The Practical Power of Money
Installation of Quicken Financial
Program
Note re: possible prior versions of Quicken on your computer:
It may be that Quicken is already installed on your computer. When you start the installation process outlined below, you will be alerted if such is the case. If you see this message, return to the Start menu, click on the Control Panel, and Select “Add or Remove Programs”. Find the older version of Quicken on the list and instruct your computer to remove this Program. Don’t worry – old data files won’t be lost- you are just updating Quicken. Now continue with the following instructions.)
Insert the Quicken Program CD into your drive. Click Install Quicken . Quicken will tell you to select Next to install the program. Click Next . Read the License Agreement and Click Yes . Choose the Express installation (this option should be pre-selected). Click Install Now . The program will install itself within a few minutes. Quicken will tell you that the program has been successfully installed. It will say that you have to restart your computer before you can use Quicken. Choose “Yes, I want to restart my computer now” (this option should be pre-selected). Click Finish.
Your computer will restart itself within a few minutes. Do nothing until you see the icons appear on your screen. Once the program has completely restarted, double click on the Quicken 2004 icon.
Quicken will welcome you. Select “I am new to Quicken” (this option should be pre-selected) and Click Next . The next option will again be pre-selected “I will use the default name and location”. Notice that your file name is QDATA. Click Next . The Quicken program will now appear on your screen.
Set-up
of Personal Information
Important
Note:
The
information listed below for the “Fall Family” is simply illustrative. Insert your own data where actual inputs are
made into Quicken for the Falls.
Click 2. About You in the top left corner. This is where you input personal information. Simply answer the questions with the your own actual information:
Congratulations! You have just completed the About You section of the input process. Now it is time to Set Your Goals.
Click Next Step in bottom right corner.
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Now it is time to Set Your Goals.
Click inside each box to indicate that you want Quicken to help you:
Manage my checkbook and bills.
Know where my money is going.
Save more money.
Track all of my investments in one place.
Get out of debt.
Make tax preparation easier.
Retire when I want.
Know my net worth.
Click Next Step in bottom right corner.
You should find yourself in Quicken Guided Setup. Go to Quicken Home and select “Setup” from
the top menu bar.
Now Select “Add Accounts”.
Let’s start with your checking account. From this point forward, the steps you take will assume you have
Internet access and download capabilities from your checking account financial
institution and credit card vendor. Remember how Quicken gave us the option of
online or manual data entry when we set up the Fall’s checking, savings, and
investment accounts? In setting up your
accounts, select ‘online’ and follow the instructions to obtain your PIN and
password for each account. The sooner
you obtain this information, the easier it will be to proceed.
If you do not have Internet access, input 30 days worth of checking and
credit card information manually to set-up these accounts.
Step 1: Checking
Account
1. Select Cash Flow under Add Accounts. Select Add Account beside Checking. Select the financial institution where your
actual checking account is deposited.
If your bank’s name is not listed, don’t select one from the list –
simply call your bank and ask if they can help setup your account so it
downloads into Quicken Deluxe 2004. If
their answer is “no” you will have to use the “manual” method for entering your
financial transactions.
2. Name the account.
“Checking” is fine to name the account.
However, if you have more than one checking account, you will want to
distinguish the names. In the next
screen, select Online in order to set-up your checking account for
online downloads. If you already have
that information, enter it here. If you
do not have a Customer ID or PIN, call the number provided by your financial
institution and obtain this information now.
3. Input your Customer ID and PIN. You may also be asked to enter your account
number and routing transit number. The
routing transit number is located on the bottom left-hand portion of your
checks and is 9 digits long. If you are
asked “Do you want to activate transaction download and online payment?” say
Yes.
Once you connect to
your bank’s site, you will most likely see directions for downloading your
bank’s information into Quicken on the left-hand side of the page. Follow these instructions.
As you prepare for
download the bank may ask you if you want to open the file or ‘save it to a
file’, choose ‘save it to a file’ and place the file on your desktop, with a
name you can easily locate.
4. Select Next to download the 30 – 90 days
transactions. If your bank gives you a
date range – try
and download all your transactions for the current calendar year unless you are
completing this process in January or February. In the latter instance, choose the last 90 day period. Quicken
will then download the transactions automatically.
Note:
You may be required
to “Exit Setup” for Quicken to complete the download. If you don’t see a screen that indicates your download is
complete and gives displays a button “Go to Register”, return to Quicken Home
and click on the account you tried to download on the left-hand side of the
page. Once inside the register, you
should see your downloaded transactions.
Depending on your bank, the transactions may already be in the main part
of your register, or they may be at the bottom, waiting for you to accept them
into your register.
All transactions
set up as scheduled transactions (that Quicken automatically inserts into your
register) will appear in your register automatically. Quicken will also downloaded these transactions into the register
during the download process and mark them as “match” in the downloaded
transaction section at the bottom of your register page. In order to avoid duplication in the
register, be sure to delete these matched downloaded transactions (click on the
“Edit” key and then “Delete”) and accept the scheduled transaction. To avoid confusing the bank reconciliation
process you must highlight the scheduled transaction in the register and click
on the clr column box. Quicken
will ask if you want to match it to your bank statement. Select No and click Enter. You want to reconcile the scheduled
transaction, because it will have any splits and category information already
input into the register.
5. Usually at this point Quicken will prompt you about
setting up the Password Vault. Follow the
instructions to enter you Personal Identification Number (PIN) and Password
into the vault. (These numbers should
be the same that you would enter if you were to access your account information
from your bank’s Website.) Then assign a password for access to the Vault and
store it in a secure place. Don’t tell
anyone this password as it gives them the ability to withdraw monies from your
account!
If you already have
a PIN and Password for other checking or credit card accounts, enter them in
the vault now – otherwise you can add this information later.
6. Now assign each of the transactions that have been
downloaded to a category, by clicking on the drop down menu in that section of
the register. After you’ve assigned the
transaction to the proper category, remember to hit ‘enter’ and hear the
familiar ‘ca-ching’ sound, verifying your input has been properly recorded.
Remember, some
checks actually affect an asset (what you own) or a liability (what you
owe). In these cases, you will need to
scroll down to the bottom of the drop down list when you choose a category and
click on the proper asset or liability account.
Following are some
examples of this:
Payment on a credit
card bill Select
name of Credit Card liability
Payment on a
vehicle loan Select
name of vehicle loan account
Investment or
savings transfer Select name of that investment or savings account.
Loan money to a
friend
Set up a new asset
account by going
to “tools”, “account list”, add account
from Quicken Home.
Then return to
your register and select this account.
Don’t despair –
learning to use Quicken correctly will pay off – your reports will actually be
accurate and meaningful and help you live the life you really want - please don’t take shortcuts!
7. Exit the set-up.
8. Select the Checking account from the Cash Flow area
of the Quicken Home page. Now click Reconcile
under the Register tab. Quicken
will ask you if you want to reconcile to the paper statement or the Online
Balance. Select Online Balance
and click OK. Next you will see
the downloaded transactions at the bottom of the screen. Here you can Mark All or highlight
each one to select individually. All
the items should have a green check mark by them and you should see a $0
difference at the bottom of the report.
