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How to Choose Personal Finance Software

What Financial Features Do You Need?

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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 understand what features you need to have in your software.

Account Balances and Transactions

Account register in You Need A Budget budgeting software
Account Register in You Need A Budget (YNAB)YouNeedABudget.com
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 it up, which is preferred for accuracy and convenience.

While automatic downloading of transactions is a very secure procedure, it's not for everyone. If you're uncomfortable with this, choose financial software that lets you import transactions after they are downloaded to your computer, or enter transactions manually.

No More Late Payments

Use personal finance software to stay on top of your bills.
John Howard / Getty Images
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 tcharged for late payments. Many software choices can send reminders to your cell phone or Smartphone or your 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 need to set up scheduled transactions for all bills that you expect on a regular basis. Deposits can be set up in scheduled transactions as well.

Quick and Easy Account Reconciliation

Reconciling banks accounts by hand is time consuming. Use financial software instead.
Jupiterimages / Getty Images
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

iBank Personal Finance Software for Mac OS
Budgets in iBank for Macwww.IGGSoftware.com
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, 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 will primarily use the software for budgeting purposes, consider dedicated budgeting software.

Make Tax Time Easier

Finishing Up Income Taxes
Comstock / Getty Images
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

Online bill payment services simplify personal finances.
Billeo Online Bill PayCopyright Billeo, Inc.
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 payments from your checking or savings account on a scheduled day each month.

Track and Analyze Investments

SmartStops is free for up to three ETFs or stocks.
SmartStops ChartSmartStops.net
Some financial software let 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 like printed and on-screen reports and graphs 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

Net worth reporting in Quicken personal finance software.
Quicken Net Worth ReportIntuit
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 graphical report and charts that break down the numbers are worth the cost.

Teach Kids About Money

Planet Orange Teaches Kids Money Management Online
Image courtesy of ING DIRECT Plant Orangewww.orangekids.com
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 very engaging way is available to assist parents and teachers with educating children through hands on, fun activities.

What Financial Software Can't Do

Paying bills online saves time.
Getty Images / Christine Balderas
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 10-20 minutes each week checking over your budget report, investigating transactions and tweaking 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 indepth use, like reconciling accounts.

More About Selecting Financial Software

Personal finance software helps you to manage money faster.
Getty Images / altrendo images
Now that you have discovered the features and benefits of financial software for personal mney management, learn more about software options to find the best tools for your financial situation.

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