Beware of the Employer Match
Filed Under Retirement
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Who doesn’t like an employer who matches a percentage of your 401k contributions? It’s free money that will grow into more free money.
But be careful…I’ve found where it can screw up your cash balance amount in your 401k account in Quicken, which in turn, invalidates your Net Worth number.
My company changed their employer match formula beginning back in January. It used to be a set amount per year, but they’ve changed it to be a percentage of my salary up to a certain point, which works out well because this change increased my match by several thousand dollars. (This change in the 401k match was negated by a change in the profit sharing plan, but it still works out to my advantage.)
I noticed tonight that the cash balance in my 401k account was declining rapidly. It’s normally either $0 or the amount of my last paycheck contribution (before the equities get purchased). I began to dig through the transactions and compared them with my brokerages transactions, and I finally (it took me longer than it should) realized that the employer matches were causing the issue.
Basically, the only transactions getting pulled into Quicken were the “buys”. There was no record of the employer match “deposits”. I’m not sure why this is at this point. Next week, after I get another paycheck, I’m going to look at the downloaded transactions a little more closely.
In the meantime, I went in and manually added the employer match transactions, and my cash balance is now at $0. That makes me feel a whole lot better.
Quicken Data Backups
Filed Under Quicken Help
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If you use Quicken, your Quicken data is essential, and an effective backup solution is absolutely necessary. You need to be able to restore your data in the event your hard drive craps out, a fire destroys your home office, or your dog has an accident on your computer.
Quicken has several backup functions built in to the software that makes it easy to keep your data secure.
- Automatic file backup - Quicken automatically keeps five copies of your data files in a folder called ‘Backup’ that is in the same folder as your original data files are in. These files are numbered sequentially from with a suffix from 1 to 5. You cannot disable or change this feature. It is intended to recover your file in the event new data that you input messes up an account, you accidentally delete an account, or other human error.
- Manual file backup - I say manual, but it’s an automatic process that enables you to backup your files to a different drive, media, etc. Instead of storing the files on your hard drive (as in option 1), you can define the drive (USB, external, CD, etc) that you want to use for your backups (in addition to the backup files in option 1).To configure this option, go to the ‘Edit’ menu, select ‘Preferences’, and then select ‘Quicken Program’. On the left side of the window, highlight the ‘Backup’ entry. Here you will define how often you want Quicken to remind you to back up, and how many copies you want to keep. If you have ample drive space, set the first number low and the second number high. You can never have too many backups!After you configure this, Quicken will prompt you to back up your files when you exit the program. You will browse to the target drive, select ‘OK’, and bingo, you’ve got a backup.
- The last option built in to Quicken is the ability to use the Quicken service (at additional cost) to backup your files online on their secure servers. While I’ve never used this, it could be advantages if you use multiple computers, or don’t have other options. It does cost more, but you don’t have to worry about additional drives or keeping CD’s in a fire safe.
Also, keep in mind that your Quicken data files include five (5) different individual files. There’s not just one.
It’s important to have backup files on a different device than the one you normally work off of. Also, you may want to consider making a ‘yearly’ backup that you store in a fireproof safe or other offsite location. Again, there’s no such thing as too many backups….backup early and often!
DK
Kitchen-Table Investor Review
Filed Under Books, Investing, Investment Club
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There’s a good summary of a book called The Kitchen-Table Investor: Wealth Building Strategies for Working Families over at Get Rich Slowly.
The part that caught my eye the most, perhaps because it’s not mentioned enough, was the second “step” entitled “Join an Investment Club”. I’m actually in the process of organizing a club with some of my co-workers. We haven’t bought any equities yet, but that is coming next month
I see the Investment Club organization as an opportunity to learn more than an investment vehicle. As JD writes, he has most of his money tied to index funds, but holds a little aside to play with on individual stocks. My investment club money will be my “play money”, but it won’t have as much exposure/risk as it would if I were investing on my own. With investment clubs, the entire club votes on which stocks to purchase, so it takes more research in a stock to convince the club members that a stock is a smart buy. The club atmosphere also removes some of the emotion associated with a stock purchase since transactions usually only occur on a monthly basis. Your in it for the long haul…it’s definitely not a day-trader’s environment. And hopefully the knowledge the group provides will make my main investment vehicle decisions that much smarter.
