Quicken
I have been faithfully (and some might say obsessively) updating Quicken with all our financial information for close to seven years now. Unfortunately I don’t have it all in one file, as we moved from Quicken for Windows to Quicken on the Mac and back to Quicken on Windows, but I have at least three years of financial data on all our accounts easily available.
A little over two months ago I started using a new financial tool called YNAB (short for You Need a Budget) One of the most important aspects of this program is its reliance on zero based budgeting, where every dollar has a job. For the first time in all these years of managing the family finances, I finally feel like I have a handle on what is going on with our money. Even though the results aren’t pretty (i.e. we’re spending how much on housing costs?!?!) it is better to have the information rather than just a sinking suspicion that all is not well. I finally feel like I have the financial information we need in order to make good decisions about what we’re going to do with the money that comes in.
However, it is making me question why on earth I need to be updating the financial information for all of our accounts, checking, savings, credit card, investments, etc. in Quicken. I have been doing double entry since I started using YNAB, and I’m getting a little tired of it. I’m also wondering what the value is in tracking the minutiae of our various investment accounts. It is easy enough to look at the last monthly statement or if I want more current information I can log onto the appropriate website and check our information there. Why should I be duplicating by hand all this information into Quicken? Sure, I can see our net worth number this way, but that’s not really all that important… and if I really want it, I could add up our numbers online and get the number in less than ten minutes.
The more I think about it, the less I can justify the time it takes to keep Quicken up to date. But still, it is very hard for me to jettison the product - I feel like it is throwing away all that time I have spent in the past. But I also realize that is a ridiculous reason to continue!
Emily on 13 Jul 2008 at 2:44 pm #
So what makes YNAB so helpful? I looked at the site and thought it sounded strange. Actually a little scammy - you know like those sites that make great promises with lots of testimonials, but never quite tell you what you’re actually purchasing?
So what exactly is it that you purchased, and why do you like it?
amber on 13 Jul 2008 at 3:23 pm #
LOL - that’s interesting to see your take on the site. What I bought was the spreadsheet version of the program. I kind of wish I had bought the application, but I would rather have a Mac version than a Windows version (which is in the works, from what I read) because it has a few features that would be nice. The spreadsheet version is a series of three sheets, one for a register of purchases, one for the budget, and an overview of everything. Spending gets entered into the register and everything is tallied automatically on the budget sheet, where you can see how it matches up to your budgeted amounts and make adjustments as needed. The overview is entirely self-generated and shows what percentage of income the various categories take up, account balances, and “overdrafts” of budget amounts.
Anyways, what I like about it is that it is a very straightforward way to create a budget and to see how your spending matches up to what you’ve budgeted. It also really makes you look at what you have available and makes it pretty obvious if you’re spending beyond what you have coming in. It is easy to tweak as you progress in the month, so that you are only spending the dollars you have.
None of this is exactly rocket science, of course, but I found with Quicken and my previous attempts at budgeting that it was too easy to think “well, we went over in that last month, but we’ll catch up in future months”. Occasionally this would happen, but it was the exception rather than the rule. Also, with a variable income, budgeting out for the whole year becomes rather difficult - and it is hard to make sure the money is being managed well. It is too easy to say “well, there’s a little extra this month, so let’s go ahead and buy X” while ignoring all the various budget category overages that need to be covered somehow. We’ve always managed to stay out of debt (non-house debt, at least) but sometimes it feels like it is only by the grace of God and the skin of our teeth that we’ve managed to do so. It seems like having a tool that makes sure each dollar of expense meets up with a dollar of income makes us be more honest and realistic in our spending and our budgeting.
I saw this program mentioned on a comment on Jennifer’s blog awhile back and decided to look into it because I’m always curious about this sort of thing. I’m not sure this is the most user-friendly sort of software for zero-based budgeting (SimpleMom.net likes Pear Budget, but I balk at paying a monthly fee for a software program) but it is working well for me so far.
Jennifer (Et Tu?) on 14 Jul 2008 at 5:24 am #
If I ever understand zero-based budgeting, it will be a miracle. I’ve been trying to figure this out ever since Simple Mom was talking about it, and I just can’t wrap my tiny little brain around how exactly it is different from normal budgeting.
I would be forever indebted to you if you could answer a couple questions for me:
1. I guess I am doing “regular budgeting,” where I make a list of what I think we should spend on various categories and write it down. Of course, the total is higher than our income I cut back on certain categories. How is this different than zero-based budgeting?
