Productive Organizer

There are some important lessons not taught in school but are necessary in life. One of them is to manage your cash and money well.

One of the greatest problem faced in the twenty first century have been how debts have taken such a great hold of people’s lives. People start asking the questions how do they get themselves out of so much debts.

The answers presented in many personal finance sites are largely the same.

You take responsibility in how you use and manage your money

1. Do not carry debt. Except perhaps mortgage. We should avoid credit card,car loans and home renovation loans as possible
2. Have adequate emergency cash. You want to build a large buffer cash slowly so that in the event of a situation you have something to fall back on
3. Start your investment warchest. I always said create a nest egg early. Pay yourself first and learn to invest and put your money to grow
4. Be insured. You do not know when illness and tragedy will strike and when they do you will need a sum of money that you will have difficulty to come up with. Hedge that risk by buying cheap low cost insurance
5. Develop a budget. Manage your money in a systematic way. Give each dollar a job
6. Boost your income. There is no point just saving and scrimping. It will be massively easier to upgrade  yourself, focus on how to carve a great career and earn a better income

You need a budget as your personal finance manager

One software that understands how to help you make sense of your finances have been You need a budget (YNAB). It is a personal finance software that focus heavily on budgeting and help you get out of debt.

It is highly flexible to accommodate to your budgeting methodology. For myself I tried many methods of saving money and I find that by following envelope budgeting, I can allocate my paycheck to virtual envelopes and prevent me from spending over the limit.

1. Find out your spending pattern

The first step is to identify how you currently spend your money. Collect all the receipts from recent purchases for 1-2 months. This will let you know what you spend on typically.

With that you can generalize them into spending categories

2. Give each dollar a job

The next step is to break your monthly income from your salary, passive income, dividend income into virtual envelopes or YNAB categories

YNAB provides a default set of spending categories that you an extend to two levels. You can also specify your own

Basically, each of your transactions will be tag to a category and you can monitor at the budget screen whether you are overspending it.

What if you do not spend enough? The amount will be brought over to next month. In this way if you overspend you will face with a deficit and if you underspend you will face with a surplus.

That means next time you need to spend less if the amount gets negative.

If you get a lot of surplus, it means u can indulge and spend on big ticket items.

3. Enter daily spending in transactions

Every time you spend money, take note of what you spend on. At the end of the day come back home, fire up the PC,  fire up YNAB and record your transactions.

Some people find it difficult to do that but, with smartphones nowadays you can enter your transactions into an iPhone or Android YNAB app or record down in a notepad and enter them at the end of the day.

It is a good habit to record these transactions and I don’t think you need to spend a lot of time.

4. Review your spending pattern

On a quarterly basis, review whether you are meeting your goals.

1. Your emergency cash category should be rising
2. You should be paying yourself first and building up a nest egg
3. You should be paying down your debts through the debt accounts
4. Your hobbies account should not be exceeded

These are some review items to evaluate. You should also evaluate whether some accounts warrant an increase or decrease in amount.

Conclusion

Saving money and clearing debt need not be filled with anxiety and despair. The first step is the most important. Follow the 4 step process to kick start a sensible money management plan.

YNAB can be a great companion software because it is ubiquitous. It is available on the Windows and Mac which means you are not tied into one platform.

YNAB also have Android and iPhone apps that allows you to record, review and sync transactions to the desktop.

Since computers have become popular, people have created budgeting and investment applications like Quicken and You need a budget (YNAB) to help them make sense of their financial well being.

However, how can you tell what are some of the important criteria that make a product suitable to be purchase or subscribe to  help you manage your money?

Create multiple savings, cash and investment accounts

Users normally do not put their money in one accounts, usually they will have multiple accounts. And then they would have their credit card accounts as well as other loan and checking accounts.