If your statement doesn’t reconcile, compare what you see on the screen
with your latest bank statement and your manual check register. Enter any items that may comprise the
“Difference” number and help bring it to 0. If that doesn’t work, simply allow
Quicken to enter an adjustment to your register and categorize it as
“Miscellaneous Expense”. Select Finished.
9. Print a reconciliation report.
10. Organizing your paperwork.
Use the three TEN
WEEKS Binders outlined in your Seminar Notebook (Session 4).
Step 2: Credit Card
Account
Note: Debit cards (even if VISA
or MC) usually won’t work as downloads with Quicken.
1. The Credit Card set-up is very similar to the
Checking Account set-up. From the Quicken
Home page, click on Cash Flow Center.
Under Credit Card Accounts, select Add Account. Go through the same procedures to set-up
your credit card as an online checking account.
2. Make sure that all of the downloaded transactions are
assigned to their proper categories. To
do this, simply select a category that best fits this transaction from the drop
down menu in the ‘category’ field of the register input. Remember to hit ‘enter’ and hear the
familiar ‘ca-ching’ sound, verifying your input has been properly recorded.
3. Reconcile the credit card account in the same manner
as the checking account reconciliation.
4. Print a reconciliation report.
5. File the reconciliation report in the proper month
divider of your Authentic Money Guide Binder, once you get the notebook setup.
Step 3: PIN Vault
Note: You may have already
completed this step as part of your checking account downloads. If so, simply verify that all of your
password information is entered into the vault and then go to Step 4.
It is a good idea to establish a PIN for the PIN Vault. Doing this allows you to consolidate
security codes into one safe place, access all on-line download accounts with
one password, and easily change your vault password. Reminder: Don’t share
your Vault password with anyone!
1. Select On-Line from the top of the Quicken
Home page. Select PIN Vault from
the drop down box. Select Set-up
and create your PIN number.
Now when you
perform downloads, Quicken will only ask for your PIN Vault password to access
all your accounts.
Step 4: Capturing Cash
We all know how hard it is to account for the cash we spend. In order to gain a real picture of what is
happening in our financial lives, we have to “Capture the Evaporated
Cash”! See Helpful Hint 2-31 for the
procedures to accomplish this.
From Quicken Home, select “Setup”
Click on “Cash Flow”
In the “Cash” line, click on “Add Account”
Name your Cash Account
Enter the Current Date and how much cash you have in your wallet or
purse.
Follow the procedures in Helpful Hint 2-31.
Always write a check to Cash and categorize that as a transfer to the
Cash Account you just established.
Make a note of the cash you spend and every day or so, record those
items as “Spend” or “Receive” in your Cash Register. Remember, you can enter several different expenses on one line
simply by clicking on the “Split” button in the category input field.
For example, if on June 5th you spent $5 for lunch and $7
for a movie you would select “Dining” from the drop down menu on the first line
of the Split transaction screen and then enter $5 in the amount line. Then you would click on “Entertainment” for
the second line and enter the $7 in the amount field. Quicken will then prompt you as to whether you “spent” or “received”
this cash. In this case you would
select “spent” and select OK.
The running balance in your Cash account should always equal the money
you have in your wallet or purse.
Follow the above steps to setup your Cash Account and enter your
current cash balance.
Write out the procedures you plan to follow to keep
track of the cash you spend so you can enter it into Quicken every day or so.
Step 5: Automatic
Budget
1. Now it’s time to create your own budget. From the Quicken Home page, click Cash
Flow in the top bar. Select Budget
from the drop down box. Click the Setup
tab. We want to create an automatic
budget, based upon your current expenses, so select Automatic and click
the Create Budget box. Give your
budget a name and enter the dates for whatever period of time you have
historical information entered. If, for
example, you haven’t been able to download your checking and credit card
transactions and you manually entered the last 30 days transactions, type in
the date range for that entry. On the
other hand, if you downloaded 90 days worth of transactions and properly
categorized those items, enter the 90-day date range. Quicken will extrapolate your monthly expenses to annual
amounts. Select the budget method as
Average amounts - monthly. Click
OK. Quicken will automatically
create your budget. Select OK.
Quicken will
automatically open the Income tab. Take
a look at Income, Expenses, and Savings budgets by clicking each tab. You will notice that Quicken uses your
actual data as the monthly average. Now
click the Summary tab. Here Quicken
extends the monthly averages into annual figures.
2. Print your monthly
budget by selecting the Reports button at the top right of the screen in
the Summary tab. Select Budget
Report. Select Date range as Last
month. Select Column as None.
Now select the Print
button at the top left of the screen.
Save this report in the Cash Flow Center. Title this budget – AS IS Budget. Now close this screen and return to Quicken
Home.
3. Now it is time to make
a change to your budget. Open the
budget you just created. Go to the Quicken
Home page, click Cash Flow in the top bar. Select Budget from the drop down box. Click the Setup tab. (If you don’t
see the Setup tab, select “Options” and “Separate View” from the main budget
screen. Now select your budget from “Setup” and open it.
Make a change to an
expense item by highlighting the expense.
To the right, select Average amount as the Method. Under Budget insert the new figure as
monthly and select the Apply button.
Now select the Print
button at the top left of the screen.
Save this report in the Cash Flow Center. Title this budget – AS IS Budget 2. Now
close this screen and return to Quicken Home.
Step 6: Reports
1. Create a Cash Flow report. Go to Reports at the top bar of the Quicken Home page. Select Reports and Graphs from the
drop down box. Click on the topic, “How
am I spending my money?” Select the Report
titled Cash Flow and click the Show Report button at the bottom
of the screen. For the Date Range
select “Last 30 Days” and for the Column select “Don’t subtotal”.
Transaction Types:
“All”.
2. Print this report by selecting Print in the
top left of the screen.
3. Name it AS IS Cash Flow 1.Close this screen and save
the report.
4. Create a Net Worth report. Go to Reports at the top bar of the Quicken Home page. Select Reports and Graphs from the
drop down box. Click on the topic,
“What do I own and owe?” Select the Report
titled Net Worth and click the Show Report button at the bottom
of the screen. For the Date Range
select “Earliest to date” and for the Interval select “None”.
5. Print this report by selecting Print in the
top left of the screen.
6. Name the report, AS IS Net Worth 1. Close this screen and save the report.
Step 7: “What If”
Analysis
1. Now enter information in the “Planning” Section of
Quicken that will allow you to create your own “What If” analysis. From Quicken Home, select “Planning”, then
“What-if Scenarios”.
2. Answer the on-screen questions and enter as much
personal information as is applicable to your current situation.
3. When you are finished with your initial input, print
out the “Plan Results” graph, as well as the “Plan Summary Report” for the 1st
two years of your plan. Do this by
double clicking on the 1st two bar graph lines of the Plan Results
Graph. Label these reports “Scenario #
1”. Finally, select “Planning
Assumptions” and print out your Scenario #1 Assumptions.
4. Run a new “What If Analysis” by selecting “What If
Event Scenarios” from the “Planning” section of Quicken Home.
