How Microsoft Money Can Help You with Your Finances

Microsoft Money 2005 takes the pain out of managing your personal finances. The popular software serves as a research tool and a means of gazing into the future. With Money 2005, you will know how much you spend in different areas and what your net worth is. You will know what any investments you may have are worth and roughly how much you owe in taxes. Without bookkeepers, accountants, or financial counselors, you can become a better saver — and that's an achievement worth its weight in gold!

Keeping accurate records of your spending and income

All the personal finance advisors agree that keeping good, accurate records is the first step toward financial security. Before you can start saving for a down payment on a house, you have to know how much you are capable of saving. Before you can tell whether your investments are doing well, you have to track them carefully. If you want to make sound financial decisions, you need to know what your spending habits are and how much income you really have.

Microsoft Money makes keeping accurate financial records very, very easy. All financial transactions you make — writing a check, making a deposit, transferring money between accounts, charging an item on your credit card, buying and selling stocks and mutual funds, and so on — are recorded in account registers. You create one account (and one account register) for each bank account you have and each account you have with a brokerage house.

Entering data correctly in Money is essential. Money can't do its job well unless you carefully and conscientiously enter financial data. If all you want to do is balance your savings and checking accounts, you've got it made, because Money offers lots of opportunities for double-checking the accuracy of transactions in savings and checking accounts. However, to track investments and loans, draw up a budget, or do a handful of other sophisticated things, you need to take care when you enter the data.

Categorizing your spending and income

Each time you record a transaction in an account register, you categorize it. A check you write to a clothing store, for example, is assigned the Clothing category. A credit-card charge you make after stuffing yourself in a restaurant is assigned the Dining category. A paycheck deposit is assigned the Salary category. After you have recorded transactions for a few months, a picture of how you spend your hard-earned cash will start to come into focus. You can generate reports or charts that show precisely what your expenses are.

Estimating your income taxes

Another advantage of categorizing expenses and income is being able to estimate your income tax bill. Rather than pay an accountant to search for tax-deductible expenses or determine what your income sources were, you can generate tax reports that do the job in lieu of an accountant. By totaling the amount you spent in categories that describe tax-deductible expenses, you can find out what your tax-deductible expenses are. You can see exactly how much you received in income from different clients. Money also offers tools for estimating capital gains taxes and exporting Money data to a tax-preparation program such as TaxCut Deluxe.

Handling your investments

In the late 1990s, all you had to do to be a successful investor was to plop down money on stocks or mutual funds, but bears have overrun the bull markets of the 1990s. These days, you have to be shrewd and insightful to be an investor.

Money makes it possible to find out — literally in seconds — how well your investments are doing. You can find out how much they have grown (or shrunk) and compare the performance of your investments against stocks, mutual funds, and bonds you don't own, as well as compare your investments to indexes such as NASDAQ or the S&P 500. You can download security prices from the Internet and find out right away what the stocks and mutual funds you own are worth. As long as your computer is connected to the Internet, you can also research stocks, mutual funds, and bonds without leaving the Money program. You will find links throughout Money that you can click to go on the Internet and research investments.

Pinching your pennies

You categorize your income and spending when you record transactions in Money. Categorizing this way makes it easy to formulate a budget. Because you know precisely how much you spend in the different categories, you can set realistic budget goals by limiting your spending on a category-by-category basis. You can tell Money to alert you when you have exceeded your budget goals and in this way tame your spending. Money can also tell you when bills fall due so that you can pay your bills on time. The program can even track your frequent flyer miles.

Planning ahead

Planning for your retirement isn't easy. It's hard to tell what the future will hold. Money, however, can help you peer into the future and plan for your retirement. If you track your investments with Money, you use the Retirement Planner to project how your investments will grow and see whether your investments will cover your living expenses in retirement. Money allows you to realistically find out whether you are saving enough. The program can also show you how to plan better for your retirement and do the things you need to do now to ensure that your retirement years are golden ones.

Banking online

Money was the first computer program to offer online banking services. Over the years, Money has refined these services such that online banking is easier than it has ever been. You can pay bills online, download bank and credit-card statements, and balance your account online.

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