The sub requirements here is

1. Able to specify different kinds of accounts (e.g. Savings, Cash, Investments) and not be seen as a generic account.
2. Accounts behave or presented differently based on their account type.
3. Able to create virtual cash accounts for each of your spending objectives

Here Quicken does a good job because it lets you

1. Categorizes different type of accounts
2. Presents them accordingly
3. Create virtual cash accounts for each of your spending categories

Create 2 level budget categories or tags for your transactions

One of the main purpose of tracking your expenses Is so that you make sure you spend within your limits.

So effective categorization of your spending patterns are important.

A functional personal finance budgeting application should allow you to tag your transactions.

These tags or categories should be presented in 2 levels, a Master Category and a Sub Category for better organization.

YNAB does a good job here since one of their strengths is budgeting and ensuring you spend within your limits.

Set up scheduled / recurring transactions and transfers

One very important criteria for me or other international users is

1. the ability to schedule a transaction periodically and able to recur
2. whether it is a payment or an account transfer
3. recurrence able to go on indefinitely
4. able to amend the recurring transaction
5. able to review the recurring transaction and trigger the entry at your control

Why is this important for international users? Because international users do not have the ability to download transactions automatically into their applications, they require a quick and easy way every month to enter transactions that will always occur.

Quicken and YNAB 3 are 2 of the applications that does this well.

• Quicken provides a Scheduled Bill/Transfer Reminders for you to manage this.
• YNAB’s implementation is to provide multiple of these at each accounts. At each account you can schedule the recurring transactions flowing in or out of the account.

What I understand is that most of the web based personal finance application are not able to do this well. They either generate the recurring activities in advance, doesn’t include account transfers or just don’t implement this.

We know that the biggest of them all, Mint.com, does not have recurring transactions.

Import and Export of Transaction Formats

Users are always afraid to be tied in to one platform and the greatest tie in cost for personal finance software is transaction data.

Thus, what differentiates good personal finance application from bad is the support to import and export of different formats.

The common formats are as follows:

1. CSV.Very portable very flexible but the users will likely need to match each fields to the software they are importing into.
2. OFX.Open Financial Exchange (OFX) is a unified specification for the electronic exchange of financial data between financial institutions, businesses and consumers via the Internet. OFX is not a financial institution.
3. QFX.A QFX file is a standard OFX file with additional fields to support a licensing fee paid by institutions to Intuit. In contrast, the standard OFX format is a free and open standard.
4. QIF. A older Quicken transaction export and import format.

If you want to import and export from 2 different programs, such as YNAB 3 and Quicken or GNUCash, the format to import and export seem to be QIF.

Manage Investment Portfolio

The next stage after you put your financial house is in order is to put your money to work to beat inflation.

The use case for investment management includes

1. Creating multiple portfolios based on investment objectives
2. Define security based on online information or manual information
3. Add assets and debts to the portfolio
4. Update prices, whether through automatic means or manually should your security is an international asset which is not from the United States
5. Update asset transactions such as buy, sell, dividends, rights issues and bonus issues

Quicken and GNUCash are very well advance in portfolio management. I have been using Quicken to manage the portfolio for 8 years, monitoring by updating transactions that are mentioned in point 5 and updating prices in point 4.

Ubiquitous budget. portfolio access

Technology have shifted so much since 10 years ago. Gone are the days where we only review and input transactions on your desktop computer or MAC.

Mint on the web

Mint on the Android smartphone

Mint on the iPhone Smartphone

Mint on the iPad

Now you can find budgeting application on the

1. Windows desktop
2. MAC desktop
3. Android smartphone
4. iPhone and iPad
5. webOS smartphone

Could we have a software platform that we can assess whether we are on our smartphone or in front of the computer?

The best solution are web personal finance applications like Mint.com, Wesebe. A web application stores your personal finance data on the web and you can assess it whether you are on the phone or computer as long as you have internet assess.

These web application also may have smartphone native applications that enable the user to enter the transaction wherever they are.

Conclusion

So far I have not found an application that satisfy these 6 criteria. Mint looks to be the closest, but it is only suitable for US users. For international users it’s a pain.

Almost all personal finance are centered around US. It would be great if we have something like Mint.com that is for international users.

