Personal Finance Software

The other day, a law student at MIZZOU sent me an email asking for advice on personal finance software. I discussed this with the geekiest member of our faculty and his summary of the marketplace was quite informative. Thus, it is this week’s Tip of the Week.

First, when considering personal finance software you have two primary choices. You either (1) purchase desktop software that you install locally on your personal computer or (2) you utilize online software that you are able to access from any on-line computer. We’ll discuss the advantages and disadvantages of each, leaving the decision of which to utilize to the reader.

Desktop Software
Advantages:
· Security is good as the data are on your personal computer. Viruses, however, can steal your information or your hard drive could crash. That said, any computer user should have strong anti-virus software installed and have backups made of important files.
· It can be set up to work with other on-line accounts and to self-update information.
· Desktop software is more flexible, allowing you to classify more accounts than most online versions.
· If you utilize Quicken or Microsoft Money, you have the strength of either Intuit or Microsoft’s word that the product will be continually enhanced.
Disadvantages:
· You will have to pay for upgrades, often costing between $50 and $100 every 2-3 years.
· The software is only on your machine, making it difficult to view over the internet. It is true that the software can publish to an online site, allowing you to view some pieces of your information over the internet, but these are not as sophisticated as the online software.
· The potential loss of data is very real, as too few people back up the data on their computers.
· The software is not updated as often as the online software.

Online Software
Advantages:
· Online software is accessible from wherever you can use the internet, including your mobile phone.
· Updates are automatic. Some sites regularly retrieve information from your online accounts.
· All the processing of data goes on through secure servers and is backed up by the provider.
· You can share information with others. For example, a husband or wife can let each other see their finances at the same time from different locations.
· Some provide free services such as bill pay.
Disadvantages:
· All of your account information is online. If someone hacked into the servers of the online provider, your data could be compromised.
· Online software is not as flexible. Some procedures may not be able to be accomplished by the online software (e.g., savings bonds).

What it comes down to is your personal comfort level and your satisfaction with the product for the purposes you need. Luckily, most of these products offer free trials online. As a point of departure, I would download some of the free trial software onto your desktop and try out some of the online services.

Desktop:
1. Microsoft Money: http://www.microsoft.com/money/default.mspx
2. Quicken: http://quicken.intuit.com/help-me-choose.jhtml?lid=site_banner

Online:
1. Yodlee: http://www.yodlee.com (choose the Yodlee Money Center link)
2. Quicken Online: http://quicken.intuit.com/help-me-choose.jhtml?lid=site_banner
3. YNAB (You Need a Budget): http://www.youneedabudget.com/aw/quicken.php?gclid=CPG34auk9JICFQ4JPQodZHEvzQ

Our geek uses Yodlee. It is free, and they are constantly updating. Moreover, they actually sell their services to banks and other institutions. Personally, I don’t use any of them. I use a spreadsheet application that I wrote and have used for several years. The trouble is that I’m old and way behind on the evolutionary curve. This weekend, I plan to explore these options to see if it is time for me to move into the 21st century with you.

If you have any questions, let me know. Between The Geek and I, we’ll do our best to help.

- Robert O. Weagley, Ph.D., CFP(r)
Chair, Personal Financial Planning
University of Missouri
Columbia, MO 65211

NOTE: This is the fourth of our new MU Financial Tips of the Week and was written by Rob Weagley, Ph.D., CFPTM, Chair of the Personal Financial Planning Department, University of Missouri, with lots of support from Andrew Zumwalt. Andrew is the Director of our MoTax program where we enhance financial education through taxpayer assistance - a program aimed at low to moderate income households. I appreciate hearing from you about ideas for future “Tips”. Thanks. – Rob Weagley

How to get rich in America

· Recognize how lucky you are to be you. First, you’re either an American or you are being educated in America, a country with 6% of the world’s population and 35%-40% of world’s wealth. In an absolute sense, what you already have at your disposal in terms of freedom and financial resources exceeds that of most of the rest of the world’s population. Be grateful for this and return the favor by making a positive difference in our world.

· Understand the power of compound interest. You probably won’t get rich from your earnings – at least most people can’t. Always pay yourself first, save your money, save religiously, save 10% of your first paycheck after graduation – every paycheck until you retire. You’ve heard this before, but it bears repeating. A 22 year-old, with a $30,000 / year starting job, saves $3,000 per year the first year. With 3% inflation in earnings/savings; a 5% rate of return above the rate of inflation, the saver would have $479,100 in “real” dollars (adjusted for inflation) when they retired. (Or, $1,811,764, as measured by the number of greenbacks/dollars.) If they wait until they are 32 to begin saving for retirement, their retirement funds would shrink to $270,961 (real) or $762,447 (nominal). This is huge.

· Resist temptation for immediate gratification. We’ve talked of this often. Bad consumption decisions can cost you a fortune. Don’t gamble. Don’t let your ego be tied to what you own.

· Take good care of your health. Exercise and eat well to lower your medical bills. This gives you greater income, leading to more savings, and on to greater wealth. Take a class in nutrition/fitness. Besides, you’ll feel better!

· Get a good education. You’re doing that! Most of you are in college or have completed a college degree. Know how special you are, as only 24% of the US population has a bachelor’s degree and 9% an advanced degree!!!

· Consider the financial benefits of being married. Research shows that married people earn more and have greater wealth than single people. They should, as they often have two incomes and are likely to have two brains. Married people tend to be healthier, happier but remember to marry the right person, as divorce can undo the best laid financial plan.

· Establish and maintain an emergency fund. Increase your insurance deductibles and maintain adequate insurance coverage in each of these areas: Health/Disability, Life, Property/ Casualty, Retirement Savings, and Liability.

· Don’t try to beat the market. Index funds work well. If you don’t believe me, read the old book; Winning the Loser’s Game, by Charles Ellis. If you’d like others to manage your money, at least understand your investments. When you are getting started, remember that small investors have small portfolios and that it is hard to be well diversified with a small portfolio. Once you’re wealthy, you can take some of your money and make some riskier individual investments.

· Strive for a balanced life. Live a principled life that is full of integrity and responsibility. At the University of Missouri we have Four Values: Respect, Responsibility, Discovery, and Excellence. While these are pretty good cornerstones upon which to build your life, you’ve your own values. Remember the person you want to be and strive to be that person.

NOTE: This is the third of our new MU Financial Tips of the Week and was written by Rob Weagley, Ph.D., CFPTM, Chair of the Personal Financial Planning Department, University of Missouri. He appreciates hearing from you about ideas for future “Tips”. Importantly, feel free to forward our “Tips” to others and remind them that they can sign up to receive the tip by sending an email to financialsuccess@missouri.edu with “Subscribe” in the Subject Line. Thanks. – Rob Weagley

Robert O. Weagley, Ph.D., CFP®
Chair, Personal Financial Planning
University of MissouriColumbia, MO 65211