More posts to follow regarding my own investment club experience. Once I have an actual financial stake in the group, I’ll integrate it into my Quicken program and will hopefully watch it grow!
DK
Quicken Version Upgrades
Filed Under Intuit
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I ran across this review of Intuit’s recent change from the Quicken Basic version to the new “Starter Edition”.
There’s been a lot of discussion recently regarding Intuit’s approach to upgrading its software. This version change, along with the announcement that versions prior to the 2005 software won’t work with automatic bank downloads in the near future, have put a spotlight on the user’s ability to upgrade without paying for a new software package.
My personal opinion is that you, as a user, should be in a constant state of upgrade. I’m not suggesting you upgrade with each new yearly release, but by using the software you purchased back in 2003 you are probably missing out on new features and abilities that the latest version offers. Technology changes, interfacing with customers, banks, vendors, etc changes, everything changes over time. Doling out $50-$60 on the latest version every few years should not be that big of a debate.
DK
“Chase What Matters” Advertising Campaign
Filed Under Credit Cards
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Quicken, like most financial software packages, does a good job of tracking credit card spending. It records individual transactions, compares your available credit to your credit limit, and will even tell you how long it will take you to pay off the balance. Nothing fancy here.
But, there’s a new competitor on the market. I saw a commercial recently for Chase Bank that advertised the ability to quickly (they claim in “real-time”) check your credit card balance via a cell phone text message. This service will enable you “to decide what to spend” on the spot. The poor chump in the commercial is seen in the electronics store kicked back in a recliner trying to figure out which big screen television to purchase. He has to text the bank to decide if he can get a 15″ or a 53″ TV.
I’d bet a dollar on the following statements about the individuals this service is targeted at:
- They are probably not using Quicken (or any other management software) to track their spending.
- They are probably only making minimum monthly payments on that credit card.
- That “TV” or other large purchase will cost them quite a bit more in the long run than what the price tag says.
It would seem to me that there is something innately wrong with this type of service. It is encouraging people to base their spending on how much available credit they on their credit card.
A smart Quicken user would know how much they can afford before they leave the house. He/she would also NOT use a credit card because a savings plan had been started and followed long before the item was necessary.
DK
Health Care Savings Accounts
Filed Under Hacks
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If you’re not familiar with a Health Care Savings Account, it’s a great way to pay for your medical costs and reduce your taxable income. You basically have a set amount of pre-tax money deducted from each paycheck and applied towards a HCSA account. The total value of the account is available on January 1 of each year, so you’re “paying back” the account during the year with your paycheck deductions.
Your HCSA account (via a debit card or written forms with receipts) is used to purchase everyday medical supplies, pay for doctor visit co-pays, and other qualifying medical procedures. The only downfall to the HCSA is that any money left over in the account at the end of the year is lost to the IRS, so you have to be sure to estimate your costs fairly accurately.
Having said all that, I’m taking advantage of the HCSA plan for the first time this year. It’s been available for several years, but for some reason I haven’t felt comfortable with it until now. So, after receiving my first check of the year last week, I went to adjust my paycheck deductions in the Quicken program and found a problem.
Quicken wants to set up a new asset account worth the total yearly value of your HCSA account, and apply your paycheck deductions to it as deposits. So, for example, if I chose to put in $100 a month, an account would be created worth $1200 ($100 x 12), and a deposit to the account would happen each month worth $100. This doesn’t work, as the asset account’s value would continue to increase.
So, to fix the problem, I’ve done the following:
- Set up two accounts….one is an asset, one is a liability (or loan).
- The asset account’s initial balance would be set to $1200, and the liabilities’ initial balance would be set at -$1200 (note that it’s negative, as a loan would be).