Should you be able to find a personal finance solution that matches these criteria do drop us a comment here and we will be very thankful for your contribution.

I share my investing experiences on Investment Moats and mobile productivity on this blog. One article that I wrote 2 years ago remains very popular.

It teaches readers how to create a budget plan and use it with some popular budgeting tools like Quicken and Buxfer.I highly recommend that you take a look at it.

One reader brought up his setup:

iBANK for Mac and iPhone. Downloading statements from Singapore Banks and iBank will make sense of it.

Here is his comments:

For Mac users, guys might wanna try iBank, Moneywell, Quicken for Mac to track your bank accounts.

Personally I’m on iBank. It also an app for your iPhone to track your expenses on the go. You can then sync it with the program when you’re back homoe. Haven’t tried that yet though…haha, not on an iPhone yet

My tracking involves exporting all my monthly bank statements into either OFX or CSV formats, then import them into iBank. iBanks can then “learn” frequent transactions and categories them automatically this is what I like haha.

Some additional notes regarding exporting bank accts/Credit card statements from local bank:

Citi accts/CC – variety of formats OFX, csv, qif, etc
DBS accts – only csv format
UOB accts/CC – csv, BUT with a .xls extension
SCB accts/CC – csv and pdf format

I believe citi has the best online platform out there so far. Formatting is consistent and most imptly the data is easily exported with inter-operability high on their minds. You can easily import their data to any financial softwares.

DBS and SCBs are not that bad, at least they standardize their export formatting (i.e. CC statements and Savings statements looks relatively the same).

UOB can really really work on thier online platform.
The exported data for Accounts and Credit Cards are formated so differently, which is a pain in the *** when you try to parse it.

Haha, so hope this helps in the audit trail too for pple on the Mac.

What do you guys think? Do you have a better setup?

Sometimes the most difficult decision one can make is to take that big scary step. That is what Sierra Black did. She had tough decisions to make and i liken what she had to face as the same as a trader whose stocks have not gone his or her way.

In her case, she had to cut loss on a home to move into a smaller one. Hats off to her for able to make that big step. Not many would be able to. If they were able to, its when its all too late.

Now she is reaping the benefits of it all:

1. Less Expenses  more Cashflow
2. More time to spend with family
3. Better living environment

I think we all can learn alot from her.

This is a guest post from Sierra Black, a long-time GRS reader. She writes about frugality, sustainable living, and getting her kids to eat kale at Childwild.com.

When my husband and I first got married, we bought a house in the suburbs and promptly had a baby. Buying that house meant buying a piece of the American Dream — but we both figured out pretty quickly that it wasn’t our dream.

I will never forget coming home from the hospital with that precious little girl and looking around my huge suburban home with a sense of confused dread. “What happened to my apartment?” I said. “What happened to my life?”

Big problems
I stayed home with our baby for a year, living on savings, and then went back to work full time. The baby went to daycare for ten hours a day, and most of my salary went there with her.

I was driving 40 miles north every day to work at a newspaper, while my husband drove 40 miles south to his research job at a major university. He’d leave the house at 8 a.m. and often come home after midnight. On a “good day” he could get home for dinner with me around 8 p.m.

Meanwhile, I’d come home exhausted with a cranky kid, only to have my boss call during our late dinner to tell me that something on my beat was on fire (sometimes literally) and I had to go cover it. On the weekends, instead of hanging out with friends or having adventures, we got to mow our lawn, clean the ten rooms of our lovely home and try to balance our finances.

We were exhausted, miserable, lonely and broke.

We lived like this for two years, and then things started to fall apart. First I left my job to have a second child. Having become a stay-at-home mom, I was starting to get serious about cutting the fat from our budget. I started with the small things:

• canceling our Netflix subscriptions
• scaling back on dining out
• buying store brand groceries

It felt like I was bailing out a leaky boat with a teaspoon. Something bigger would have to change.

[Read the rest of this wonderful story at Get Rich Slowly >>]