Use a sample scenario
as presented in the Seminar for Greg and Ginger Grounded.
5. Run the “What If” scenario.
6. Print and label and file the results as outlined in
the Seminar.
7. Make sure you label the reports as you learned to do
in the Seminar. Enter each scenario in your
Week 3 Appendix A Scenario summary log as well. Organize these reports in the same manner you were instructed in
the “Organizing Your Paperwork” section on page 4.
You have accomplished a
great deal so far and are using Quicken to give money your attention rather
than your energy. Please scan the
following material to see if the samples provided will assist you in entering
other financial information into Quicken that you have yet to complete.
Don’t feel like you need to
re-do what you have already done if instructions are provided below for an
action already completed. The following
sample case is provided as a supplement to the Quick-Start guidance provided
above.
The following Guidelines
illustrate how to setup other aspects of your finances in Quicken as well as
better understand features you’ve already encountered. Utilize the sections below that apply to
your situation. Once again, enter your
own financial information where the “Fall Family” input is mentioned.
I. Checkbook and Savings Registers
If you made a mistake in the amount or date entry, you can correct it here. Let’s practice correcting an error.
Click on the “Exit Setup” box at the bottom left of the screen. Quicken will take you to the Quicken Home page. At the left of the screen, you will see the Cash Flow Center.
Click on the name Joint Checking under the Cash Flow Center and Quicken will take you to the Joint Checking account bank register. Look at the top green bar. This indicates the account that is highlighted. In this case it should say “Joint Checking”. Simply Click on the date. The date is now highlighted. You may see “May 25, 2004.” Input the correct date of May 31, 2004 and hit the Tab Key on the keyboard. (Although the Tab Key and Enter Key are interchangeable, we will use only the Tab Key for now. In a minute, we will examine the use of the Enter Key.) This takes you to the Num column, representing the checking number input. Since this is a beginning balance, there is no check number in this field. Click on the arrow key (pointing down) in that field. This shows you the available entries that you can select. We will work with these entries at a later date. For now, this field should remain blank, because this is the opening balance in our checkbook.
Hit the Tab Key on the keyboard. This takes you to the Description of the entry. Here you should see “Opening Balance”. Hit the Tab Key again and the amount becomes highlighted. When an area is highlighted, you can type in that field to make a change. Change the amount from your original entry of $1,500 to $500, by typing over the amount. Hit the Tab Key. (Remember, the Tab Key and Enter Key are interchangeable, but for now we are only using the Tab Key.) This now takes you to the “Xfer Acct” section of the register input screen, representing the transfer account where this entry originated. You should see “[Joint Checking]” in this field. Click on the arrow key (pointing down) in that field. This shows you the available entries that you can select. We will work with these entries at a later date. For now, we will leave this entry as is.
Hit the Tab Key on the keyboard. This takes us to the “Memo” area of the input, just like the “Memo” area of a checkbook. Type in “Beginning Balance” in this field.
Now hit the Tab Key. The Enter selection is how highlighted. Continue to hit the Tab Key to see how it moves you to the other selections. At any time, as you move through the selections, you can make a change to any of these fields, now or in the future.
After you have used the Tab Key to move through the selections, enter your cursor toward the top of the register and practice using the Enter Key. You will find that it moves you in the same manner as the Tab Key. However, once you get to the last input field, the “Memo” field, when you hit the Enter Key, the program thinks you are done with the entries. It may say, “You are recording a transfer back into the same account. Save it anyway?” The “Yes” button is highlighted. You can either hit the Enter Key or Click Yes on the screen. Quicken will then prompt you “Are you sure you want to modify this account’s opening balance?” Select “Yes”. Quicken then takes you to the next line in the check register.
Once you hit Enter in a transaction input section in quicken, you will hear a cash register ‘ca-ching’ sound. This tells you your entry has been ‘posted’ or recorded in Quicken.
Click on the Report button at the top right of the register. Select Register Report from the drop down box. Select the Print box at the top left of the report. Close this report by clicking the “x” button at the top right of the report.
At this time we want to make a change to the Joint Savings account. When you click on “Joint Savings” in the column on the left, notice the green bar at the top changes from “Joint Checking” to “Savings: Joint Savings”. This lets you know you are in the Joint Savings account register. Go through the same procedures that you completed for the Joint Checking account and change the Joint Savings account to the correct date of May 31, 2004 (from May 25, 2004) and the correct amount of $1,200.
Click on the Report button at the top right of the register. Select Register Report from the drop down box. Select the Print box at the top left of the report. Close this report by clicking the “x” button at the top right of the report.
We also want to print the credit card registers. Under Cash Flow Center on the left-hand side of the Home Page screen, click on Bank of America. Now at the top bar you will see Credit: Bank of America Credit Card. You are now in the Bank of America register.
Click on the Report button at the top right of the register. Select Register Report from the drop down box. Select the Print box at the top left of the report. Close this report by clicking the “x” button at the top right of the report.
Now select Quicken Credit Card under the Cash Flow Center at the right. Now you see Credit: Quicken Credit Card to let you know you are in the Quicken Credit Card Register.
Click on the Report button at the top right of the register. Select Register Report from the drop down box. Select the Print box at the top left of the report. Close this report by clicking the “x” button at the top right of the report.
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Now it is time to add investment accounts. You are now familiar with moving around the Quicken home page into the checkbook and savings registers. You are also familiar with entering checking and savings account balances. Entering investment accounts works the same way. Let’s get started.
From the Quicken Home page, you have been working in the Cash Flow Center area at the left of the screen. The next area down is Investing Center.
Click on Investing Center. Here you see three separate areas: Investment Alerts, Investment & Retirement Accounts, and Watch List. We want to add investment accounts, so we will work in the Investment & Retirement Accounts area. In this area you will see the buttons to select to Add Account, Edit Accounts, Show Reports, and Go to Full Portfolio.
Click the Add Account box. Next it asks for the financial institution. The Falls use Vanguard, so type “Vanguard” in the highlighted box. You will notice that as soon as you type the “V” Van Kampen Funds, Inc. and Vanguard Group appear in the box. Highlight “Vanguard Group” or continue typing the name. Click Next in bottom right corner.
Normally, you would want to select Online in order to download your financial information from the Internet. However, for purposes of this case study, we will make this a manual account. Click the button beside Manual.
Click Next in bottom right corner. Quicken now asks for the type of investment account you want to add. This is a standard brokerage account. Since “Standard Brokerage” is pre-selected, simply Click Next in bottom right corner.
The next screen asks for the name of the account. Type “Vanguard Brokerage” in the highlighted box. Click Next in bottom right corner.
In order to enter the statement date, Click on the box (representing a calendar) beside the date. This brings up a calendar. The Fall's statement date is June 8, 2004, so Click on June 8 on the calendar. The program will automatically input the date in the field for you. Jerry has no cash, but has $2,000 in a Money Market account with Vanguard. Click on the Money Market field and input $2,000. Hit the Tab Key. You should notice the Total Cash Balance at the bottom of the page change from 0 to 2,000.
