Do We Really Need A Money Management Software?

Posted on June 13, 2010 by Ranjan

Balancing our checkbook and listing out our investments in a notebook (In MS Excel these days) is all we need to be doing about money management. No?

Most of us would not bother about setting up a detailed system that tracks our expenses, optimizes our income and tracks our savings and investment.

But there are several downsides for not maintaining any records or just maintaining a manual notebook for all your financial transactions.

Notebook records don’t give you the options of retrieval of data in any desired format other than the one you are using. For example, a list of fixed deposits will not give you another list which is sorted in a way that shows in an order when you will get the redemption or maturity of those FDs.

Excel is a powerful spreadsheet and can be used by trained users in a very effective way. But the caveat here is that you need to be a trained user to make use of the spreadsheet software. Even with trained users, getting reports in charts, tables, etc will not be easy.

Record keeping is a simple, easily implemented, and cost effective management tool. Complete, well organized records can help ensure proper management of your money.

But it is also important to be aware of the limitations of good record keeping. We need to take care of the following:

Records must be updated regularly.

You must update records correctly.

The records need to be readily accessible.

Records containing any confidential information must be secured.

I believe that available technology can help create a strong system to manage your money. But they also need to be easy to use. It should not be like a Jet’s dashboard which has hundreds of powerful utilities and features but very complicated to understand.

There are some desktop softwares that are coming to the market and promise loads of features.

An option that is growing in popularity is software that is kept entirely online. You never actually download a program to your computer and can access your information from any computer connected to the Internet, including SmartPhones.

This is referred to as “cloud computing.” Some websites offer a low monthly fee to use the software and other sites are free and entirely advertising supported. Some people prefer this method for its convenience and other people stay away from these programs due to security fears.

Once you begin to use personal finance software you’ll wonder how you ever managed your finances without it. I believe that people might become addicted to seeing the computer generated reports of exactly where their money goes each month. They should find this makes it easier to create a budget and stick to it.

That’s the premise that I am working on right now. Do you have thoughts on using software to manage your money. I’m listening.

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Three Principles of Personal Finance Management

Posted on August 4, 2009 by Ranjan

Talking about Personal Finance is a constant struggle for me. I don’t want to sound like a preachy expert. I don’t want to be appearing to impress by using jargons and numbers. And I wouldn’t like to spoon feed people.

But I do want to share what I know and hope that people take care of their own personal finances.

I do not know if I am failing or succeeding. And I don’t care. It’s the journey that interests me.

Along this journey of talking about personal finance, I have realized that it’s better to show rather than just tell. Also, more than any theory, there is a need for a tool in our hands that can help us manage our money.

That tool should be easy to use and give us necessary data/metrics so that we can improve our money management further.

That brings me to the three guiding principles that have helped me conceptualize the software. (Check out RupeeManager, being launched in September, 2009)

The three principles of money management are (I call it the Three M Principle…..mmm):

1. Measure: (Know Yourself)

2. Manage: (Know how your money is doing)

3. Make Your Rupee Work: (And not just You working for Money!)

1. Measure: It’s common knowledge that whenever you need to manage something, you need to measure it first. I was talking to my sister the other day and she told me she knew how to handle her money. (She was polite and didn’t tell me that she doesn’t need a blog to tell her how! And she’s right). She said, “just spend less than what you earn, and everything is fine”.

“Brilliant”, I said. But, to my questions about the numbers that proved that she was on track, she drew a blank. If she had numbers on what percentage of the earnings go into what categories of expenses, we might have had a discussion on how to improve upon that. If she had figured out her risk profile/appetite, we could had a discussion on whether her investments match that or not.

In other words, if we had a way to measure income, expenses, portfolio, risk profile, etc, we could have a discussion on how to improve them. No records, no improvements. Or perhaps, ignorance is bliss!

The RupeeManager is primarily aimed at helping you measure your rupee. Once you are aware, other things follow.

2. Manage: Now that you have numbers ready, the improvements follow naturally. For example, you see that your percentage spend on “eating out” is 2-3 times the monthly grocery bill or it forms 25+% of your expenses.

It’s perfectly okay if “eating out” is high on your agenda. But if the figures scream at you, you would think twice before rushing out for another “eat out”.

Also, you will get an idea how to balance your portfolio according to your risk profile. You will match the portfolio with your risk appetite and see if you can take more risk or go more conservative. In other words, you get to decide your asset allocation strategy.

3. Make your Money Work: Other than tracking your earnings and your expenses, it is important to see if your money is working for your future.

We are adding a feature where you can customize your spending plan between fixed expenses, discretionary expenses, short term savings and long term investments. It’s like assigning goals for your money. (Sehwag, go and batter them into pulp. Dravid, stick around till the end. Dhoni, Yuvraj, finish it off. Etc, etc. )

The software that we are building will be based on these three principles of money management. So that’s what “RupeeManager” will be all about.

Do you have any suggestions? We’re listening.

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Have you got your Financial Health Check done?

Posted on July 14, 2009 by Ranjan

Every problem has a solution. Easy. But diagnosing the real problem is a big problem.

This hit me big time when a relative we lost last month, complained of sore stomach a few months back. Taking it to be a mild acidity thing, the real problem got ignored. And by the time the Doctors got to the real diagnosis, it was too late.

I know it’s a bit scary and what’s that to do with this space where I talk about improving my financial IQ?

The post title is self explanatory. I’ll tell you a few more details.

We are building a “Rupee Manager“, where apart from helping you track your income, expenses, investments,etc, we are also planning a few steps to help you do your own “Financial Health Check (FHC)”. This would be the snapshot view and a more detailed version of your FHC can be done in the “Rupee Management Workshop” that we are planning.

All you have to do is answer a few simple questions and the health check does the rest, providing you with instant feedback.

Now, asking the relevant questions is an issue that I am working on right now. And giving the appropriate answers for a snapshot FHC is the challenge.

I write this post to share with you the relevant questions that I can think of right now. Would you want to add your own questions? Here they are:
Step 1
Personal and family details

Name
Sex
Age
Occupation:
Spouse name
Spouse age
Other dependents
No. of Parents dependent
No. of children
Sons
Daughters

Step 2
Questions to identify your risk profile

Step 3

Finance Overview

Gross Annual Income
Approximate Net Income every month
Approximate expenses every month
Monthly investments

Step 4

Questions to identify your financial IQ:
Are you aware of asset allocation principles?
Are you aware of your assets and liabilities?
What does your liability costs?
Are you aware of your human life value or the amount you should take an insurance cover for yourself?
Have you ever tried to do a personal budget exercise?

What more questions should be there? More importantly what answers should your FHC provide you with?

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