Your Money, Part 2

by Al Levit

GLENDALE, CA (Sept. 9, 1998) -- Yesterday, in Part 1, I described how Microsoft Money 99 can help us manage our finances on a day-to-day basis. I wrote about what I consider to be the day-to-day aspects of Money, which are setting up accounts and then making sure that the program keeps track of all your financial activity.

As I noted yesterday, for those of us that have been using Money and Quicken for quite a while this day-to-day maintenance has been quite a chore, although I have found it well worthwhile (along, apparently, with millions of other Quicken and Money users). Fortunately, recent upgrades to the programs have made the input easier, and now many of us can "download" most or all of our transactions, eliminating 80% - 90% of the drudgery involved in using these programs.

Today, I want to discuss more of the benefits that Money 99 has to offer. I will begin with the Planner module, which is set up to allow the user to make sure that her personal finances work. It is divided into three different components. The first component is the Budget Planner, and it allows you to set up a yearly budget.

Money takes a very Foolish approach to budgeting. You first tell the program how much you earn, and then you allocate this income in the following priority:

* First to debt payments
* Next to long-term savings
* Finally to expenses

The idea, of course, is that to the extent the budget doesn't work the expenses will be reduced and the long-term savings will be left untouched. Naturally, since this is a Microsoft product, there are fancy videos included on the CD that explain the budgeting approach as well as describing how to use the wizards in the program to come up with your own budget. One of the nicer wizards available is the AutoBudget expense wizard that will allow you to start with assumed monthly expenses equal to the average actual monthly expenses found in the Money 99 database.

Of course, if these historical expenses don't quite work out (they never quite make it for me!) then you have the flexibility to make any and all adjustments you may wish to by category. In most cases, it won't take very long before a budget comes out that is reasonable and allows for a desired amount of long-term savings. On the other hand, if it does take a while to reach this goal, then a financial problem has been identified and you on are your way towards solving it!

Naturally, drawing up a budget is only half the battle, and the easy half at that. The real test is sticking to the budget, and Money 99 has a remarkable report that is automatically generated each month to help with that. This "monthly report" includes a variety of data, and one of the items is a detail, by category, of how you did against your budget in the previous month. If your budget isn't realistic, you should find out sooner rather than later as you review a few months of these reports.

Once you've got the Budget Planner completed, you can set up my favorite part of Money 99, which is the Lifetime Planner. This is the Planner module that will tell you whether you are saving enough money to put your children through college and retire in comfort. It will map out your finances for your entire lifetime and let you know whether there will be money at the end.

Most people have no idea how much money they'll need to have a comfortable and Foolish retirement. In fact, these days many of us are afraid to ask. However, in this area of cyberspace we Fools want to know, and Money 99 gives me a better idea than any other source that I'm aware of. This is also one area where Microsoft has made significant improvements over the Money 98 module, which itself was pretty good. It is now very easy to adjust for long-term changes in income and expenses, such as the reduction in income, taxes, and child-care expenses when one spouse stops working. In addition, detail freaks can see a complete year-by-year cash flow analysis for the current year until the end of life. Personally, I find this valuable because it gives me far greater confidence in the results that are summarized on the screen.

Naturally, the Lifetime Planner goes hand in hand with Cash-King investing, since we are decades-long investors. The Planner also lets you make your own assumptions about annual return, and I've put in 15% for pre-retirement and 12% for post-retirement for my Cash-King accounts. Money 99 has warned me that 15% is so aggressive that "it may be difficult to achieve without incurring a significant risk of losing some of my principal." To a certain degree, I suppose that warning is correct, since I bought some Schering-Plough (NYSE: SGP) on the same day that Tom bought it for the C-K portfolio. I am currently down about 4% on SGP, and I may lose quite a bit more over the short term.

On the other hand, I will be very surprised if my investment in SGP is worth less than I paid for it 10 years from now. I don't know if SGP will earn 15% annually over then next 10 years, but I'm pretty sure that I'll be comfortable with my investment, that I'll sleep well at night, and that I'll be able check up with it on a quarterly basis just to be sure that things haven't gone drastically awry. That's what C-K investing is all about.

