Managing money was never so easy

Anagh Pal, Outlook मनी

Are you finding it difficult to track your fixed deposit maturity dates, insurance premiums and EMI payments? Are you lost in the maze of various bank accounts, credit cards and investments?

You may be keeping records of your transactions in your notebook. If you are tech savvy, you would have Excel as your money manger and friend. Time to take a step forward -- personal finance software may be the way to stay on top of your money.

If the software is linked to all the financial institutions you would be dealing with, as is possible abroad, it can be a one-stop shop for all your financial needs.

Why do you need it?

Personal finance software is neither a magic solution to all your money management problems, nor is it meant just for those who are completely clueless about their finances. Rather, it's an assistant that will help you in the task. Even if you think you are managing your money well, you can use one to have a greater grip on your finances. It can help save time spent in worrying about missing a payment.

What can you do with it?

From basic bookkeeping to more advanced tasks, these software will help you mange your money at different levels.

Track your portfolio. Be in complete control of your investments in stocks and mutual funds. If appropriately linked, you do not have to enter stock and mutual fund quotes manually; the software will download it for you from respective sources and keep your portfolio updated. The software will also provide capital gains statements.

Manage your budget. Set up spending limits for each transaction and see how well you stick to your budget. This way, you will know that you need to cut down on eating out or that you can afford to spend some more on shopping.

Know your tax liability. If you update all your tax-related transactions, year-end tax computation would be a piece of cake.

No missed deadlines. You will be told well in advance that your National Savings Certificate (NSC) is maturing, or when you have to make a payment. This means fewer worries and no late charges, besides the fact that your money never lies anywhere without accruing interest.

Generate reports. Such software allows you to generate reports in the form of graphs, charts and statements about your net worth, cash flow, balance sheet, asset allocation and all other transactions. When you log in, you know exactly where you stand and what you should be doing if something is not in place.

Automatic updates. Apart from stock quotes and mutual fund NAVs, all transactions you make using plastic money (say, with a credit card) can be automatically updated. Similarly, all your bank transactions will get posted on your PC.

Online payments. If your software is adequately linked, you can make all your payments online. For example, your child's school fees will be paid automatically on a certain date if you have scheduled it and the operation will be entered in the appropriate section of your expenses.

E-filing tax returns. As the software will integrate all your money transactions, it will not only compute your taxes, but also 'e-file' the returns.

What options do you have?

Though various foreign software are available, it is better to use India-specific ones as they are more suited to Indian needs.

Foreign software. The most popular and feature-rich foreign software is Quicken Mac and Microsoft Money. These have several versions to choose from -- Microsoft Money Essentials and Quicken Starter for basic budgeting, and Microsoft Money Plus Premium and Quicken Premier for advanced functions. Acemoney, RichOrPoor and Moneydance are also well known.

The problem is most of these are not suited to the Indian individual as they do not cater to all the investment options available in India. For example, they wouldn't have a separate section to make an entry for post office savings and Public Provident Fund.

They may not even automatically update investments in Indian stocks and mutual funds. Also, if you are investing in shares of, say, Reliance Petroleum [Get Quote], you will have to make a manual entry Since they won't have Indian companies in their list. Other functions like computing tax returns will also not work, as the software will not understand the nuance of Indian tax laws. The online bill payment facility, too, won't work.

India-specific software. Some of the foreign software have versions for the Indian market. With Acemoney, you can download quotes form the Indian market. Moneydance is also about to launch an Indian version.

As of now, Easy Life from Adit Microsys, a software solution provider, is the only Indian personal finance software available. The software contains the entire gamut of India-specific investment. It has different sections for entering details about your NSC and for investments in physical assets like land, vehicles and gold. Income tax calculation under the Indian rules are also integrated.

The benefits

"It allows you to download valuations from NSE, BSE and Mututlfundsindia and even provides the capital gain statements," says Arun Roy, a finance professional, who purchased Easy Life online. "When I used Excel or even Microsoft Money, I had to enter the valuations manually," he adds.

Mumbai-based financial planner Sandipan Reddy, who uses Easy Life to manage his own and his clients' finances, recommends the software to his clients. "Normally I need 4-5 sittings with my client. But if he is using such a software, I can get his entire financial picture at one go. For people who are not well-versed with Excel, or have little time to spare, it is very useful," he says.

The drawbacks

Since the legal framework does not exist and all branches of government-owned banks are not computerised, online payments and downloading of bank statements is not possible at present, says Jaidip Parikh, product manager, Adit Microsys. "However, we may introduce these features in future since technology is not a problem," he adds.

Roy, who got statements from HSBC and HDFC Bank [Get Quote] when he used Microsoft Money, is looking forward to the day when he wouldn't have to make entries of his bank statements manually. Reddy feels that the software should automatically update SIP investments in mutual funds. The company has promised to include this feature in its next version.

Software versus online portfolio nanagement sites

There are various websites that help manage your portfolio online, but they do not provide a complete solution. You can't do much if you don't have access to the Internet. Besides, the data may not be as secure on the Net as on the software in your personal computer.

Roy says that he invested in a personal finance software as it helped him capture all his finances, not just his investments in stocks and mutual funds. Also, Easy Life allows him to integrate all investments under different family heads, without him having to create separate folios for each.

What to buy

Most of these software allow a free trial. Download the software and operate it before you put your money into one. Always look for a software that is more comprehensive and integrates most of the money transactions you make.

To reiterate, a software can only serve as an aid in managing your finances. To get the best out of these, you have to be disciplined. As Roy says, "Regular entries are a must." There is no substitute for hard work, but getting organised helps.