Click Next in bottom right corner.
Now Quicken asks for the “securities” (investments…stocks, bonds, mutual funds, etc.) in the account. Although you can “look up” these investment symbols on the Internet, for purposes of this case study, we will do manual inputs.
Click in the “Ticker” field and enter the following ticker symbols. Hit the Tab Key and then enter the “Security Name” for the following stocks and one mutual fund. The Tab Key will take you to the next selection:
Ticker Security
Name
GE General Electric
PG Procter and Gamble
PNC PNC Bank
MSFT Microsoft
VFINX Vanguard 500 Index (this is a mutual fund)
Click Next in bottom right corner. Quicken will then ask if you want to connect to the Internet. Select “Don’t Connect” and Click (If you don’t see this message – don’t worry.)
Next in bottom right corner.
The next screen is the “Current Holding Information”. You should select “stock” for each holding, except VFINX, which is a “mutual fund”. You then simply need to input the number of shares by hitting the Tab Key between entries:
Ticker Number
of Shares
GE 50
PG 15
PNC 10
MSFT 48
VFINX 25
Click Next in bottom right corner.
Quicken takes you to a summary screen. (If you notice errors, Click Back or Click Edit and make the necessary correction.)
Click Done in bottom right corner.
Quicken now takes you to a new screen. The gray bar at the top tells you this is the “Vanguard Brokerage” account. You will see the summary for the Fall's brokerage account. Vanguard automatically inputs the values of the stocks and mutual funds for you, if you are connected to the Internet.
Notice the “As of” date at the top right of the screen. Click on the box (representing a calendar) to the right of the date. This is where you can examine your performance as of any date, since the original purchase, by simply selecting the appropriate date on the calendar.
Now notice the blue highlighted box near the top left – entitled “Show”. Click on the drop down arrow on the right. Now Click on the first selection, “Value”. Quicken automatically inputs the price per share, the number of shares, and total market value of the stocks and mutual funds, if you are connected to the Internet. The “Cost Basis”, however, is missing. The “Cost Basis” is the amount paid for the securities. This is because we entered only the number of shares the Falls already own. We did not make a “purchase” of these shares in Quicken.
In order to add the cost basis of our securities, we will start with the first security, General Electric. Click on the Enter button under the Cost Basis column for GE. Click Enter Missing Transaction.. in the bottom left corner. Notice that the next screen states Buy Shares Bought at the top blue bar. Click on the arrow to the right of the blue highlighted box titled Buy - Shares Bought. Here you will see all the different types of transactions that can be chosen. Since we are entering the amount we paid for the shares we purchased, we will leave the Buy – Shares Bought title highlighted. Simply Click either the arrow button again, or the Buy – Shares Bought title to select it.
Hit the Tab Key and the program takes you to the Transaction date field. Input the date of March 8, 2004. Hit the Tab Key again, and it takes you to the Number of Shares field. Input “50” as the number of shares. Hit the Tab Key and input $29 as the price paid per share. Hit the Tab Key again. Notice that the Total cost is automatically calculated for you at $1450. Now input $50 for the Commission and hit the Tab Key. Notice that Quicken adds the commission amount to the amount paid for the stock. The Total cost is now $1500. Click Enter/Done in the bottom right corner.
Note: If you don’t have internet access so the price is entered automatically, the price for GE at 7-1-04 was $31.98 per share. The following prices can be entered manually, if your computer doesn’t automatically download the price information.
In the “Enter Missing Transaction Screen” Select “Done”
Now you should enter the following information for the remaining securities, using $25 as the commission for each transaction (remember to select Enter under the Cost Basis column):
No. of Shares Purchase Purchase Cost
Ticker Purchased Price Date
PG 15 $90 February 2, 2000 54.20
PNC 10 $45 April 16, 2002 52.51
MSFT 48 $35 June 2, 2000 28.48
VFINX 15 $110 May 8, 2001 105.41
Because Vanguard Index 500 (VFINX) was purchased with two separate transactions, when Quicken takes you to the Enter Missing Transaction screen, simply Click Enter Missing Transaction.. in the bottom left corner and continue to enter the second transaction:
VFINX 10 $95 August 12, 2002
Quicken takes you back to the Holdings screen. The blue highlighted bar at the top should say Value. If not, Click the arrow key to the right and Click on Value. Now you will see the amount of Gain/Loss on each security in dollar terms and percentage terms for the total number of shares owned. The first columns of Gain/Loss represents the change since the purchase date, the next set represents the changes for the current day. The Day Change amount represents the change in price of one share of the security for the current day.
Go to Reports at the top bar. You have a whole host of options here - select Investing in the drop down box. Then select Portfolio Value. In the Date Range – Select Customize Date. Accept the entry in the “from” field and enter 7-1-04 in the “to field”. Print this report by selecting Print at the top left of the screen. (Don’t worry about saving this report when prompted by Quicken).
Close this screen by clicking the “x” at the top of the screen.
Now that you know how to add investment accounts, we will expand that knowledge to include retirement accounts.
Go to the Quicken Home page. Click on the Investing Center tab in the left column. This will open to the Investing Center page. Click on the first tab at the top titled Today’s Data. Under Investment & Retirement Accounts in the middle of the page, you should see the total value of the Vanguard Brokerage account that you previously input. At the bottom of the Investment & Retirement Accounts box, you will see four boxes. Click the last one titled Go to full portfolio . This screen shows each of the securities (stocks, mutual funds) that the Falls own. Notice that by clicking the “Go to full portfolio” tab, you have opened the Portfolio tab (look at the top gray bar).
Now it is time to enter the Fall’s retirement accounts. Click on the Today’s Data tab at the top in the gray bar. This takes you back to where we started. Under the Investment & Retirement Accounts area, Click the Add Account box.
The input for retirement accounts is the same as the investment accounts. Next it asks for the financial institution. The Falls use A.G. Edwards for their retirement accounts, so type “A.G. Edwards” in the highlighted box. You will notice that as soon as you type the “A” A.G. Edwards appears in the box. Highlight “A.G. Edwards” or continue typing the name.
Click Next in bottom right corner.
Quicken now asks for the type of investment account you want to add. Since this is a Roth IRA (individual retirement account), Click the IRA or Keogh button. Now Click Next in bottom right corner.
The next screen asks for the name of the account. Type “A.G. Edwards Roth IRA-Jerry” in the highlighted box.
Click Next in bottom right corner. Normally, you would want to select Online in order to download your financial information from the Internet. However, for purposes of this case study, we will make this a manual account. Click the button beside Manual.
“Myself” is pre-selected as the owner of the account, which is correct, so now we must select the type of account. Click on the arrow beside Pick an IRA Type and select “Roth IRA”. Click Next in bottom right corner.
In order to enter the statement date, Click on the box (representing a calendar) beside the date. This brings up a calendar. Jerry’s statement date is May 31, 2004. In order to select May 31, 2004, you must Click on the arrow pointing to the left that appears at the top of the calendar, beside the calendar month. This takes you back to the previous month. You can continue to click this arrow until you get to the month needed. The arrow to the right takes you forward in months, while the arrow to the left takes you backwards in months. Find the month of May, and Click and on the 31st. The program will automatically input the date in the field for you. Jerry has no Cash and no Money Market Fund in his Roth IRA, so you are finished with the input on this screen. Simply Click Next in bottom right corner.
