Chapter 2

Introduction to the Big Picture

In This Chapter

Distilling Quicken to its very essence

Setting up additional bank accounts

Adding, removing, and modifying categories

Understanding tags

Before you spend a bunch of time on Quicken, you have to understand the big picture. You need to know what Quicken can do. You need to know what you want to do. And, as a practical matter, you need to tell Quicken what you want it to do.

Boiling Quicken Down to Its Essence

When you boil Quicken down to its essence, it does six things:

• It lets you track your tax deductions.

  This feature makes preparing your personal or business tax return easier for you or your poor accountant, Cratchit.

• It lets you monitor your income and outgo using your computer, a mobile device like a smartphone, or printed reports.

  Usually, this stuff is great fodder for discussions about the family finances. And if you’re running a business or investing in real estate rental properties, this income-and-expense information becomes more than just great conversation fodder; the information also helps you manage your business better.

• It lets you print checks (and sometimes other forms too).

  This device is mostly a time-saver, but it can also be useful for people who are neatness freaks.

• It lets you track the things you own (such as bank accounts, investments, and real estate) and the debts you owe (such as home mortgage principal, car loan balances, and credit card balances).

  These things are really important to know.

• It helps you make better personal financial planning decisions about such matters as retirement, your children’s future college costs, and your savings and investments.

  I think this stuff is really neat.

• It gives you the opportunity to pay bills electronically and, in some cases, even do all your banking electronically.

  This stuff is pretty neat, too. No, let me amend that: Online bill paying and banking are really neat. I do have some minor (very minor) reservations that I discuss in Chapter 6, which deals with online banking in depth.

Tracking tax deductions

To track your tax deductions, make a list of the deductions you want to track. To do so, pull out last year’s tax return. Note which lines you filled in. (Perhaps mortgage interest, property taxes, state income taxes, and charitable contributions?) This method works because there’s a darn good chance that the tax deductions you claimed last year will also be the tax deductions you’ll claim in the future.

I cover the Quicken categories, which you use to track your tax deductions, a little later in this chapter.

Monitoring spending

At our house, we (my wife [Sue] and I, your humble author) use Quicken to monitor our spending on the mundane little necessities of life: groceries, clothing, dog food, cable television, and…well, you get the picture. To keep track of how much we spend on various items, we also use the Quicken categories.

If you want to monitor a particular spending category, decide up front what the category should be before you begin recording your data.

Your list of spending categories, by the way, shouldn’t be an exhaustive list of super-fine pigeonholes, such as Friday-night Mexican food, Fast food for lunch, and so on. To track your spending on eating out, one category named something like Meals or Grub usually is easiest.

In fact, I’m going to go out on a limb. You can probably start with a dozen categories, more or less:

• Car
• Clothing
• Entertainment and vacation
• Groceries
• Household expenses (besides food)
• Insurance
• Medical and dental
• Rent (or mortgage payments)
• Taxes
• Utilities (electricity, water, cable television)
• Work expenses

If you want to, you can expand this list, and you can do so over time. Heck, you can create dozens and dozens of categories. My experience, though, is that you’ll probably use only a handful of categories.

Printing checks (and other forms)

You can use Quicken to print checks. This little trick provides a couple of benefits: It’s really fast if you have several checks to print, and your printed checks look very neat and darn professional.

To print checks, you need to do just two things. First, look through the check supply information that comes with Quicken, and pick a check form that suits your style. Then order the form. (The check forms that come with remittance advices — or check stubs — work well for businesses.)

Preprinted check forms aren’t cheap. If you’re using Quicken at home with personal-style checks (such as those that go in your wallet), using computer checks may not be cost effective. Even if you’re using Quicken for a business, and you’re used to buying those outrageously expensive business-style checks, you’ll still find computer checks a bit more expensive.

I’m pretty much a cheapskate, so I don’t use printed checks at home (although I do use them in my business). I should admit, however, that I also don’t write very many checks.

By the way, I’ve “checked” around. Although you can order Quicken check forms from other sources (such as your local office-supplies store), they’re about the same price from Intuit (the maker of Quicken). If you want to order from Intuit, you can refer to the catalog that came in the Quicken packaging. You can also visit www.quicken.com.

One other comment here about printing checks: If you’re going to pay bills electronically, you don’t need to print checks with Quicken. Oh, sure, you can print checks if you want. But you won’t want to. Paying a bill electronically is easier and cheaper than paying a bill with a Quicken-printed check.

A general comment about printing other forms: If you run a business, and the business needs to produce invoices, you can use Quicken Home & Business and Quicken Rental Property Manager (two business-y flavors of Quicken) to produce invoice forms, too. (You can add both of these features by choosing the appropriate command — Add Home & Business or Add Rental Property Manager — from the Help menu.)

Tracking bank accounts, credit cards, and other stuff

You must decide which bank accounts and credit cards you want to track. In most cases, you want to track each bank account you use and any credit card on which you carry a balance.

You may also want to track other assets and liabilities. Assets are just things you own: investments, cars, a house, and so on. Liabilities are things you owe: margin loans from your broker, car loans, a mortgage, and so on.

Shoot, I suppose that you could even track the things your neighbor owns — or perhaps just those things you especially covet. I’m not sure that this is a very good idea, though. (Maybe a healthier approach is to track just those things that you’ve borrowed from your neighbor.)

