Personal Finance

How to Use and Choose Financial Planning Software


When you drive your car, the gauges on the dashboard let you know what’s happening with everything from your engine RPMs, to your speed, to your gas levels, and even the temperature outside. Unfortunately, although many people keep a keen eye on their car’s dashboard, they don’t have a financial dashboard to keep the same kind of eye on their finances. Cue financial planning software — it organizes your finances and lets you see exactly what’s happening so you can make wise choices about the future.

Wondering if you need financial planning software, which type to choose and how to use it once you have it? It may be easier than you think. Here’s our overview:

Who Needs Financial Planning Software?

Anyone who has a financial goal — including paying off debt, buying a home, setting themselves up for retirement or anything else — can benefit from financial planning software. Even if you use a certified financial planner or advisor, planning software can help. In most cases, experts focus on the big picture, while the right software can help with the small day-to-day decisions as well.

Theoretically, you could use a pad and a pencil or a spreadsheet to track and organize your finances, but those methods are more prone to errors, and quality software typically features dashboards or reports that let you see exactly what’s happening with your money.

What Types of Financial Planning Software Are There?

Financial planning software can be divided into two main categories: tax planning and money management. The first helps you fill out tax forms, but it also goes a step further and helps with long term tax goals, making it particularly important for anyone who owns their own business or has a lot of capital gains considerations. Money management software helps you organize your personal finances and plan for the future.

What Features Do You Need With Money Management Software?

The most important features you need with money management software are budgeting, planning and reporting tools. Budgeting tools allow you to enter how much you earn, your monthly bills and your spending habits. If your income fluctuates for any reason, you need software that can handle that, and if you plan to use your software to track your expenditures so you can analyze just how much you’re really spending at the grocery store, the coffee shop, the mall or anywhere else you frequent, your software should connect with your checking account so that each purchase is instantly recorded and ported to your software.

Planning tools help you make decisions for the future, and ideally, the software should help you forecast a number of what-if scenarios. For example, your software should be able to compute how you need to change your savings goals or how your retirement nest egg would be affected if the bonds you have default at a rate of 2 percent versus 3 percent or any other number. Reporting tools allow you to visually see what’s happening with your finances using pie charts, spreadsheets and other report formats.

However, you may also want software that includes banking tools so you can direct the software to send payments from your checking account to your utility company, mortgage holder, etc. If you are actively involved in day trading, you may also need investing tools that generate stock quotes and track your portfolio. Finally, you want a program that can export relevant details to your tax prep or planning software as needed.

What Features Do You Need With Tax Planning Software?

With tax planning software, in some cases, you may just want just basic software that can fill out your tax return. If so, you want to ensure that it has the latest information and automatic updates related to personal and business deductions as well as error checking and the ability to file your taxes online. It also needs to be able to sync with your financial planning or accounting software to make tax time a bit more streamlined and a bit less stressful.

However, in other cases, you may want more from your tax planning software. In particular, you may want tax planning tools that help you make decisions on retirement contributions, estate planning and strategic investments.

How Do You Decide Which Software to Choose?

Because of the vast range of financial planning software on the market, whether you are looking for tax planning or money management software, you are likely to find a lot of options that fit your needs. Once you have narrowed down the list, it’s time to see how the software feels.

Go to the software’s website, and watch a demo of the software in action. Alternatively, if the company offers a free trial version, download that or create an account and start exploring. At this point, you already know whether or not the software offers the tools you need, so you need to consider intangible concepts. Namely, how does the software feel to you? Does the user interface feel logical and intuitive, or frustrating and inconvenient? Experiment with a few different types of software until you find what you need.

How Do You Get Started With Financial Planning Software?

Once you’ve decided on the software you want, set aside a day or at least an afternoon to get it set up. Keep in mind that setting up the software takes longer than using it. To ensure you have all the information you need, gather together all your financial documents including paycheck stubs, other earnings statements, monthly bills, statements from your retirement accounts and such like. Additionally, also make sure that you have the username and password of any online accounts you use. For example, if you plan to sync your checking account and your money management software, you need your login details so that you can connect the two services.

If you have a long or short term financial goal, financial planning software can help you meet that goal. Whether you opt for money management or tax planning software, you gain access to tools and information that organize your finances, track your budget and generate financial advice for you. It’s time to have the same control over your finances that you have over your car.

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