Now Quicken asks for the “securities” (investments…stocks, bonds, mutual funds, etc.) in the account. Although you can “look up” these investment symbols on the Internet, for purposes of this case study, we will do manual inputs.
Jerry has all of his Roth IRA invested in the American
Balanced Fund. Click in the “Ticker”
field and enter the ticker symbol “ABALX”.
Hit the Tab Key and enter the Security Name as “American Balanced
Fund”. If you are connected to the
Internet, you can Click
the Ticker Symbol Lookup at the bottom left of the input
screen. This will take you to Quicken’s
Symbol Lookup screen. Click on
“Mutual Fund”. Next, input the mutual
fund name of “American Balanced Fund” and Click Search
. This is how to find a ticker
symbol using Quicken’s Ticker Symbol Lookup.
You can follow the on-screen instructions to cut and paste the security
symbol back into Quicken if you like.
Close this page by clicking the red X at the top right of the
screen. Now you are back to the Quicken
Account Set-up Screen.
Click Next in bottom right corner. The next screen may ask if you want to connect to the Internet. (Don’t worry if you don’t see this message). Select “Don’t Connect” and Click Next in bottom right corner.
The next screen is the “Current Holding Information”. You notice that the category of mutual fund is pre-selected. Input “400” shares and select “Mutual Fund”.
Click Next in bottom right corner. You can now review the summary of your input. Click Done in bottom right corner. The familiar “ca-ching” reminds you that Quicken has recorded your information.
You should now be at Summary tab of the A.G. Edwards Roth IRA screen. This title and tab can be seen at the top of the gray bar.
We must now enter the Cost Basis, the original purchase price, of the American Balanced Fund. Click on the Enter button under the Cost Basis column. Click Enter Missing Transaction.. in the bottom left corner. Notice that the next screen states Buy – Shares Bought at the top blue bar. Click on the arrow to the right of the blue highlighted box titled Buy - Shares Bought. Here you will see all the different types of transactions that can be chosen. Since we are entering the amount we paid for the shares we purchased, we will leave the Buy – Shares Bought title highlighted. Simply Click either the arrow button again, or the Buy – Shares Bought title to select it.
Hit the Tab Key and the program takes you to the Transaction date field. Input the date of April 15, 2002. Hit the Tab Key again, and it takes you to the Number of Shares field. Input 400 as the number of shares. Hit the Tab Key and input $10 as the price paid per share. Notice that the Total cost is automatically calculated for you at $4000. Hit the Tab Key and input $50 for the Commission and hit the Tab Key. Notice that Quicken adds this to the amount paid for the stock and now the Total cost is $4050. Click Enter/Done in the bottom right corner.
Quicken will take you to the Enter Missing Transaction screen. Verify the input is accurate. Click Done in the bottom right corner.
You are now back at the Summary tab of the A.G. Edwards Roth IRA account. Notice the Gain/Loss amount. This amount represents the total gain in the American Balanced Fund, since the purchase date of April 15, 2002. The next column represents this amount in percentage terms. The next column represents today’s Gain/Loss in dollars for the entire 400 shares. The next column is the Gain/Loss in dollars for one share, and the last column represents today’s change in percentage terms for one share.
It is now time to enter Rita’s Roth IRA. Look at the Quicken Home area at the left of the screen. Select Investing Center. Click Add Account in the Investment & Retirement Accounts area. Follow the same instructions as the input for Jerry’s IRA. (Return to the beginning of this Section, Section VI). The only difference is the ownership of this account. Instead of maintaining the pre-selected “Myself” option, you will choose the “My Spouse” option. Additionally, name the account “A.G. Edwards Roth IRA-Rita”. All dates and amounts are the same as Jerry’s. Remember to enter the Cost Basis for Rita’s account as well.
Now if you look at the Quicken Home area to the left, you will see both Roth IRAs listed under the Investing Center area. Click Investing Center and you will see the detailed information under the Investment & Retirement Accounts area.
Congratulations! You have just completed the input for retirement accounts.
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Now it is time to enter debt. We will start with the Fall’s Vehicles. Under Quicken Home , Click Property & Debt (on the left-hand side of your screen). Under the Property & Debt Accounts area Click Add Account . Select Vehicle and Click Next .
Name the account “Jerry’s Car” and enter the following information: Make “Honda”, Model “Accord”, Year “2000”. Click Next .
The vehicle was acquired June 18, 2000 for $15,800 and is now worth $9,500. Input this information. Click Next .
There is a loan on this vehicle, so select “Yes – create a liability account for me” and Click Done .
Input the following information regarding the loan. The loan was taken out on June 18, 2000 for $10,000 for five years with a compounding period of monthly and a payment period of monthly. There is no balloon payment. The current balance is $4,000 as of June 15,2004. The payment amount is $205.26 due on June 30, 2004 at an interest rate of 8.5%. Click Done .
The next screen, Edit Loan Payment, allows you to input information in order for Quicken to pay the loan. We will not do this for purposes of this case study. Instead, simply Click Cancel .
Quicken takes you to the Register tab for Jerry’s Car. You can see the opening balance is the purchase price of $15,800. In order to make the current balance the same as the current value of $9,500, Quicken makes a balance adjustment of $6,300, which brings the current balance (value) down to $9,500.
Look at the Quicken Home area under Property & Debt. Click on Jerry’s Car Loan. Quicken will take you to the Register tab for the Liability: Jerry’s Car Loan. Here you see the beginning balance of the loan, $10,000, the reduction of $6,000 representing payments to date, and the ending balance of $4,000 still owed on the loan.
Click Property & Debt under the Quicken Home area. This takes you to the Property & Debt Center where you can see Jerry’s assets and liabilities.
Now it is time to enter Rita’s vehicle and vehicle loan. Click Add Account under the Property & Debt Accounts area. Select Vehicle and enter the following information for Rita’s van, in the same manner as Jerry’s car. Rita has a 2002 Honda Odyssey that she purchased April 28, 2002 for $25,000. Its current value is $20,000. Rita took out a loan on April 28, 2002 for $18,000. The original loan term was 4 years. The loan compounds monthly and her payments are also monthly. There is no balloon payment. Rita currently owes $6,000 as of June 10, 2004. The next monthly payment is due on July 10, 2004. The interest rate on the loan is 9%. Click “Calculate” and Quicken should show the payment as $447.93.
Click Done .
The next screen, Edit Loan Payment, allows you to input information in order for Quicken to pay the loan. We will not do this for purposes of this case study. Instead, simply Click Cancel .
Quicken takes you to the Register for Rita’s Van. Here you can see the opening balance of $25,000, representing the purchase price of the van. In order to make the current balance the same as the current value of $20,000, Quicken makes a balance adjustment of $5,000.
