Making Sense of Your Dollars

We all know how work can follow us home. As a finance director, making sense of my family’s finances was the last thing I wanted to do, but given my career choice, there were some obvious advantages.

Here are the tips that have stuck with me and are top of mind right now:

#1 Automate: We use software for everything. If you’re just reviewing your bank statement, or hand writing all your transactions into a ledger, consider one of the many personal finance software options available.

I use the free version of Quickbooks, which downloads onto your computer. This version will give you all the functionality you need for family finances and then some. Quickbooks is geared toward small businesses, so it won’t be as intuitive to use as some other tools available.  This system requires you to make entries for all of your banking transactions and credit card expenses. It gives you the ability to customize the tracking of your expenses by creating your own expense accounts (in addition to or in replace of the standard set of accounts). It will be a time investment if you have not been in the habit of keeping a ledger previously, but all that hard work will pay off as you obtain valuable visibility into your spending. Standard reports will allow you to easily see how much you’ve spent on what for any period of time. Have you tried to make a budget and failed? Aligning your budget line items to your expense accounts will let you easily be able to see how you’re actual expenses are tracking to your budget mid-month. Not to mention all the time you’ll save during tax season. Are you just about pulling your hair out right now digging around for receipts and pouring over bank statements to add up all your charitable donations or medical expenses? With Quickbooks, you’ll have a number to put in the box with the two clicks of your mouse.

If you’re still not sold on accounting software, may be the answer for you. A free online service from the makers of Quicken, uses your financial information available online to save you from having to enter the information yourself. After a brief registration, you search for your financial institutions for bank accounts, mortgages, credit cards, auto loans, etc, enter your log in credentials for their websites and interfaces with those sites to obtain all your transaction and balance information. It allows you to categorize your expenses and will even create a budget that you can track against. I especially liked the alerts it presented with ideas on ways to save money. The reporting doesn’t seem to be as customizable as it is in Quickbooks, but if you’re looking for results with a minimal level of effort, this is definitely something to try.

#2 Take advantage of tax-free savings programs: Most of us have 401(k) or IRA accounts established, but have you looked into your state’s 529 college savings plan? Like a 401(k), 529 plans let your investments grow tax-free and withdrawals for qualified higher education expenses are also tax-free. Not only that, contributions are tax-deductible (up to a certain amount which varies by state). The Oregon College Savings Plan can be started with as little as $25. Plans among the states vary and you are not limited to using the plan in your resident state, however certain benefits like tax-deductible contributions will only be available in your state. We are not big savers in my family, but I have been diligent about keeping every birthday and holiday check written to my sons in a savings account in their names. I’ve been waiting for the market to bounce back before investing the money, but I can’t procrastinate about it any longer! I still have until April 15th to make my contribution and have it count towards my 2010 taxes. Disclaimer: You should read the plan’s disclosure booklet so you are aware of the risks and limitations of any plan before enrolling.

#3 Interest rates make a difference: If you have owned your home for at least a few years, now is the time to consider refinancing your home. Interest rates are down and there is a high likelihood that refinancing to the current rates could make a difference. There are a lot of options out there and it is a good idea to shop around, but a good place to start is at your bank. This is something that is definitely on my to-do list to look into.

#4 Refine your estimates: If you have a huge refund on your 2010 federal taxes or had to write a fat check to the IRS this year, it’s time to consider completing a new W-4(s). Completing a W-4 form accurately can be confusing, as there a couple of side calculations that may need to be done depending on how many wage earners are in your home and other factors. The basic idea is this: the higher the number of allowances you claim, the less money will be withheld from your paycheck for federal taxes.  So if you got a big refund, your number of allowances should probably increase.

I use Turbotax to complete my taxes and in the Other Forms section there is the option to complete a new W-4. Turbotax will ask you a series of specific questions to determine your number of allowances and it was a lot easier to complete that the calculations on the actual form. I would recommend completing your W-4 in Turbotax if you already have it. Taxes are not an exact science, so there is no calculation that will guarantee you won’t have to pay/receive a refund for the year.

If you or your spouse is newly self-employed or performing contract work where taxes are not being withheld, you should be paying estimated taxes on a quarterly basis. The calculations for this form are easier to complete and involve estimating the total wages you will earn for the year. Paying taxes quarterly before the end of the year will help you avoid penalties and interest.

This is what’s been on my mind as I finish my taxes and look toward the year ahead. Hopefully it has sparked or renewed your interest in taking control of your personal finances.

Good luck!

p.s. April is Financial Literacy month. You can celebrate by checking out the website 360 degrees of Financial Literacy for more information and resources.


Nicki Stewart is a wife, full-time wage earner, and mother of two boys, Oliver (almost 4) and Finn (2 ½). In her (very) spare time she enjoys dancing, cooking, socializing with her local mom’s group, reading blogs about food, and going wine tasting with her husband.


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