December 8, 2022


Getting a Business

What is Personal Money Management Software? How Can it Help?

Many, but not all, financial problems can be traced to mismanagement somewhere in the past. Taking on too much “bad” debt, failing to pay credit cards off before other lower interest debts, and so on, are examples of money problems that can often be avoided with prudent financial planning. That’s certainly not to say that all potential situations can be accounted for – major car or house repairs, for example, can often result in debt that takes quite a while to pay off. However, many situations, such as an unexpected appliance breakdown, can be planned for by creating an adequate “rainy day” fund. We’ll explore the ways that personal money management software can help you prepare for the worst and strengthen your financial situation in the long run.

Proper money management borrows a page from typical company accounting. A business entity needs to have at least two statements, a balance sheet and an income statement. Analyzing your financial situation requires these three analyses as well. First of all, you need to find your assets and liabilities (the equivalent of a balance sheet). Enter in your bank, credit card, 401(k), etc., balances into the software. This will give you an idea as to how your financial situation stacks up against present and future expenses. Do you have more immediate liabilities than tangible assets? If so, then you may need to cut back on spending to restore this balance. This can also help you judge various net worth goals. A classic example of this is retirement: seeing how much your net worth is will let you know how close to retirement you are.

Secondly, personal money management software should include the ability to create a budget (essentially a future income statement). Creating a budget is essential to know how, given your expected income vs. expenses, your financial situation will change over time. It will also help you allocate your funds to critical areas while at the same time helping to prevent overspending. Consider for example, the classic example of a person who doesn’t save anything and gradually builds up credit card debt over time, only to struggle to pay it off later on. If that person created and held to a budget, they would likely not be running up their credit card debt as they would see how much they could afford, what is necessary to buy, how much extra spending money there is, and so forth. Like income statements, budgets permit you to get a glimpse at how your financial situation will look in the future. They let you see how well you could weather scenarios like “what if a car repair came up” or “what if my house had a major roof leak”.

Personal money management software is necessary to help guide you to a more solid financial future. You can look at what you have now and explore various ways to build upon that position. You may find after analyzing your situation that the best option would be to pay down your debt, or you may even find that your 401(k) is lacking in comparison to your other assets. Putting all your data into personal money management software will help you figure out the major questions for any financial situation: how much do I have, how will I be in the future, and how well will I fair if “x” scenario arose? Continually assessing these questions is essential to maintaining a solid foundation for your monetary life.