Under Quicken Home Click Property & Debt. Here you can see the Subtotal value of the Property (Assets) of $29,500 and the Subtotal value of the Debt (Liabilities) of $10,000, for a net Total value of $19,500.
Print the Net Worth report by selecting Reports from the top bar. Select Net Worth & Balances from the drop down box. Next, select Net Worth. In the date range, select “Customize Date” and “to” 07-01-04 then click on Print in the top left corner of the report. Close the report by clicking the “x” in the top right corner.
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It is important to learn how to set-up your paycheck in Quicken. Your paycheck can be split to track W-2 income, state and federal tax withholdings, 401(k) contributions, insurance and medical deductions, among others. After an easy one-time set-up, future transactions may be automatically entered as a single transaction if you receive a regular monthly salary.
From the Quicken Home page Click on Setup found at the top of the activity bar. In the left bar under Add Accounts select Paycheck. Next, Click Add Paycheck . Then follow the guided instructions and enter the paycheck information to track all earnings and deductions for Jerry:
Jerry
Company Name Stone
Street Middle School
Account Joint Checking
Date June 1, 2004
Select “Enter without prompting”, so that Quicken will automatically enter the paycheck information in the register for you.
Salary per paycheck $5416.67
401(k)
Name Account Leave the name of Employee Contribution Transfer
Account Select <Add New Account> From the Drop Down menu list
Financial institution Select This account is not held at a financial institution use
Select Investment 401(k)
Name account “Jerry’s 401(k)”
401(k) contribution $250
Employer match $312
Disability $ 25
After-tax Deductions:
Name “Life Insurance”
Category: “Insurance” - Life insurance $150 (click on arrow to find Insurance – Life Insurance under expenses)
After these entries, the screen should show Jerry’s net paycheck as $3,817.67. If you don’t see this number, go back and review your entries and made any necessary corrections.
Click Done in the top right corner.
For purposes of this case study, we will not enter year-to-date information. However, this is good information to have in reality. The paycheck information just entered will automatically appear in the appropriate categories every month.
Click Exit Set-up at the bottom of the screen.
Since we have input Jerry’s 401(k) retirement account, we need to update this account in the Investing Center. Go to the Quicken Home Page and under the Investing Center select Jerry 401(k). Quicken will then ask you to tell it about the account (we will do this later). Click “Cancel”. Quicken will ask if you are sure you want to cancel. Select “Yes”.
Quicken takes you to Jerry’s 401(k) account information screen. Select Enter Transactions at the top of the screen. Since Jerry has purchased all the shares already held in his 401(k) over the past five years, we will enter his current balance as one purchase.
Enter Transaction: “Add –Shares Added”. This will simply add the current shares to Jerry’s 401(k) account, without “buying” them with his cash.
Transaction Date: June 10,2004
Select Security Name from drop down box: American Balanced Fund
No. of shares: 1425
Price paid per share : $13.50
Date Acquired: May 31, 2004
Click Enter/Done.
Now select the Edit Account Details box at the bottom of the screen and input the following:
Employer: Stone Street Middle School
Employer Status: Current
From Paycheck: Stone Street Middle School
Contributions: $250
Matching: Yes
Matching Amount: $312
% Vested: 100%
An employer ‘matches’ an
employee’s 401k contributions by contributing a percentage of the amount the
employee contributes. In this case, the
Retirement information in Financial Life Plan – Part 1 indicates
that the employer contributes $1.25 for each $1.00 the employee
contributes. However, the employer does
not allow the employee to have all of the employer’s contribution, until they
have been employed for a period of time.
One of the most common ways to entice an employee to stay with the
company is to require the employee to “vest” in the retirement plan.
Many times the “vesting schedule” states the employee can keep 20% of
the amount the employer contributed after one year, 40% after two years,
etc. After five years of employment the
employee is “fully vested” and can take the entire amount contributed by the
employer, and any gains/losses, when they leave the company. Contributions made by the employee and any
gains/losses from the investments, are always the employee’s and can be taken
with them whenever they leave the company.
Click on the “Quicken Home” button.
Congratulations! You have just completed the entry of a paycheck.
From the Quicken Home page Click on Setup found at the top of the activity bar. In the left bar under 4. Add Accounts select Bills. Normally you would want to use Quicken Bill Pay, but for purposes of this case study, Click Add Bills Manually . Then follow the guided instructions and enter the following monthly bills (unless otherwise noted) for Jerry and Rita. Simply click on the box for each expense and you will enter the amounts in the next screen:
§ Mortgage $575.86
§ Home insurance 33.33
§ Electricity 125.00
§ Groceries 225.00
§ Videos - Other 25.00
§ Telephone 45.00
§ Personal Care - Other90.00
§ Fuel – Other 95.00
Click the Next box.
Enter the amount of each bill under the Amount column. Also enter the Next Date as July 1, 2004. All bills will be paid monthly from the Joint Checking account as of the 15th of the current month. Simply click on the appropriate box to enter the data.
Now Exit Setup.
Jerry and Rita are panicked about Emily starting college within the next year and are saving $163.93/month toward her college expenses. To see how they calculated this amount and entered this information, retrace their Quicken input steps as follows;
From Quicken Home, select Planning from the top bar
Then “Savings Goals”
“Goal Name” – Enter “Emily’s College Fund”
“Goal Amount” – Enter $10,000
“Finish Date” – Enter 6/1/2009 – Emily’s projected graduation date
In the “start” field at the lower left hand corner enter; “6/1/04”
Now click on “Contribute” on the top bar.
And in the “From Account” field, select “Joint checking” from the drop down menu.
The monthly savings goal is calculated by Quicken and should show as $166.66
Now select
“Report” and “Print”. This register report reflects the transfer they have automatically setup each month from their checking account into their savings account.
Take a moment to click on the “Withdraw” button at the top of the screen. When Emily’s college expenses are paid, the payments can actually be entered here.
Click on the RED X box at the top right hand corner of the screen.
It is time to reconcile a bank account. However, we need to input some checks that have been written first.
From Quicken Home in the Cash Flow Center, Select Joint Checking. Enter the following checks by tabbing to each field. After information is entered, hit the Enter Key to accept it into the register.
Date Check No. Payee Amt Category Memo
6/2/04 100 Sue Barber 15.00 Personal Care Haircut
6/5/04 101 Publix 65.00 Groceries None
6/5/04 102 Texaco 28.00 Auto – fuel None
6/7/04 Deposit Cash Received 125.00 Gift Rec’d Rita Bday
6/10/04 103 Publix 55.00 Groceries None
Notice that when Texaco was input as the Payee, the program pre-selected Auto-fuel. Likewise, once a payee is entered, such as Publix, the category is pre-selected from that point forward. You can, however, change the category if needed.
Now we can reconcile the bank account. In the Joint Checking area (that we currently have open), select Reconcile under the Register tab. Input the ending balance off the statement (as of 6/8/04 as $4,209.67. There are no service charges or interest income. Select OK.
Looking at the (imaginary) bank statement, all of the payments and checks showing have cleared, except check #103, because it was written after our bank statement date. Click on “Mark All” at the bottom of the reconcile report. Now simply unclick the items that have not yet cleared the bank.
