If ever there was a time to take a long, hard look at the income and the outgo, this is it!!! It seems like everyone, irrespective of lifestyle, income, job security, etc., is scaling back, tightening their belts, just trying get a handle on how current economic conditions are impacting them. And probably the single most important step to take in understanding how best to manage our finances comes from a very clear understanding of more than what we spend ... it comes from knowing exactly what we spend it on.
There are some really great tools available to help us do just that! Today, with the popularity of Debit Cards, and software products like Quicken and Microsoft Money, getting at the heart of where every single penny we spend goes is a whole lot less challenging than it used to 
be. Setting the system up does take a bit of time and organization, but once set up it can save you literally hundreds of hours and considerable money, too! With 2008 coming to a close
How often have you heard the phrase "if you watch the pennies, the dollars will take care of themselves!". So much of what we spend, we don't even think about. And when the time comes where we have to tighten the belt straps, we're not even aware of how much "wiggle room" some of those expenditures give us in our weekly or monthly budget. How often do you make a quick stop on the way home to McDonald's to pick up dinner because your day ran long and you simply don't have either time or energy to prepare a meal? Or have you thought about the little things like haircuts, manicures, tips, the stops at the local Convenient stores, treats for the kids at the grocery or toy store, movies, etc. Without tracking all of the expenditures we make, it's so much harder to take a look at exactly where the money has been going ... to know where we might conserve.
It certainly true, you don't really need any special financial software to simply "track" your expenses. A basic "spreadsheet" would allow you to list your expenses and categorize them. And there's no question that tracking that way is certainly better than not tracking at all! But that sort of tracking has many limitiations...primarily in ease of input and what you can do with that information once you've entered it Financial software will do so much more than that ... including making tax time a whole lot less challenging!
So, whether you're starting from scratch, or moving information from a basic spreadsheet, or even trying to get a bit more out of your financial software, there's no time like the present to set it up and put it to good use, and here are some tips moving forward:
- Gather all your account numbers and vendor information (things like credit cards, mortgage holders, auto loans, school loans, etc.).
- For things like mortgages, car loans, etc., it's a good idea to have both your initial statement (showing your starting balance, interest rate, start date, etc.) as well as your most current statement
- Also a good idea, have a copy of your last annual tax return - it will help you in setting up some of your default information
- You'll be asked to set up "categories" for all your expenses. One trick is to start by jotting down a list of every type of category you have...personal, household, business, charitable, etc. Making that list will make it easier to "subcategorize" to make the system easier to use. For example, for all my business categories, I place an * before the category name. That way everything business related stands out from all other categories.
- When creating categories, you'll also be able to identify which categories will be included on your tax return...and on which line! Taking the time to set up now will dramaticaly simplify tax preparation, whether you do it yourself, or have a preparer do it. If you have an accountant do your taxes, they'll LOVE the organization of data. And, since it will take them less time to prepare your taxes, you'll be paying them less as well.
With the above information hand, many of these programs permit you to use your own, real information in walking through their tutorials. For example, when it comes to a tutorial on setting up checking account information, they'll ask if you'd like to use "your own" information while you practice. Doing so is an excellent idea...you're creating content WHILE you're learning how to use the program.
After setting up all your accounts, and all your categories, it's a simple matter of getting into the habit of entering data daily, preferably, as expenditures are made. Making the habit of investing 5-10 minutes a day can save you many hours later on. If your bank has a download service for your accounts, the process is made even easier because all bank information will be added automatically into your system! Talk about "user friendly!!!" Can't get much easier than that!
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