically speaking, this means you’ll be able to spend money on what counts — and have a better idea about what to cut.

For instance, if your family lives for having fun on the water, then spending and savings should be focused around things such as swimming lessons, beach vacations, and saving for a boat. Things that aren’t priorities can be scaled back or eliminated.

Narrowing down the list

One way to focus on your priorities is to review a bunch of broad categories, pick the ones that matter most, and then list the specific activities or expenses within the key categories:
Life priorities and personal financial planning
For instance, someone who prioritizes Business may list “home office”, “seed capital”, “truck”, or “relocation” to support his or her dreams. If you are a fanatic about Sports, either as a spectator or participant, then “season tickets”, “lessons”, or “gym equipment” might be listed as specific expenses or activities you want to invest in. People focused on Education might list “Timmy’s college fund”, “tutoring for kids”, or “grad school.” Religion-focused activities or priorities might include “church fund”, “mission”, or “pilgrimage.”

These are life priorities. Don’t think that you will be able to do financial planning for everything right away. Taking part in a mission, relocating to another state, or leaving your job to go to grad school are serious decisions that might take many years to plan and save up for. But the important thing is identifying what those priorities are, and aligning your spending and saving to support them.

What if all of these categories have specific expenses or activities that are important to you? It’s a common desire to “have it all.” But when it comes to managing your finances and planning for the future, it’s impossible to have everything … unless you’re Donald Trump (in which case you’re probably not reading this guide!)

When listing specifics, don’t include fixed expenses, such as paying back student loans or getting insurance for your car. While necessary, such expenditures aren’t your personal life priorities. As we’ll see in Chapter 3, fixed expenses do have to be addressed when it comes to making spending decisions. For now, you don’t have to include them on your list.

Build your list until you are satisfied with the priorities it contains. Really make an effort to identify true priorities — things that you really want to be a part of your current life, or your future. Knowing your priorities will make it much easier to manage spending as well as financial planning for the future.

This post was excerpted from Personal Finance For Beginners In 30 Minutes, Volume 1:
How to cut expenses, reduce debt, and better align spending & priorities