Notice the deposits made after June 8 have not yet cleared. Make sure you “Unclick” the green check-mark next to these deposits if you have used the “Mark-All” approach noted above.
You should see the Difference at the bottom of the screen as $0.00. This means you have successfully reconciled the Joint Checking account. Click Finished.
Quicken asks if you would like a Reconciliation Report. Select Yes. Title the report “June Reconciliation”. Since we reconciled as of 6/8/04, use this date. Select All Transactions and click Print.
Now you are ready to Print a Cash Flow Report. From the Quicken Home Page click on “Reports” in the top bar. Choose “Cash Flow”. When the drop down box appears, select “Cash Flow” again. In the “Date Range” as box select “Custom Date” and enter “From 6/1/04 to 6/30/04”. Leave the “Column” as “Don’t subtotal”.
Print the report by right clicking anywhere on the
report and selecting Print. Since you
can recreate this report at any time, there is no need to save it. Close this screen.
From the Quicken Home Page click on “Reports” in the top bar. Choose “Net Worth and Balance”. When the drop down box appears, select “Net Worth”. Leave Date Range as “Earliest to date” and Interval as “None”.
Print the report by right clicking anywhere on the report and selecting Print. Close this screen.
Now that you are familiar with the basics of the Quicken program and input, it is time for you to expand those skills. Here are some exercises that will give you practice for financial transactions you will soon encounter in your life, if you haven’t already.
From Quicken Home select “Setup” and the “Property and Debt”
Under “House” , select “Add Account”
Enter the following information in the input screens you see;
· Name: Jerry & Rita’s House
· Original purchase date is June 10, 2002.
· Original purchase price is $85,000.
· Current Value estimate is $105,000.
· Yes – Create a Liability Account
· Opening Date of Loan is 6-10-02
· Original loan amount is $76,500.
· Original mortgage is a 20 year mortgage.
· Compounding period is daily.
· The payment period is monthly.
· There is no balloon payment. (This is a large payment that pays off the loan before the smaller monthly payments would have.)
· Current balance is as 6-13-04 is $72,676.
· Interest Rate is 6.875%.
· Monthly principal and interest payment is $587.38 due the 10th of July.
· In the “payment” section of the next screen, select “Edit”.
· Homeowners insurance is paid with the mortgage payment.
· In the Category section type in “Insurance” and click on the arrow.
· Select: “Home Insurance”; in the amount enter $40.
· In the “Category Section, type in “Real Estate Taxes” and you’ll see a screen asking you if you want to create a new category. Say “yes”
· In the “Setup Category” Screen, place your cursor in the “tax line item” and select “Schedule A – Real Estate Taxes”, then click OK.
· The real estate taxes paid with each payment are $100.
· Back at the Split Transaction Screen, select OK.
· The mortgage payee is the American Mortgage Company.
· The next payment is the 7-10-04.
· The category for interest is “Mortgage Int:Bank”
· Set up the payment as a “Scheduled Transaction” by selecting “Payment Method” in the “Transaction” box.
· Select “Scheduled Transactions”
· For the “Register Entry” select “Automatically Enter”.
· Pay from Joint Checking.
· Pay 10 days in advance.
· Now “Exit Setup”
These last steps tell Quicken to automatically enter the monthly mortgage payment into the Joint Checking account register 10 days prior to the due date. Because this is only an entry and not a payment, the check must still be written to the mortgage company.
Select “Report” and Select “Register Report”. Print the report and title it “Fall’s House Register.”
To estimate the “listing price” of the home divide $105,000 by .94 – what is the listing price they would need to end up receiving $105,000?
Note: The following is a brief overview that you will need to understand as you finish the Fall’s Case Study as well as begin using Quicken to manage your own finances. References made to “your finances” will apply to both the Falls and yourself.
Most Quicken users never venture past using the program to pay their bills and summarize their tax information. The program, however, can actually be used to put you in control of your finances and minimize the amount of time you have to spend managing them. In order to “graduate” from a basic use of Quicken to this more advanced application, we’ll now explore how to use the Quicken Planner.
Think of personal financial management like a triangle – with 3 corners.
You’ve already gained experience with #1 and #3. This section you’ll be learning how to use #2- Quicken’s Planner.
Keep in mind that Quicken’s 3 components don’t always “talk” to each other very well, so you have to make sure that the information you’ve entered in your day-to-day transactions - #1 – is consistent with #2 – taking that actual information and planning with it. Finally, #3 – your budget – has to be updated with the choices you’ve made using the Planner, # 2. You also may need to make actual changes in your day-to-day transactions - #1 – as a result of what you choose with #2 – the Planner.
Even though it seems a bit confusing now, in no time at all you’ll be an ‘advanced’ Quicken user and have the skills to keep all these 3 corners of your personal financial management triangle connected!
The first step you’ll take is to print the following financial reports
As you input your financial information into the Planner, place a check mark by the items on these reports, so you make sure you don’t miss any information, or inadvertently enter some things twice. Use the “Budget” Column for items of income and expense as you enter your information into the Planner.
Save these reports – mark them as “Initial Planner Input”
Click on Planning at the top bar and select Planning Assumptions. Select Living Expenses in the left column. On the orange Living Expenses line, click on Edit. Select Category Detail and then click on the Details box. If you scroll down through these expenses, you will see the expenses you’ve actually entered into Quicken. Under normal circumstances, you would examine each item on your Net Worth and Cash Flow reports and enter any missing information here. For purposes of this case study, Cancel out of this screen and now select Rough estimate. Click on the Yearly Living Expenses box and enter $36,000. Select Done. Close the Planning Assumptions screen by clicking on the red X in the top right corner of the screen.
Select Planning at the top bar again. Now choose “What If” Event Scenarios. Here we will enter any missing information, in order to run “What If” scenarios. Under normal input, you may not have as much missing information. However, we shortened the input process many times. As a result, we have additional missing information that we must now input.
Select About You and enter the following:
Select Done.
Select Salary and enter the following for Jerry:
Click
OK.
Click
Done.
Continue selecting each item, regardless of whether or not it is checked and entering all the information you know about the Falls, based upon the information in the Financial Life Plan. The following represents information you may not see in the Planner:
Now calculate what the Fall’s payment would be if they paid off their Quicken Credit card over 5 years. Print out this schedule, and label it – “Quicken Credit Card Repayment.”
Once you have these two monthly
payment amounts, return to the Planning Assumptions section of Quicken.
Select Continue.
Quicken takes you to a chart indicating that the Fall’s plan is working. It appears, based upon the income and expenses enter, Jerry will be able to retire at age 65.
Print the Account Balances Graph by selecting Print in the top left of the “What If” screen. Close the graph by clicking the “x” in the top right corner.
Also print out a Planning
Assumption Report, from the “Planning Assumption” section of the Planner. Staple or paper clip this report to your Net
Worth and Budget Reports which you used to make sure you were entering
everything into the Planner. When your
Professor returns your Plan Results
Graph, staple all these reports together.
This is the starting point for the
Falls and we want to make sure we keep a record of it.
