Updated: May 3, 2013 12:14PM
Originally published: August 7, 2001
Last week’s column showed you how to get your Quicken program installed, and create a checkbook in the program. Remember, you can keep only your register online while writing or printing paper checks, or you can actually bank online and let your bank send out the checks.
Either way, the important aspect of using Quicken is to track your expenditures in categories every time you write a check. Today we’ll focus on using Quicken to track and control all of your money.
Step 1. By now you should have created a personal checking account in Quicken, even if you’re not banking online. Just click on ``Banking,’’ which is one of the five options that is always at the bottom of your screen. When you click on ``Banking,’’ select ``View My List of Accounts’’ from the menu that pops up on screen. Then choose ``New’’ at the top of the screen, and you’ll be given a choice of accounts: checking, credit card, etc. Click on ``Checking’’ to create your new account.
Copy at least the last month’s entries in your paper checkbook register into your Quicken check register. (For a really good picture of your spending, you’ll have to go back and enter the past year’s checks into your computerized check register.) Make sure that each entry is placed in a category, either one that’s already set up in Quicken, or in a category that you can easily create yourself.
Step 2. Your checkbook isn’t the only place that makes money disappear out of your budget. Click on ``Banking,’’ then follow the above procedure to set up a separate account for each of your credit cards. If you’re banking online, you can download your credit card activities at the same time you download your banking transactions.
Or you can simply take your monthly credit card statement and transfer the information from your paper statement into the register for this new credit card account. You’ll list each purchase and its price, as well as interest charges and your closing balance. Again, you’ll give each of your credit card purchases a category that will help you manage your budget.
Step 3. There’s one more place that money escapes your clutches.
It happens every time you use an ATM, get cash and spend it on things ranging from the morning newspaper to taxis, a cup of latte or whatever. If you’re banking online, these ATM withdrawals will show up automatically in your check register and will be deducted from your balance. If you’re just manually entering your finances into Quicken, you’ll have to keep track of the ATM withdrawal receipts and enter them into your check register. In the section titled ``Banking’’
you can also create a new ``cash account.’’ Then, every time you have an ATM withdrawal in your check register, categorize it as a ``Transfer to Cash Account.’’ Now keep track of all your paper money spending at the end of every day in this ``cash account,’’ again selecting a category for each expense.
Here’s a special tip: If you’re banking online, you should use your ATM card as a debit card instead of your charge card whenever possible. The amount of your purchase will automatically be debited from your checking account - and you’ll see each individual debit and can easily categorize this spending.
OK, you’ve spent a few long evenings entering all this information in the spending registers for your checking account, credit card accounts and even in your cash spending account. Now you’re ready for the most fantastic reward - or the biggest shock!
At the bottom of every Quicken home page screen you’ll see five major activities. You’ve been using ``Banking’’ so far, setting up your accounts. Now click on ``Planning,’’ and a menu will appear. Click on ``Report on My Spending’’ and you’ll have four choices. Click on ``Itemized Categories.’’
Suddenly your entire year’s (or month’s) spending appears in the categories you have chosen. You’re face to face with how much you’ve spent on dining out this year - whether in cash, on credit cards or paid for by check. You’ll also see how much you spent on telephone bills or utilities or clothing. The totals for each category may surprise you. But let’s make it even more fascinating.
At the line on the very top of the screen, click on ``Reports.’’
Then choose ``Easy Answers-Reports’’ and click on ``Where Did I Spend My Money?’’ Then click on ``Show Graph.’’ Suddenly all of your spending categories appear in a multicolored pie graph! OK, I admit I find this spectacular, but if you aren’t transfixed by the possibilities here, just stick with the written categories.
Now it’s time to do something with all of your financial information. Let’s do two important things with your Quicken program: Create a budget and get out of debt.
Create a budget
Now that you know where all your money has been going, would you like to take a little more control? It’s easy to budget using your program. Once you’ve entered your past spending, and taken a look at the itemized categories to see where your money has been going, you’re ready to make some decisions about future spending.
Unfortunately, the one thing a computer program simply can’t do for you is give you the discipline to stick to your plan. But the program will make it easy for you figure out where to cut back, and then track your good intentions against your actual cash flow.
To start the budgeting process, click on ``Planning’’ at the bottom of your screen. Up pops a menu, and you’ll choose ``Budget My Spending.’’ The program will automatically create a budget that reflects your past spending (which you’ve already entered into your check register) on a monthly basis for each category you’ve chosen.
If you don’t have any transactions in your register, it will help you build a budget from scratch. In that case, your screen will show all zeros, so click on ``Categories’’ to select which pre-set categories you want to include in your budget (or any additional categories you might want to create). Click ``OK’’ and they’ll all show up on your budget page.
Now it’s up to you to insert the amount you’ve budgeted for each category, each month. To budget the same amount (for instance, your mortgage payment, which remains the same every month) enter the amount in the January column, click on edit, and then click ``Fill Row Right.’’ Now that amount will automatically be entered every month.
But perhaps for something like electricity bills, which rise during summer air conditioning months, you’ll want to go back to last year’s check register to create a realistic budgeted amount.
Once you have your budget categories set up, start thinking about where to cut back. Perhaps you’ve decided to spend less money on dining out. Simply click on your category for dining out and change the amount to a smaller number. Also, click ``Edit and Fill Right’’ so this budgeted amount is lowered for the rest of the year.
In the coming months your spending will be tracked against the goals you set now - for dining out and for every other category.
Now, click on ``Reports’’ at the very top of your screen, and then ``Easy Answer Reports’’ and ``Did I Meet My Budget?’’ You can get the report graphically to see where you’re ahead of plan, and where you’re falling behind. If you’re spending more than you intended, the category will show up in red. If you’re on target, the bar graph appears in green.
If you want to automatically see this graph every time you open your Quicken program, go to the Home Page, click on ``Customize’’ at the top right of your screen. Then you’ll see a list of items you can put on your home page. Chose ``Budgeted Categories’’ and ``Add.’’ (If you want to put this graphic at the very top of your home page, just choose ``Move Up’’ until it is at the top of your home page list.) Click ``OK,’’ and now your home page shows you exactly how you’re doing compared to your five largest budgeted categories.
Get out of debt
One of my favorite sections of the Quicken program is the part that helps you determine how to pay down your debt. It’s also the easiest section to use. Click again on ``Planning,’’ and then ``Create a Debt Reduction Plan.’’ Be sure that the original set-up CD-ROM is in your computer because there’s a friendly voice to guide you step by step through the process of analyzing and reducing your debt. It’s like having a personal financial adviser at your side to assist you in making some tough choices. And using this section of Quicken is absolute proof that the program is designed for real people, who must make really tough financial decisions and choices.
If you’ve already set up credit card accounts in your program, much of the work is done for you. If not, then get all of your latest credit card statements together. You’ll need to enter the amount of the debt, type of debt (credit card, personal loan, home equity loan, etc.), current balance and interest rate. Then Quicken sorts your debts - highest interest rate first - and helps you decide how to adjust your budget categories to pay down your bills faster.
Reinforcement comes from graphs and reminders that show you how much interest you’re saving and how soon you’ll be debt-free.
Coming soon in our continuing series, a lesson in how to use Quicken to track your investments in stocks and mutual funds.
Terry Savage is a registered investment adviser for stocks and commodities and is on the board of directors of McDonald’s Corp. and Pennzoil Co. You can send her questions via e-mail at email@example.com. Her second book, published by HarperCollins, is Terry Savage’s New Money Strategies for the ‘90s. Copyright Terry Savage Productions.