Coffee heat rising

KISSing the Bookkeeping

Recently Money Beagle put up a post ruminating about whether his bookkeeping system, which entails subtracting earmarked funds against net worth, is maybe a shade on the overcomplicated side. I’ve been thinking the same thing about my own baroque shekel-counting schemes: this stuff is getting out of hand! As one of MB’s readers remarked, it may be time to apply the KISS principal: Keep It Simple, Stupid.

Bank accounts grow like topsy around this place. Right now I have four personal bank accounts, a joint checking account with M’hijito, a business checking account, and a PayPal account for the business. To keep track of credit-card charges, I use yet another spreadsheet. Then there are the spreadsheets for the budget: one for monthly nondiscretionary expenses and one for discretionary spending. Taken together, these little fellows have spawned eight spreadsheets for me to keep up-to-date.

These were relatively easy to handle in Quicken, because Quicken links accounts so that when you make a transfer from one to another it will automatically register the transaction in both accounts, and because it’s very easy to reconcile an account in Quicken. But now that I’m keeping my books in Excel, reconciliation is an old-fashioned headache, and transfers require me to manually debit one account and credit the other. It doesn’t sound like much extra work, but when you have to do it, you find it’s easy to lose track of stuff. One already has enough pains in the tuchus in one’s life without having to deal with some more.

How to decomplicate this?


In the first place, at the time I was laid off, I had a $14,000 emergency fund, which I stashed in my checking account and used as a “cushion,” ensuring I would never overdraw the account and eliminating the need to keep track of it someplace else. Since the market had crashed with a resounding thud, I really didn’t want to invest this money, because I was afraid of losing even more than the $180,000 that had already gone down the toilet.

After a difficult year of trying to live without pulling down anything from the remnants of my life savings, the market has pretty well recovered and savings are nearing their former state of normalcy.

So, in the fall I let my financial manager know I could not continue to live on less income than my base expenses and I would have to start taking a drawdown from investments. He suggested that instead of incurring a taxable event each month, I should use the after-tax money in the emergency fund, since in reality there’s plenty of money in taxable savings to cover emergencies. So I’ve been using about $1,100 a month of that 14 grand to supplement Social Security, providing enough to pay the bills before the unpredictable and unreliable pay from adjunct teaching comes in. To manage this, I opened a tiered money-market checking account to hold the amount remaining from the original 14 grand; from that I disburse the $1,100 to regular checking once a month. I figure this fund will be exhausted by September.

Adjunct teaching pay has to go to cover the mortgage on the downtown house. My initial plan was to transfer only enough to cover my share of each month’s payment to M’hijito’s and my joint checking account, which exists to hold cash for the mortgage. To keep from diddling it away on daily expenses, I started stashing teaching income in the money market account. Obviously, though, to keep track of those two items—the fund I was now depleting for living expenses and the money for the mortgage—and ensure I didn’t accidentally spend some of one fund on the other purpose, I needed another spreadsheet, one that would keep track of the mortgage payment fund. Now we’re up to nine spreadsheets. Make that ten: there’s one tracking investments, too.

Then something over $11,000 came in from the insurance company to cover hail damage. This money had to be carefully sequestered, because if I diddled it away there wouldn’t be enough to pay the swarms of workmen. Reluctant to open yet another account, I stashed it in the money market account, along with the mortgage fund and the dwindling cost-of-living fund. This added to the potential for confusion exponentially, requiring yet another spreadsheet.

Meanwhile, the bank account holding the self-escrows for annual tax and insurance payments (I have to set aside $325 a month to cover property tax, car insurance, and homeowner’s insurance) also held the summer stipend I got for developing the online course last year. The summer money would, I hope, carry me through what I expected would be four months in 2010 with less income than outgo (it devolved into five months, but that’s another story). There’s now just enough summer money left (if my arithmetic is right) to cover half the cost of the new pair of prescription glasses.

Okay. That’s the “system” as it stands. Is there a way to decomplicate this system?

Now that we have a permanent loan modification, it’s clear that the amount I’m earning during the academic year will more than cover a full year’s mortgage payments. The departmental chair has assigned me two sections to teach next summer, the proceeds of which will be gravy.

So, New Plan #1: transfer 100% of September-May teaching income to the joint account as it comes in. Let M’hijito figure out how to allocate it, with his share, to cover the mortgage. Use the summer pay (June-August) to cover the extraordinarily high costs of living in Arizona during a 115-degree summer, and, for a change, actually run the air-conditioning when typing on a keyboard will raise a sweat.

New Plan #2: At the end of each month, transfer any money left from that month’s income into the savings account for discretionary spending.

These two strategies will hugely plump up monthly savings, which is used for things like clothing, car maintenance and repair, and house repairs. In the winter, there’s often $100 or so left; in the summer, a fair amount should remain from the teaching income—possibly enough to add up to around $3,000, plenty to buy clothes, keep the aged car running, and cover small emergencies.

Decomplicating benefits: Moving all academic-year teaching income directly into joint checking eliminates the need to keep track of how much of the money-market account’s balance should be held aside for the mortgage. That takes one moving target off the field. Transferring whatever remains in checking at the end of each month allows me to see, at a glance, what’s in savings to cover unplanned expenses.

Once the glasses are paid for, all that will remain in the Tax & Insurance account will be dedicated fully to paying tax and insurance. This will decomplicate another spreadsheet; here, too, the bottom line will show how much is available to cover those exorbitant costs.

And once the bills for the roof, the new air conditioner, and the exterior painting are paid, all that will remain in the money market account is the balance of the survival savings. When that’s depleted, the money market account can be closed. w00t! A whole spreadsheet gone!