The bottom line for me, though, is that I can use the financial planning modules in Money 99 to predict whether I really am saving enough money to realistically meet all my goals. In addition, if I have debts to pay, Money 99 has a Debt Planner that will help me to pay them. There is also an investment side to Money that space prevents me from describing. Suffice it to say that my financial affairs are in pretty good shape, and they would be in quite a mess if it weren't for Money 99 and it's predecessors.

That's it for today. Tomorrow, I'm going to switch topics and talk about my dumbest investment of 1998. For more Foolish reading tonight, consider TMF Runkle's Post of the Day about the many things that you'll need to get a mortgage to buy a house.


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09/09/98 Close

Stock  Change    Bid 
 AXP   -3 5/16  76.69 
 CHV   +  1/4   80.25 
 CSCO  -3 13/16 90.81 
 KO    -  7/8   62.63 
 GPS   -2 7/16  58.50 
 EK    +  3/8   81.63 
 XON   +1 3/8   68.75 
 GM    -1 3/16  57.56 
 INTC  -  21/32 81.25 
 MSFT  +  9/32  102.25 
 PFE   -2 1/2   98.19 
 SGP   -1 5/8   94.25 
 TROW  -  7/8   28.00 
              Day      Month       Year       History 
 C-K         (1.70%)    5.27%      3.74%       3.74%  
 S&P 500     (1.69%)    5.08%      0.02%       0.02%  
 Nasdaq      (2.19%)    8.36%     (2.51%)     (2.51%) 
 Cash-King Stocks 
     Rec'd    #  Security     In At       Now    Change 
     2/3/98   24 Microsoft     78.27    102.25    30.64% 
     2/3/98   22 Pfizer        82.30     98.19    19.31% 
     5/1/98   37 Gap Inc.      51.09     58.50    14.50% 
    6/23/98   23 Cisco Syst    86.35     90.81     5.17% 
    8/21/98   22 Schering P    95.99     94.25    -1.81% 
    2/13/98   22 Intel         84.67     81.25    -4.04% 
    2/27/98   27 Coca-Cola     69.11     62.63    -9.38% 
     2/6/98   56 T. Rowe Pr    33.67     28.00   -16.85% 
    5/26/98   18 AmExpress    104.07     76.69   -26.31% 
 Foolish Four Stocks 
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Eastman Ko    63.15     81.63    29.26% 
    3/12/98   20 Exxon         64.34     68.75     6.86% 
    3/12/98   15 Chevron       83.34     80.25    -3.71% 
    3/12/98   17 General Mo    72.41     57.56   -20.50% 
 Cash-King Stocks 
     Rec'd    #  Security     In At     Value    Change 
     2/3/98   24 Microsoft   1878.45   2454.00   $575.55 
     2/3/98   22 Pfizer      1810.58   2160.13   $349.55 
     5/1/98   37 Gap Inc.    1890.33   2164.50   $274.17 
    6/23/98   23 Cisco Syst  1985.95   2088.69   $102.74 
    8/21/98   22 Schering P   2111.7   2073.50   -$38.20 
    2/13/98   22 Intel       1862.83   1787.50   -$75.33 
    2/27/98   27 Coca-Cola   1865.89   1690.88  -$175.02 
     2/6/98   56 T. Rowe Pr  1885.70   1568.00  -$317.70 
    5/26/98   18 AmExpress   1873.20   1380.38  -$492.83 
 Foolish Four Stocks 
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Eastman Ko  1262.95   1632.50   $369.55 
    3/12/98   20 Exxon       1286.70   1375.00    $88.30 
    3/12/98   15 Chevron     1250.14   1203.75   -$46.39 
    3/12/98   17 General Mo  1230.89    978.56  -$252.33 
                               CASH     $48.07 
                              TOTAL  $22605.45 
 *Please note: On 8/4/98 $2,000 cash was added to the
portfolio for future investment. This will be reflected
in the numbers as soon as possible.

*The year for the S&P and Nasdaq will be as of 02/03/98