How I use Microsoft Money

I've said previously that I use Microsoft Money 2007 to manage my finances. Here's how:

I have the following accounts set up:

• Cash
• Checking
• Savings
• Credit Card
• Roth IRA
• 457
• Taxable Investments

These accounts are not "linked" to my actual accounts, and I use no automatic updates (other than stock prices). Cash represents the amount of cash in my wallet. Everything else is self-explanatory (though for those who don't know what a 457 is, it's the equivilant of a 401(k) for those who work for municipal governments). Many of these contain composite balances -- for example, I have two different checking accounts with different banks, but the balances are combined in my "checking" account in Money.

Now you may ask why I don't use automatic updates. There are two reasons. First, if I used automatic updates I would have to maintain separate accounts for my various accounts, including for several credit cards that get used for different things. Second, and I think this is the more important reason, by requiring myself to enter everything manually, it really requires me to look at my spending. It's too easy to allow automatic updates to fill everything in, and then look at totals spent in various categories. Doing everything manually results in my looking at my spending when I spend the money, when I enter it into Money and when I look at my spending by category.

On my Money home page, I have the option of selecting specific categories to track, and assigning them a monthly budget. I use that to track my two largest discretionary spending areas -- groceries and dining out. With my current living situation, I tend to eat out a lot. But that's a whole different post.