- The monthly paycheck deductions are applied as deposits to the liability account as if you’re repaying a loan.
- The medical costs (prescriptions, OTC drugs, co-pays, etc) would be applied as deductions to the asset account.
This method allows you to continue to track your medical costs, but the net worth of the HCSA account will result in a value of $0 at the end of the year (assuming you use all of the HCSA funds).
DK
Account Information
Filed Under Organization
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Let’s assume that you, as an average Quicken user, have several accounts that all have different account information that you want to keep in a single place. How do you effectively store the information and retain some form of privacy and security?For example, your “Cash Flow” accounts may have a checking and savings account and a credit card or two. Your “Investing” accounts may include a 401k, Roth, or brokerage accounts. And, your “Property and Debt” accounts would include a mortgage, car loan, student loan, and their associated asset accounts. All of these various account will probably be at different institutions and have different websites, usernames, and passwords for account access. As a precaution, I’d suggest keeping a record of the important account information in a separate, secure place.
To do this, enter the website, username, password, and any other pertinent information in the Comments section of the Account Details screen. This information won’t be visible unless you open up the Details screen. Do this for each account.
Once you’re complete, you can print the account information. To do this, open the Account List. At the top right of the screen there is an Options menu. You’ll want to select “Print Additional Information”. Then select the Print menu item. Your account information, along with the website information, will be printed in a nice report.
Take that report and keep it in a secure location. A fire-safe, relative, or other location can be used to keep your data secure, but also provide a backup in case your computer (and Quicken backup file) fail or are destroyed.
DK
Savings Goals
Filed Under Saving
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Quicken has a neat feature that helps (me) out with saving for bills that come due periodically or when I want to save for something specific (like a new camera lens). A ‘Savings Goal’ is a virtual account (internal to your Quicken program) that visualizes how much you’ve saved towards a specific item. Your cash is actually kept in any real account you’d like…the virtual Savings Goal account is simply linked to your checking, savings, etc account, and withdrawals/deposits are made to/from it like any other account.You can access the Savings Goal screen from the Planning menu in Quicken.
For example, I set up a Savings Goal for my yearly property taxes. I have a home equity loan (not a conventional mortgage), so I’m responsible for paying my property taxes each year instead of it being put into escrow by a mortgage company. To make sure I’m saving enough for it throughout the year, I make a monthly deposit to my ‘SG-Property Tax’ account. Then, when my taxes come due, I “withdraw” the money from my ‘SG-Property Tax’ account, write a check, and I’m done. I don’t have to worry about coming up a with a large amount of cash each year.
Quicken is even smart enough to tell you when you’re falling behind on your goals (if you like your computer yelling at you).
The only negative aspect of these virtual accounts is that you have to know which real account your money is in. When you reconcile the real account, the balance will be short by the amount you have in your Savings Goal account. While this doesn’t affect anything in the real world, it can be somewhat confusing and disconcerting when you look at your real account balance. I typically only use one real savings account to link to my Savings Goals, and I name the Savings Goal accounts so that they will be listed in the sidebar immediately after my real savings account. That makes it easier for me to see the whole picture.
Savings Goals are a neat, helpful tool if you have problems with money and “saving-self-control”. Set them up, automate the deposits, and you’ve got one less thing to worry about. They are also helpful for those big, fun purchases…it helps to know how far you have to go, and keeps your wallet in your pocket until you have the cash in-hand.
DK
Welcome to QuickenEngineering.com!
Filed Under Misc
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I’m a big fan of the Quicken financial management software made by Intuit. I’ve been using the software since 1993 to manage my personal finances, budgeting, track my investments, etc. I honestly can’t imagine anyone not using a similar software program to manage their money. After all, “you can’t manage what you don’t measure.”
Anyway, I consider myself a “power user” and am pretty familiar with most of the functions built into the software, so I thought I’d share some tips and tricks I’ve learned along the way….more posts to follow.
DK
