How to Choose the Right Personal Financial Software

Whether you're new to personal finance software and you need to know what money management benefits you can expect, or you're looking to switch to another software of the same type, this list of features and benefits will help you to understand what features you need to have in your software.

Account Balances and Transactions

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At a glance, personal finance software shows the balances of all accounts that you choose to track. As purchases and payments are entered into the software or downloaded from banks and other financial institutions, the software does the math to reflect accurate account balances. If you use an online personal finance app, balances will update at least once a day. If you want to use Windows or Mac desktop software, find out if the software will update accounts automatically each time you start using it, which is preferred for accuracy and convenience.
While automatically downloading transactions is a very secure procedure, it's not comfortable for everyone. If you are uncomfortable with this process, choose financial software that lets you import transactions after they are downloaded to your computer, or enter transactions manually.

No More Late Payments

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Most financial software lets you schedule reminders for bills, paychecks, deposits and fund transfers, a feature that helps a great deal with avoiding interest and fees charged for late payments. Many software choices can send reminders to your cell phone, smart phone, or through email. At a minimum, an alert should appear right in the software when bills are coming due.
For any alert to work with personal finance software, you will need to set up scheduled transactions for all bills that you expect on a regular basis. Deposits also can be set up in scheduled transactions.

Quick and Easy Account Reconciliation

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Reconciling personal financial accounts is easier and error-free when financial software with a reconciliation feature is used. This feature is usually found in Windows and Mac financial software, but not as often with online apps. When an account is reconciled using personal finance software, transactions are checked off in the software with a mouse click when they match the financial statement. All the math is done for you and determining if your account balance matches the bank, credit card company, or other financial institution is much faster.

Budget Planning

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Most financial software will walk you through creating a personal budget in a way that is easier than setting up a budget spreadsheet. After a budget is set up, you need to assign budget categories to income and expenses in your accounts. The software should have a memorized transaction feature so you only need to assign categories to most transactions once. While almost all personal finance software includes a budgeting tool, if you primarily use the software for budgeting purposes, consider dedicated budgeting software. Also, you can download some budget spreadsheet templates.

Make Tax Time Easier

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Transaction categories for taxes are included in some financial software, and you can always set up your own tax categories, which are then used when you prepare your return to generate a report on tax deductions, estimated taxes paid, and other items. If you categorize income tax-related transactions from paychecks, charitable donations, and other tax-deductible expenses, annual income tax preparation gets much easier. Run a tax report for the year to get data for your tax return, or even easier, transfer data to tax software.
If you aren't diligent about using tax categories consistently, you should not use them at all to avoid income tax return errors.

Pay Bills Online

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Some financial software will let you pay bills online directly through the software while automatically entering transactions into accounts at the time payment is made. Many banks and brokerages offer free online bill pay services, but some charge a fee for this service. Another option is to use an online bill pay service that's not affiliated with a banking institution. These services remind you to pay bills and some can be set up to automatically make electronic payments from your checking or savings account on a scheduled day each month.

Track and Analyze Investments

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Some financial software lets you enter or download investment transactions and keep account values updated nearly up-to-the-minute with automatic updates via the internet. Look for features, such as printed and on-screen reports and graphs, to help you track your investments, and capital gains reporting.
If you are looking for software that helps with making stock trading and investment decisions on a daily or weekly basis, consider stock analysis software.

Determine Your Net Worth

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Not all financial software tracks net worth, but fully-featured software usually tracks assets and liabilities to give an accurate snapshot of your net worth at any given time. Software with detailed net worth reporting will probably cost $15-$20 more than basic financial software, but if keeping an eye on your net worth is important, having a graphical report and charts that break down the numbers are worth the cost.

Teach Kids About Money

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The earlier your kids learn about managing money, the better prepared they will be for budgets and bills as adults. Free or low-cost software that teaches kids about money in a very engaging way is available to assist parents and teachers with educating children through hands-on, fun activities.

The key to using financial software to manage and save money is to use the software often and at regular intervals. The amount of time required depends on how intricately you set up budgets and other financial tracking tools.

If you want to do extensive budgeting, plan to spend 10 to 20 minutes each week reviewing your budget report, investigating transactions, and making small changes to the budget. If you use your software to pay bills and track account balances or investments, some weeks will require a 5-minute glance at related tools, while you'll need to set aside about 20 minutes other weeks for more in-depth use like reconciling accounts.

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