By the end of the summer, here’s how I expect this to look:

Still complicated, but at least it shouldn’t take 10 spreadsheets to keep track of it.

Speaking of those spreadsheets, why do I need ten of the damn things? Right now I have two workbooks, one tracking cash flow (in all those bank accounts!) and credit-card charges and one tracking the budget, along with various schemes, projections, and retrospective summaries. Why am I doing this?

I think I’ll collapse these into a single workbook, leaving all the fevered calculations in a separate file. This will allow at least allow me to move back and forth between cash flow and the budget, rather than keeping two files open in Excel to enter routine transactions. This will reduce the number of pages where I regularly enter numbers from sixteen to five. That is, from these (some of which have been defunct for over a year!)…

to this:

And that, I suppose, is as close to minimalist as I’m gunna get.

Excel vs. Quicken

So…how’s the bookkeeping working, after a year of using Excel instead of Quicken for Mac?

Last January I switched to Excel for tracking my bank accounts, budget, and credit card charges. After years as a Quicken customer, I’d really lost patience: data vanished in the transfer from Windows to Mac, Quicken for Mac was clunky, and I’d long ago had it with having to upgrade to a pricey  new version every time I turned around. It appears I’m not alone in those sentiments.

Excel has its advantages and its disadvantages vis à vis Quicken. Biggest negative: it can’t talk to your bank or your investment house. Quicken lets you upload and download transactions and data from those august institutions. Nor does Excel care to converse with TurboTax, Intuit’s tax preparation software. Excel talks to you and only to you (or so we hope).

If you want to integrate your bookkeeping with your banking and investing, however, there are alternatives, some of them out there in the Cloud. Programs such as (which, alas, was purchased by Intuit), Buxfer, MoneyStrands, Pear Budget, or Thrive sometimes do that sort of thing, and of course Mint will now interact with TurboTax. Not having tried one of these programs, I hesitate to state that any are better, worse, or the same as Quicken. But there they are: something to try if your patience with Intuit wears thin.

Excel has one helluva learning curve, especially for those of us with English-major math skills. After a year of working with it, I’d say my skills are no better than they were at the outset. A year of manipulating Quicken left me with a black belt in Advanced Quickening. However, a rudimentary understanding of Excel’s functions allowed me to build checking and savings accounts and to massage the data into something that I think will be intelligible for my tax accountant.

It’s useful to know that Microsoft now offers a variety of home and office financial  management templates, designed to work with Excel. But it’s pretty easy to build your own.

To build the new Excel workbook, I tried to ape the accounts and functions of Quicken. This entailed creating spreadsheets for each bank account, laid out in identical patterns, plus another spreadsheet for credit-card charges. The latter allowed me to reset the balance each month to the amount budgeted for discretionary spending (which is all that goes on my credit cards), so that the bottom line showed how much was left in any given month’s allowance.

Typical headers for bank account
Tracking credit-card spending against an $800 budget

Come the first of this year, I created what I hope is an intelligible spreadsheet for the accountant by merging data from the credit-card spreadsheet with the bank-account spreadsheet entries and then sorting all the data by category. This made it possible to summarize tax-related data while also making all the year’s transactions, organized by budget category, easily visible and transparent to her.

A number of revelations ensued as I tried to organize this material for the tax accountant. One is that it makes sense to number tax-related categories (1, 2, 3…), so a “sort” command will bring them up at the top of the “sorted” spreadsheet. For example,

1 Medical
2 Mortgage interest
3 Trade group dues

…And the like. When “sorting” data, Excel wants to put numbered items before alphabetical items; so, if you preface each tax-related category with a numeral, the “sort” function will gather all the tax-relevant categories together.

Yeah, I know there’s something called a “pivot report,” and yes, I do suspect it could solve all my problems. However, only a Druid could comprehend the instructions in Excel’s Help file. I gave up after several efforts at trying to call upon those spirits.

In addition to its impenetrability, Excel has the annoying quirk that the (very simple!) formula you enter to create a running balance sometimes comes unstuck for no discernible reason, giving you an incorrect balance. Occasionally I haven’t discovered this until I’ve tried to reconcile my books with the bank’s. Figuring out the problem can be really difficult, because it often results not from incorrect data entry but from some mysterious disjunct between what you’ve asked the program to do and what it decides, midway through the process, to suddenly start doing. When gut instinct tells you something like this is happening, the solution is to go up to a row where the formula is visibly working and then drag the “balance” cell’s qualities all the way down the column. This corrects the error, wherever the heck it started.

We know the irritants presented by Quicken. It’s bloatware. It’s vaporware. The Mac version is clunkware whose files can neither be read by the PC version nor converted to a readable version. Your accountant, you can be sure, uses the PC version. And worst of all, its maker Intuit forces you to buy new, ever-more-bloated versions every time you take a deep breath. IMHO, these are very, very large irritants.

So, of course, is the difficulty of learning and manipulating Excel.

For me, just now it’s a toss-up. For a brief, not-so-shining moment last month, I considered running out and buying the latest version of Quicken to restart my books in 2011. But, on reflection, possibly not. Quicken’s biggest advantage over Excel is its ability to commune with your financial institutions. I’ve never felt moved to use that feature; my financial manager does the buying and selling of shares, and it’s pretty easy to access the credit union, the IRA, and the brokerage accounts online. Comparing and reconciling them is very simple, and I don’t need a piece of intermediary software to perform the desired transactions.

So. To the extent that one can be said to any software, I suppose I Excel.

What program do you prefer for bookkeeping, and why?