Everyone has money concerns of one kind or another – whether you're trying to make ends meet or preparing for the next tax return, we all need to know where our money's going and what expenses we're facing in the future.
Personal financial software (PFS) packages claim to make money management simpler, but can they really save you time and money? We take a look at what's available and what they can do for you.
Software to suit your needs
Before you delve into comparing packages, it's a smart idea to decide exactly what issue you need help with. Software doesn't solve problems by itself, it only makes some things easier to manage. What's best for you depends on the scale of your problem and how much effort you're prepared to put into solving it.
What's your problem?
Maybe you want to find out where your money's gone – if you know how much you spend on each type of expense, it's easier to see where you can cut back. Perhaps you need a better idea of what expenses are coming up so you can hold back on that impulse purchase. Or you might need to try some scenarios to see how you can reduce the cost of your loans or credit card debt.
The first step is to work out what might help – or what you may already be using – and then take a look at some of the popular software packages to see which can make your life easier.
Gather your data
Everybody has a bank account, and most people also have credit cards, loans and investments – and they're not always all with the same institution. It's useful to be able to see all this information in one place though, in a single balance sheet for all your credits and debits, to help you get a better idea of your income and outgoing expenses.
Most banks and financial institutions let you download your transaction data in a standard format, although they usually only hang on to the data in this form for a limited time, typically 90 days. To go back any further, you'll need to extract the data yourself from printed statements. Some of the most common data formats available are:
- CSV (comma-separated values): Each line represents a single transaction, typically with values for the date, a description, the credit or debit amount and a running total, all separated by commas. The exact layout may vary, but the essential content is the same.
- Microsoft Excel format: Excel will quite happily accept CSV files, but some institutions offer Excel files as a separate option. Note that the file type may be .asp rather than .xls or .xlsx, which can be read by other programs such as browsers, as well as Excel. To open the file, you'll need to choose the program from a list and you may get a warning message before it opens.
- QIF (Quicken Interchange Format): A data format recognised by many financial packages, not just Quicken.
- OFX (Open Financial Exchange): The standard supported by many PFS packages. It's used for both download and transfer to other institutions.
You may find your bank offers other formats associated with specific applications, such as MYOB (Mind Your Own Business) and QuickBooks, that are designed for small or medium businesses and may be too complicated for your personal finances.
The most basic solution for home accounting is a spreadsheet, using Microsoft Excel or one of its free open-source equivalents, OpenOffice Calc or LibreOffice Calc. You can open your CSV or Excel file with either and, if you're comfortable with spreadsheets, categorise your own transactions and produce pivot tables and graphs that are just as good as most of the specialised PFS packages.
If you want the bulk of the work done for you though, you'll need to invest in a software package. Most require data to be uploaded in QIF or OFX format, so if all you have is a CSV, you'll need a conversion program. You can buy one, such as CSV2QIF, for $37, but there are plenty available for free, from XL2QIF, a free add-in for Excel, to CSV converter or CALC2QIF, an OpenOffice counterpart.
The ultimate effort-saving software is an online package that can obtain data directly from your financial institutions. When you sign up for the service, you provide your internet banking username and password, and the application keeps itself up to date with your transactions. This can save you a lot of effort, if you're prepared to trust the package with access to your financial information.
Most, but not all financial institutions in Australia support the OFX transfer format used by these packages. However, some of these packages don't recognise Australian banks.
Caution: sharing your login details in this way may expose you to the risk of fraud if those details are compromised.
Plan and control
Once you've gathered the data and worked out where your money's going, you may have already identified areas that you need to get under better control. This is where a budget comes in – it's a detailed plan for where and when you want to spend your money.
Back in the day when cash was king, you could set a budget with a row of jam jars labelled "rent", "food", "clothing" and so on. As you got paid, the money went into the jars. When each one ran out, that was the end of that kind of expenditure for the week or the month. Any left over could go towards a holiday or evening out.
This is the principle behind envelope budgeting, with the jam jars becoming virtual envelopes in PFS packages. You can make this as simple or complex as you like, but bear in mind that managing expenses in this way requires up-to-the-minute records. Whenever you buy something, you need to take the equivalent out of your virtual envelope. Some packages include smartphone apps so you can keep track of expenses on the go, but this level of input isn't realistic for everyone.
What you get
Most packages provide summary reports of your data, both line-by-line and in various graphical formats. Typically, you can choose reports such as:
- Cash flow analysis
- Expense analysis
- Budget vs actual spend
- Credit card use
- Personalised reports
- Set budget goals
Choose a package
There are dozens of PFS packages available ranging from free to very expensive ones, depending partly on what level of support you expect. Some of the more sophisticated ones advertise a range of powerful features to pay bills, manage stocks and shares and prepare tax returns, but some of these advanced features may be unavailable or unsupported in Australia. On the other hand, we're used to sophisticated online facilities from our banks, such as BPAY and direct debit, so perhaps they're less necessary.
You get back what you put in
If you're to get real value from using one of these packages, you'll need to keep your data up to date. We strongly advise starting with a simple, free package so you can figure out just how often you'll use it and whether or not it will help you save time and money, before you consider upgrading to one of the more expensive packages if you think it's necessary.