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January 18, 2015

Top Tools For Managing Your Finances

By Charles Rotblut

A change in TurboTax regarding Schedule D: Capital Gains and Losses gave me the inspiration for this week’s commentary. Since I’m switching tax software programs, you might appreciate me expanding the conversation from merely TurboTax to discussing the tools I use to manage my finances. None of what I am going to say should be construed as either being the best way or the only way to do it, but rather as just a method that works for me and food for thought about how you approach your personal process.
But, first a few words about TurboTax, since many of you likely use it. I’ve used TurboTax for possibly close to 20 years, and Quicken even longer. For as long as I can recall, Schedule D was included in the Deluxe version of TurboTax’s desktop software. Not anymore. Now taxpayers have to buy the more expensive Premium version. “This will be a surprise” is how a spokesman for Intuit described the change to Matt Krantz at USA Today.
While at Wal-Mart on Sunday, I looked at TurboTax Premier. It was priced at $74.99. Then I looked at H&R Block Tax Software. The Deluxe version, which includes Schedule D, cost $34.95. I put the H&R Block software in my shopping cart. H&R Block’s website says the software will import TurboTax data from last year’s tax return, including Form W-2 and Form 1099. I haven’t tried the program yet to confirm how well (or poorly) the information carries over, but I’m willing to give it a try.
There are other alternatives. TaxAct is cheaper than both TurboTax and H&R Block, but its import capabilities seem more limited than those of H&R Block. There are also many online tax applications (including offerings from TurboTax, H&R Block and TaxAct), though I’ve always liked having my tax return stored on my hard drive at home and not out in cyberspace. I do file my federal and state taxes electronically, however.
I also use Quicken and will upgrade the program next year when I’m forced to. I use the “Starter” version, which has enough functionality for me. I use Quicken to reconcile my accounts (checking, savings, credit card, etc.) The “One Step Update” function makes it easy to download updated data for all of my accounts at once. I also use the program to track spending and create reports (e.g., how much was spent on medical expenses; fortunately, we’ve been healthy enough to not qualify for the medical expense tax deduction). I don’t use the portfolio tracker, primarily because I don’t want a constant update of the value of my investments. Not seeing it regularly keeps me from worrying about the impact of every market drop.
I try to do financial transactions online as much as possible, including paying bills. Cybersecurity is an issue, which is why I started using a password manager a few months ago. I use Dashlane, which both stores passwords and suggests new ones. The big advantages are that all of my accounts have different passwords and neither I nor my wife have to worry about trying to remember every unique password. There are several competitors to Dashlane, but I liked Dashlane's ability to work across multiple devices with a single account.
Bills are kept in a box near my desk, so they are all in one place until I get to them. I still opt for some paper statements, particularly for credit cards that are used less frequently, so I don’t overlook them.
As far as my portfolio is concerned, I run a simple report in our Stock Investor Pro program that gives me updated valuation, earnings estimate revision, price momentum and earnings growth data on a weekly basis. Those numbers are far more important to me than whether one of my holdings rose or fell over the past five trading days. I log into my brokerage accounts as little as possible to avoid seeing the account balances. I’ll look at my 403(b) plan, which is invested solely in Vanguard funds, just a handful of times throughout the year, most often at the end of April and the end of October to see if rebalancing is needed.
I do regularly track the news and earnings impacting the stocks I own, with CNN Money being my primary source. I think a spiral notebook works great for maintaining a diary of events and significant news, though I personally use a spreadsheet on Google Docs since I commute by train. It’s simply easier for me to use an online program than to attempt to balance both a laptop and notebook on my lap. I use phrases and abbreviations since I’m the only person looking at the notes. For example, when I bought Infoysys (INFY) last October, I jotted down, “26-week RSI of 88; P/E of 19.7 vs five-year high of 23.8; beats estimates; sell if valuation high or growth/momentum weakens.” That little note gave me the basic sell guidelines for the stock. As simple as it may seem, the note takes away the emotional component of the decision process. This is why my notes not only contain sell rules for each individual stock I own, but rules for managing my entire portfolio as well.
The most important parts of my process are discipline and routine. I focus on the process and not the outcome. When a good process is consistently followed, the best possible results—given prevailing business, economic and market conditions—will be realized.
Take from these what you will. There is no single right way to manage your finances or portfolio, though there are likely far more wrong ways to manage both. Also realize that the best system in the world won’t work if you can’t or won’t stick with it. Find a process that fits with your personality and lifestyle, realizing that it may be an adaptation of many other systems.

The Week Ahead
he U.S. financial markets (and our office) will be closed on Monday, January 19, in observance of Martin Luther King, Jr. Day.
More than 50 members of the S&P 500 will report earnings next week, most of them mega-cap companies. Included in this group will be Dow Jones industrial average components American Express Co. (AXP) and UnitedHealth Group (UNH) on Wednesday; Travelers Companies (TRV) and Verizon Communications (VZ) on Thursday; and General Electric Co. (GE) and McDonald's Corp. (MCD) on Friday.
The week’s first economic report will be the National Association of Home Builders’ January housing market index, released on Tuesday. Wednesday will feature December housing starts and building permits. The January PMI manufacturing index flash will be released on Thursday. Friday will feature December existing home sales.
The Treasury Department will auction $15 billion of inflation-protected securities (TIPS) on Thursday.
About The Author - Charles Rotblut, CFA is  the VP and Editor for American Association of Individual Investors (AAII).  Charles is also the author of Better Good than Lucky.  (EconMatters author archive here)
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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Item Reviewed: Top Tools For Managing Your Finances Rating: 5 Reviewed By: Econ Matters