Blowing Quicken a little KISS

To move forward with our personal finance plan for 2013, we'll be tracking our expenses more carefully.  Just like Johnny Five, we need input to change direction with our finances, and to start making better deals with ourselves to meet financial goals.

I've had one version of Quicken or another for years, but I've always fallen short in keeping things current.  Call it personal laziness, call it ADHD, call it whatever, but I haven't stuck with it long enough to reap any benefits from the process.  This isn't Quicken's fault.  It's my fault.

However, one thing I did have control over, and one decision that contributed to my lack of success in this area, was that I tried to track too much.  Quicken is powerful and can track things at a very granular level.  And I think that I wanted to track everything at that level, down to the penny, to satisfy some kind of dark personal finance deviancy or something.

Avoiding the account tracking chain reaction

One dirty little secret with tracking accounts is that they're interconnected.  Another dirty little secret is that deciding to track the details of an account probably triggers the creation of more accounts, each of which have their own details that need to be tracked.  This was what caused me to experience overwhelm with trying to track lots of stuff.

Trying to track all of the items on my paycheck was the biggest offender.  Since I have money deducted that goes to my retirement plan, I needed to track how each payment was allocated if I wanted all of the numbers to match up in the retirement plan account.  Also, there were deductions for my flexible spending account; those would have needed to be tracked as well.  It was just too much.

So I'm trying a different tack this year.  I'll think more about what I really need to track.  The corollary to this: I need to get comfortable with what I'm letting go untracked.

Another way to think about this is to keep things as simple as possible, but not simpler.  (Apologies to Albert Einstein.)

This is my plan …

Here are some of the trade-offs that I've already made (with discussion with my wife) in tracking expenses in Quicken:

• We're letting our credit cards do the heavy lifting with how we categorize expenses.  After an unfortunate experience with getting rid of receipts and needing them only a week later for my flexible spending account claims, I was paranoid about getting rid of receipts.  I kept them all, for years.  At the end of last year, I finally got rid of many of them.  With the exception of stores like grocery stores, wholesale clubs, and department stores, we're going to keep it simple with the categorization.  If we go to Chili's we don't need to keep the receipt to know that it's in the Dining category.  If we go to the vet, we don't need to keep the receipt to know that it's in the Pets category.  But we'll keep Walmart receipts so that we can break things down to groceries, household, and medical expenses, for example.  We cam probably get by even without keeping convenience store receipts.  If the charge is a few bucks, it's probably food.  If it's $30 to $40, it's gas.
• I'm only going to track my net pay on my paycheck.  Tracking every last deduction, withholding, and deferral on my paycheck was too much, and I'm not really sure what I would have used the information for anyway.  If I need to see that I paid more in Social Security tax this year than last year, I can look at the end-of-year statements, or my tax forms.  If I want to track allocation to my retirement accounts, I'll do it periodically on whatever schedule I choose, instead of needing to allocate each and every paycheck (which required manual lookups from the website, unfortunately).  I think I can trust my employer to get all of the numbers right.  It's a big employer.
• I'm not tracking sales tax.  A side effect of not keeping each and every receipt is that I miss out on the sales tax amount.  On my federal taxes, I have the choice of deducting state income tax or state sales tax, but not both.  By not keeping track of sales tax, I can only choose to deduct state income tax.  Since I live in a state with a whole bunch of different sales tax rates, it's not cut and dried to figure out the tax from the total bill.  But I'll forgo that option for the time to keep things simple.
• We're using as much automatic updating as we can.  I had tried to update everything manually in an effort to become more aware of where our money was going.  But that turned out to be a lot of busywork.  Using the automatic updating for as much as we can has already saved a lot of time.
• For some investment accounts I'll update only once in a while.   My retirement account can probably be updated once a month or so, if that.  (This one doesn't have the ability to be updated automatically, unfortunately.)  It's not changing that rapidly, and not by a large percentage, so I can update this as I feel the need.
• We will, however, track categories of spending in a detailed way.  The big number — the credit card payment — just wasn't enough information to be actionable, so we'll be separating out groceries, medicines, prescriptions, household items, etc.
• We will, however, track principal and interest portions for our debts.  After we build up our savings a bit, we'll be aiming to pay off the debts we have.  Seeing the debt amounts go down faithfully will be important.

That's my plan, and I'm sticking to it.  Keep it simple, stupid.

Quicken wizards:  Any more tips on working with Quicken for someone who obviously has a lot to learn?