2. I’ve heard that you don’t have a “misc.” category with ZBB. What do you do about unexpected or one-time expenses such as car repairs, summer camp registration, etc.?
3. To use Quicken as an example: in Quicken you can type in what you want to spend in each category, then do your data entry of what you actually spent, and run a report that compares what you actually spent to your budget. How is YNAB different than that?
O wise Oracle of Zero-Based Budgeting, please enlighten me, a budgeting moron!
amber on 14 Jul 2008 at 4:02 pm #
Hmm… well, I’ll give it a try - but I’m still rather new to this myself so I’ll apologize in advance for my answers.
1) Yes, that is the same as ZBB. I think where ZBB is different is in how you proceed through the month. Generally with a budget, once it is set, it is firm. With ZBB, you modify the budget to fit how the money actually goes out as the month progresses. Overspend on groceries? Don’t say “oh well, better luck next month”, instead adjust something else in order to make up for your overspending. Your budget is more of a living thing, rather than a guideline that may end up only bearing a slight resemblance to what actually happened that month.
2) I think you can still have a misc fund, you just need to be very clear about what you’re putting in there, and adjusting your budget accordingly. Personally, I like being more granular than that, so I’d stick summer camp under Educational Expenses or perhaps Entertainment and just budget more in the month when that fee would be due. Since you’re only budgeting out a month in advance rather than the whole year at a time like Quicken encourages you to do, it isn’t that hard to put that in. As for unexpected expenses, with ZBB you’re encouraged to set up some funds to help pay for that sort of thing. You’d be setting aside some set amount each month that would go for car repairs, health care bills, property taxes, or whatever so that when faced with an unexpected expense, you’d have some money to draw from. Of course if that isn’t enough, you’d need to either reduce spending in other areas or tap your savings to handle it (which would either be added to the budget at supplemental income if the savings account is outside of the budget, or as a transfer if the savings account is in the budget) In my experience at least, there are very few, if any, completely unexpected expenses - you have some idea that your car would need to be repaired, your house fixed, or that their might be a health problem or something - it is just a matter of not knowing the timing rather than not knowing that it is coming at all.
3) YNAB does that too, but like I said in point 1 when you’re comparing your spending to your budget, you can and should be making adjustments as you go so that you can better reflect the reality of your spending. Otherwise you end up (like we generally did) looking at the budget and saying “oh well, we’re over on this category this month, but we’ll make it up later” when in reality, later would never happen and reality would continue to drift further and further off from budgeted amounts. Of course, you can adjust the Quicken budget for future month’s spending to try and make reality match the budget, but it seems like it is too little, too late at that point.
I think one of the greatest strengths of ZBB is that it keeps you honest, and keeps you focused on what’s happening now. You can’t just look at your budget, think “well, it all seems reasonable - we should be able to make it work with these amounts” and continue on with what you’re doing, vowing that you’ll match your numbers next month and somehow things will all work out. As you can probably tell, this was my biggest failing in the whole budgeting area - and perhaps it isn’t a problem you suffer from so all this seems rather unnecessary. But ZBB has made a big difference for me, and has really helped me understand the concept that a dollar spent in one place is a dollar that can’t be spent somewhere else. (I know, duh, but still I’ve proved remarkably resistant to internalizing this basic fact over the years)
I hope this helps!
Valerie on 16 Jul 2008 at 10:53 pm #
Well it’s good to know we aren’t the only ones that keep saying “we will make it up next month”. Thanks for the link, I will check out the software. Right now I use a combo of Quicken and Excel for the monthly budgeting to do that same thing but would be nice to have it all in one place.
Amy F on 22 Jul 2008 at 8:47 am #
I used to keep all our finances in MS Money but stopped for the same reasons you quit Quicken. I’d get a little off with investments dividends and get frustrated, then quit tracking them altogether. I’d “borrow” money from one category, maybe in the next or previous month to fill in gaps, which led to my never quite feeling like I knew what was coming or going. When my first child was born in 2004, I gave up on the whole thing. We’ve survived without budgeting for 4 years until this spring I realized that we were eating through savings and we put down the credit cards cold turkey and started an envelope cash system Dave Ramsey-style. I signed up for as many automatic payments as I could and found cheaper auto insurance in the process. We finally have a real emergency fund and are saving for future expenses instead of hoping the money will be there when bills come due. We didn’t have credit card debt, but I was surprised how hooked into credit cards we were just because of that 3 week payment delay.