Is MoneyWell money well spent?

January 29, 2008 at 11:45 pm Leave a comment

Are you on the following financial plan: Once or twice per month you write out checks/do online bill pay, look over credit card statements (matching them with receipts? Who does that?), and balance your checking account, all while the rest of the month dreading anything to do with your finances?

Yea, me too! But I think I’ve found a way out.

A few days ago I posted about MoneyWell, a new Mac personal finance application that I’m trying out. It uses the concept of Buckets to help you budget your money. It forces you to think of things a bit differently, which may just be the ticket to getting out of debt.

Allow me to expand:

Most any personal finance application can track everything you spend, but the big strength of MoneyWell is in forcing you to create a budget and providing simple tools to help you set goals and reach them. By being reminded how much money you have already spent in a given month on a particular category, perhaps you won’t be quite to cavalier with your spending.

When you first begin using MoneyWell, you must create a Spending Plan. This is essentially a list of categories you are going to spend money in with an estimate of what you think you’ll spend. You must also set precedence for what you need to spent money on first (such as house payment), second (car payment), on down the line. This is usually not that big of a deal as the expenses that are very important tend to take up a large portion of your income, so just stick them at the top with everything else below. Don’t get all crazy on me – It doesn’t have to be exact. In fact, months down the road you can have MoneyWell look at your spending history update it to be better match actual spending patterns.

Next, you have to allocate your income to your spending plan. It automatically fills this in from the highest priority things on down the line, so if you put a category at the bottom of your list for “New Gadgets”, and configure your spending plan as $1000 per month into that category, you’ll only get money allocated to it if all the categories (or buckets) above it get fully funded.

As you add transactions to MoneyWell, you select the bucket that each transaction comes from. This is similar to the categories you select in other applications like Quicken. On one section of the UI (on the main screen – not hidden away!), these buckets are shown along with how much money is remaining in them to be spent or showing how much you’ve overspent. Having this constant reminder of how much you have left to spend in various categories is a very nice feature that helps me stay mindful of my limits.

When a new month rolls around, any overspending or underspending you’ve done in your buckets gets rolled forward to the next month (along with any new allocation). Let’s say you overspent last month dining out to the tune of $50. If you spending plan is to spend $250 a month on Dining Out, when the new month gets here and you’ve allocated your income, your Dining Out bucket will only have $200 in it ($250 – last months $50 overage). If you are consistently overspending in a particular category, you either need to modify your spending plan, or modify your spending habits.
If this sounds difficult to live with, know that MoneyWell is also flexible. If you have money left in another category , you can transfer money from one bucket to another. So, if you had to spend an extra $25 entertaining unexpected relatives, you can move the $25 you saved by skipping a haircut out of your Hair Care bucket over to your Dining Out bucket.

As I mentioned in my previous post on MoneyWell, the way I have chosen to use for maximum effectiveness is to put all my accounts (including credit cards) into it. When I arrive home from a day of shopping (or work – I eat out for lunch a lot), I take the credit card receipts out of my wallet and enter them right into MoneyWell. This might sound like a hassle, but it really isn’t. Previously, I was starting to approach a George Costanza sized wallet with literally 3 months of credit card receipts inside. Now, each evening I enter in the one or two expenses that I had from the day (if any), and I’m done. By looking at this on an almost daily basis, I’m reminded how much money I have left in each category, and I feel like I have my fingers on the pulse of things, financially.A big advantage of tracking your credit card purchases this way is that, once entered the receipts can be dropped into a file folder. When the credit card bill comes in, simply reconcile it as you would any other account. Since you have already entered the purchase data from each of your credit card receipts, reconciliation should be simple.

Checking your credit card statement is something that we’ve all been told we should do. Listen to any consumer advocate radio show (like Clark Howard), and you’ll hear horror stories of companies charging people like $29.99 a month for literally a year or more before they noticed. Once they do notice, the most they can hope to have reversed are charges that took place in the last 60 days.

A side effect of using MoneyWell in this manner is that any unexpected bills or ones that don’t match your amounts will stick out like a sore thumb.

So, yes, it does take me a minute or two per day to manage, but it actually feels freeing, and I don’t think I’m going to dread handling my finances anymore.

“That sounds great and all, but does it really work?”, you are probably asking. I’ve only been using it a week, so I’m sure I’ll be able to say more about it with more certainty in the coming weeks and months. But, I already find myself looking for small ways to save money and limit my spending on a daily basis. I don’t think I’d be doing that if I were still using Quicken. I truly do believe that by keeping tabs on different categories the way MoneyWell does, I will ultimately be in much better control of my money.


Entry filed under: General, Mac.

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