How Financial Planning Software Works

Keep dreaming people. Maybe you can finally retire when you hit 190. See more investing pictures.
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If you ran an Internet search on "the importance of planning" in January 2010, you would have come up with about 38 million hits. And while money might not buy happiness, it sure does buy lots of other things. In fact, it's one of those components of life that's pretty important to plan for. But too many people only consider money in the short term, living a paycheck-to-paycheck lifestyle, without considering their long-term financial future.

It's all well and good to manage your bills each month, but unless you're keen on working to the grave or spending your retirement skating along the poverty line, you'll want to stretch your dollars a little further as you get on in years. Plus, unfortunate occurrences like a lost job or a house fire could put a serious crimp in your pay-as-you-go practice.


Setting aside a safety net might seem like a daunting task. After all, major monthly bill-paying sessions can drain anyone's checkbook. But spare cash is like those last couple of french fries on the plate: If you can just manage to withstand the compulsion to plop them in some ketchup en route to your mouth, you won't have so many regrets when you look at the scale later. For budgeters beginning cold turkey, look over the article How Personal Budgets Work.

Once you've freed up a few extra dollars, it's time to decide what to do with them -- and more importantly, if they'll be enough to, say, buy you a spot on the beach when you retire. Tossing your daily collection of spare change in a jar might help pay for a vacation or perhaps fund some roof repairs, but unless you carry coins around in a bucket, chances are good that jar won't put you through grad school, buy you a new car or cover your cost of living for 20 years or more. This is where serious financial planning comes in.

Of course, nothing in this world is 100 percent certain (barring our old friends death and taxes). Likewise, preparing a solid financial scheme isn't a guarantee you'll pass your whole life in tight fiscal security, but it can vastly improve your odds. On the next page, we delve into some common examples of financial planning software to see what they can do for you.


Financial Planning Software Basics

The days of piggy banks and money under the mattress may have gone, but saving for the future is as important as ever.
© 2009 Jupiterimages Corporation

There are options when it comes to financial planning. You can hire a professional financial planner to set your money straight. Or you can purchase some software and figure out matters for yourself.

Let's look at one popular DIY financial planning product to get a better idea of how these software platforms can help get the books in shape. Quicken Premier 2010, which is produced by Intuit and costs about $60, offers a wide range of services to help people get their finances worked out.


Quicken Premier allows users to simplify their online banking into a consolidated login location, grabbing pertinent information from each site so there's no time wasted entering everything by hand. The majority of all large financial institutions are accessible, including those that offer 401(k)s, IRAs and other investment options. After all the information is centralized, you can manipulate it to track your budget and categorize your transactions.

Come tax time, Quicken identifies any items that are deductible, and it also helps keep customers on top of bill paying. If you aren't the best at remembering upcoming bills, the software helps in two ways. First, it knocks your budget down to the expected post-bill level before the bills are due so you don't overspend. Second, it sends you reminders when payment deadlines are approaching so nothing slips your mind and leaves you with killer late fees.

Practical day-to-day financial services aside, Quicken Premier also has tools to help customers figure out ways to get rid of their debt load, while at the same time assisting them to construct a long-term savings and investment plan.

On the next page we'll look at a few more things personal financial software can typically do, and consider some related tools for financial planning.


Planning for the Future

Let's look more closely at a common scenario where financial planning software often comes into play. Planning for retirement is really about playing the odds: You need to save X amount of money to get through X number of years.

Assuming a man retires at age 65, if he dies just 10 years later but he's developed a portfolio to keep himself in cash for the next 20 -- well, at least he was taken care of. On the flip side, that same man might have another 30 years to live, making those last 10 a real struggle. Throw in a spouse and the future grows even more difficult to foresee.


However, if you're the kind of person who sees the glass half full, you'll want to make sure enough money is there if you need it -- whatever you need it for. Personal financial planning software can help get you prepared. In a typical product, if you input your data, the software quickly generates reports that show your current money level and estimates whether you're on track to meet your future financial goals. You can tweak the data to find out what you'll need to change in order to get where you want to be, and read tips on how to accomplish that effort.

Pretty soon, you can develop a plan that'll have you prepared for those big ticket items you expect to purchase. You can also get on track to retire the way you'd like, whether you're dreaming of a cozy mountain chalet, a beachside bungalow, a chic uptown condominium or just the old family homestead if you feel like staying put.

On the next page are some links to lots more information that will help turn neophyte spenders into savvy investors.


Lots More Information

Related HowStuffWorks Articles

  • Ararm Yardena. "Quicken 2010 Takes Cues from the Web." PC World. Oct. 29, 2009.
  • Brooks, Arthur. "Can Money Buy Happiness." The American. May/June 2008. (1/12/2010)
  • Bruckenstein, Joel. "The Best Financial-Planning Software -- An Update." Morningstar Advisor. Nov. 14, 2003. (1/12/2009)
  • Intuit Web site. (1/12/2009)
  • "Making a plan for the long haul." Consumer Reports. May 2009. (1/12/2009)
  • T. Rowe Price Web site. (1/12/2009)
  • Wang, Jim. "Quicken Premier 2010 Review." Bargaineering. Nov. 23, 2009. (1/12/2010)