Now you are ready to enter “What If” scenarios. This feature allows us to compare our current financial circumstances to alternative choices.
The following Exercises allow you to practice using the Planner. These exercises are only provided as samples. Remember to enter your own information, rather than that of the Fall Family as you proceed through the exercises.
Application of the “What If” scenarios in Quicken can prove very valuable throughout your lifetime. Utilizing these scenarios is an excellent way to see the results of a decision, before you actually commit to it. Therefore, you are able to make well-informed choices, by examining the impact of those choices on your current and future financial situation.
Before we run a “What If” scenario, let’s first see how the Fall family’s current financial situation supports his retirement at age 65.
· Go to Planning and select Retirement Planner from the drop down box. Here Quicken says that it can tell you whether or not you can retire when you want, based upon your current financial situation. Click Next at the bottom right of the screen.
The About you information is accurate, and we will assume that there are no changes to the information input previously. Continue through the “Can I retire when I want to?” section without making any changes. Simply read each section as you continue to familiarize yourself with the alternatives you could implement. Stop when you get to the bar graph titled “Can I retire when I want to?”
Exercise #2
Jerry has recently begun to realize how quickly time goes by and how quickly his children are growing up. He is feeling guilty for not spending more quality time with his children while they are young. Jerry has contemplated reducing his work hours. Jerry wonders if he would be jeopardizing his financial future, if he spent fewer hours working and more hours with his family. Jerry would like to reduce his working hours starting this school year, September 1, 2004, and continue for the next 16 years until the children are out of high school.
Jerry has determined that his employer will allow him to reduce his working hours in order to spend more time with his family. However, in order to do this, he must take a $10,000 reduction in pay, from $65,000 to $55,000 annually.
(Go to Planning and select “What If Event Scenarios” from the drop down box.) In order to change Jerry’s salary, select “salary” from the menu on the left side of the screen. To change the end date of the current salary, highlight the end date in item 2. and select Edit. Click the drop down arrow for “When does salary end?” Now you must arrow up and click on “Specific date”. Now you can input the end date of 9/1/04.
Now you must go to the item 1. area and click Edit. Here you must insert a “New” salary of $55,000 from September 1, 2004 until Jerry retires.
Again, go to item 1. and insert a “New” salary of $65,000 to capture the period of September 1, 2004 until retirement.
To verify accurate input, highlight each line item in 1. and verify the corresponding information in item 2.
Click Done.
Hint: Try several entries in the “Living Expense” section of the Planner until the “Plan comparison Graph” is working.
It is important to remember that once you save a Plan, the assumptions you’ve entered now are saved and become the basis for any future changes you make – that’s why it’s so important that you carefully track the changes you’ve saved, and the ones you’ve discarded in your Scenario Summary Log.
Exercise #3
Jerry has just realized that upon retirement, his living expenses will go down. He will no longer spend as much money on professional clothing, dry-cleaning, gasoline driving back and forth to work and other expenses associated with his profession. He also realized that his medical expenses are likely to increase.
1. Run a “What If” scenario and decrease the Fall’s living expenses by $3,000 per year until Rita dies and increase their medical expenses by $1,000 per year, beginning at Jerry’s retirement date and ending at Rita’s death.
Rather than selecting Living Expenses as the Assumption to change, select Adjustments. Click New and enter each change separately.
2. Print the “Plan comparison graph”. After reviewing this graph, pretend that Jerry and Rita decided not to assume these expenses would occur, so Close Without Saving. Label this scenario #3. Log your assumptions with “did not save” in the Scenario Summary chart.
Exercise #4
Interest rates on mortgage loans have been declining steadily over the past few years. While the Fall’s current mortgage rate is 6 7/8%, they have been told they can refinance their loan and get a rate of 5%, with no changes to the current terms of the loan. The closing costs associated with the refinance are $1,000. Jerry would like to know if he would be better off financially if he paid off his current mortgage 5 years early, on June 10, 2017, or if he should refinance his current mortgage.
Begin with your saved plan, which should match printed plan #2b.
Can Jerry retire at age 65 and payoff his mortgage five years early?
Be sure to add a
one-time $1,000 expense as an Adjustment and indicate that this one time
expense starts 9/10/04 and ends 9/01/05.
Enter the new loan
information in the “future loans” section.
The new loan amount is the same as the current balance of the original
loan, $75,000. The new term will be 18
years, since the Fall’s have already paid 2 years on the original mortgage.
4. Print the results and label the graph #4b. Save this “What If” as a Plan, since
the Falls plan to proceed with the refinance.
5. Would the Fall’s be better off financially to payoff
their house loan early or refinance their current loan?
Exercise #5
Jerry has decided to save more for retirement, in order to increase the likelihood of retiring early. He has determined that he can save an additional 5% of his annual pay until he retires, starting 9-1-04. However, he is not sure if he should add to his Vanguard Brokerage account or his 401(k) account.
Why do you think there is no
change from the prior scenario?
During the process of reviewing the current planning settings for Jerry’s 401(k) account, it becomes obvious that his existing contributions are not reflected. Before determining the impact of saving an additional amount in the 401(k) let’s enter the current information;
Select “Investments” in the Planning Assumptions Section
Edit
Jerry’s 401(k) – in the contributions area select “New”
Jerry’s current contribution – based on his new salary of $55k is $250/month or approx. 5% of his salary.
Toward the bottom of the next screen, enter Jerry’s employer’s share – which does not depend on whether or not Jerry contributes. The employer contributes 6.81% of Jerry’s revised pay.
Print out the new “Plan Comparison Graph” and label it # 5b- 5% to brokerage + correct existing 401(k) and log it into the Fall’s Scenario Summary Log.
Delete the 5% savings to the Brokerage account.
Increase Jerry’s contribution to his 401(k) from 5% to 10%.
Would what we have seen happen to Jerry and Rita’s plan always happen when faced with this kind of decision?
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Exercise #6
If we actually implement changes as a result of the “What If” scenario
results, we have to integrate them into the budget. Let’s integrate a change in Jerry’s salary from $65,000 to
$55,000 and the Fall family grocery expenses from $250 per month to $375.
1. Go to Cash Flow and select Budget in
the drop down box. Click on the Budget
tab. Click on the Income Tab
and click Salary. Change the
(monthly) amount in the gray bar to the right of the screen from $5,417 to
$4583.33. Apply this change.
2. Change the grocery expense in the budget from $200
per month to $375. To do this, you must
select the Expense Tab.
3. Change the Household expense from $1,000 to
$2,500. Since there are several items
that have yet to be broken down in the budget – we’ll increase this account
until those updates are made.
4. Print the new budget by selecting Report in
the top right bar. Print the Current
Month budget in landscape mode.
Remember the 3 corners of the personal financial
management triangle?
1. Financial
transactions
2. Financial
options
3. Financial
changes
You have successfully completed the personal
financial management cycle for the Fall Family by:
1. Accurately
tracking their day-to-day transactions with Quicken.
2. Evaluating
various financial decisions using Quicken’s What If Analysis tool.
3. Integrating
the desired changes into their day-to-day experience via a budget update.
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