Saturday, February 20, 2010

GnuCash Personal Finance Manager

For years I've used a spreadsheet to manage my personal finances. Over the years my spreadsheet has gotten prettier and more complex with grander formulas that tell me exactly how I am wasting my money.

Last November I discovered GnuCash. Once I got my head wrapped around it I decided to ditch the spreadsheet for my daily finances (but not all together--I'll explain).

I am no accountant, but after a little self teaching I learned rather quickly that I was reinventing the wheel with my spreasheet. In my spreadsheet I used a "transaction type" column so I could sort my transactions and make neat little pie charts that tell me things like, how much I blew going to lunch every day. Or, how much it cost me to have a car.

GnuCash can do all that too, but first I had to figure out that every thing is an account. (see double-entry bookkeeping) For some things this makes since. My Checking account is an account. My credit card is an account. My investments are accounts. Where I had trouble with this, at first, was expenses.

Expenses all fall under one account (cleverly called 'expenses'). Then everything you spend money on goes into it's own sub account. I buy gas, it goes under Expenses:Auto:Gas. The more you divide things up the more specific you can be with reports. For example; I can bring up a report that just shows all the gas I bought last month by drilling down all the way to Expenses:Auto:Gas.

If I choose, I can also bring up a report that just brings up Auto. Then I can see a pie chart of all the Auto sub accounts. I'll have a wedge for Gas, Maintenance, Insurance, Fees, and Parking. These are just examples. I can make sub accounts for anything I spend money on, or delete the ones I don't need. GnuCash comes with a set of expense accounts you can use, or you can make your own from scratch.

Personally I started with theirs, and then added and deleted as I saw fit.

The beauty of the system is you can be as detailed or as lazy as you want. If you are a real obsessive compulsive tightwad, you can enter every receipt and even divide them up by what was spent on lunch and what was spent on sales tax (for the record, I put sales tax under Expenses:Taxes:Sales Tax I don't believe it was one of the default categories).

On the other hand, you can trash receipts and download the Microsoft Money or Quicken file from your bank once a month. They can be imported in to GnuCash almost just as easily as they can the expensive counterparts they are supposed to be imported into.

Which brings me to the last thing I love about GnuCash. It's open source, which means it's free, but it's better than free.

I did mention I still use a spreadsheet for somethings, and it's true. Perhaps I haven't completely embraced my new methods. There are just some things I still find easier on the spreadsheet. Specifically, future planning. I can just copy and paste rows of information and see where I'm going to put my tax return. In my spreadsheet I also have sheets with formulas that help me with other financial aspects. The one I use most helps me divide up my income by percentages, but GnuCash gave me a reason for a new one. A formula that calculates sales tax from the total on a receipt (for those generic receipts that don't give me sales tax).

I haven't posted here in a while, so I apologize if this is just a blarg of information. There are a few new posts I've been meaning to work on and get up here. In part I must blame Google Buzz for reminding me that I have a neglected blog. In the not too distant future I plan to write about tools and procedures you can use to easily keep your GnuCash data safe and secure.

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