Planning your personal finances

Your computer’s computational horsepower makes it the ideal tool for doing complicated calculations. So maybe you’re not surprised that Quicken comes with five powerful calculators that let you make smarter borrowing choices, better mortgage-refinancing decisions, more accurate savings and investment calculations, and extremely helpful retirement and college savings calculations.

I believe that these financial planning tools are the most valuable features that Quicken offers. If you don’t want to wait to find out more about them, flip to Chapter 10. I’ll wait.

Banking online

If you want, you can tell Quicken that it should do the work of paying some person or merchant electronically. In other words, at the same time that you describe some check to Quicken — you do so by entering stuff in a window — you can say to Quicken, “I not only want you to record this check for me, but I also want you to pay it for me.”

If your bank supports online banking, you may also be able to move money between your accounts and get up-to-date statements electronically. Ask your bank for details about this service if you’re interested.

To perform this sort of online banking, you need to have an Internet connection, and you need to do a little bit of paperwork. But the Quicken online banking features can save you scads of time. And the features are easy to use. Basically, all you do is use Quicken in the usual way — which is what I talk about in the chapters that follow — and then click a couple of extra buttons.

Setting Up Additional Accounts

When you first began working with Quicken — and this may have been only a few minutes ago or several years ago — you were prompted to set up an account. And you probably set up at least a checking account because this is probably your most active bank account. If you want to track any additional accounts — for example, a savings account — you must set them up, too.

Setting up another banking account

To set up an additional checking, savings, or money market account, you give the account a name and then its balance as of a set date. Here’s how:

1. Click the Add an Account button.

   Quicken displays the Add Account window, shown in Figure 2-1.

   The Add an Account button is located near the bottom of the Accounts bar, which appears along the left edge of the Quicken program window. You can collapse and expand the Accounts bar by clicking the small arrow button just left of the Accounts label. If the arrow button points down, clicking the button collapses the Accounts bar. If the button points right, clicking the button expands the previously collapsed Accounts bar.

2. Click either the Checking or Savings hyperlink.

   Quicken displays a version of the Add Account window, shown in Figure 2-2, that asks for the bank name.

   

3. (Optional) Identify the financial institution and then click Next.

   To identify the bank and (simultaneously) set up the account for online banking, enter the bank’s name in the Enter the Name of Your Bank text box. As you type the bank name, Quicken creates a list of banks that match what you’re typing. When you see your bank listed, select its name. Quicken then asks you to enter the bank’s online sign-on information for the account. (This information probably includes a username and password or equivalent information.) If you want to enable online access to the bank account information, provide the requested information and then click the Connect button. Alternatively, if you don’t want to identify your bank, you can click the Advanced Setup link (near the bottom of the window) to display a second Add Account window (not shown) that asks whether you want to connect to your bank automatically so you can download transactions or want to enter transactions manually.

4. Indicate whether you want to download transactions or manually enter transactions and then click Next.

   When Quicken asks whether you want to download account activity and balance information directly from your bank or enter the information manually, indicate that you just enter transactions manually. (Quicken asks the “manual versus online” questions if you select a financial institution that allows for online banking.)

   

5. Name the account and then click Next.

   When Quicken displays the first Add Checking Account dialog box (see Figure 2-3), move the cursor to the Account Name/Nickname text box and type a name in that box. Then, if you’re working with some versions of Quicken, you may get a chance to indicate how you’ll use Quicken by selecting one of those “This account is primarily used for” buttons so Quicken can start you off with a good beginner set of categories. Click Next after you do this. You’re almost done.

6. Enter the account balance date.

   When Quicken displays the Add Checking Account dialog box, shown in Figure 2-4, enter the date that you’re going to start keeping records for the bank account with Quicken. (Quicken wants you to start your record keeping for an account on a bank statement date because on a bank statement date, you have a really good balance from the bank.) Move the cursor to the Statement Ending Date text box, and type the month number, a slash, the day number, a slash, and the year number. If you start on July 1, 2015, for example, type 07/1/2015. Or, if this seems way too complicated for you, click the button at the end of the Statement Ending Date text box so that Quicken displays a pop-up calendar. Then click the date. Use the << and >> buttons to move back and forth a month at a time.

   

   

   Note: If you want to keep your transaction records for tax purposes, of course, it makes sense to track whatever accounts you can from the first of the year, assuming that you have all the necessary statements or your own records of all the transactions.

7. Click inside the Statement Ending Balance text box and enter the bank account balance.

   Use the number keys to enter the balance. The folks at Intuit, by the way, really want you to use the balance from your bank statement. If you have terrible financial records — for example, if you haven’t reconciled your account since either George Bush left the White House — this idea is probably good advice. If you have neat, accurate financial records, go ahead and use your check register’s balance.

   If you do use the bank statement balance as your starting balance, be sure to enter all the transactions that have cleared or will clear after the bank statement balance date. (This should make sense, right? If a check or deposit isn’t reflected in the bank statement figure, you must enter it into Quicken with its correct date.)

8. Click Next and then click the Finish button.

   Quicken redisplays the Home tab.

Hey, Quicken, I want to use that account!

In Quicken, you work with one account at a time. The logic is simple: You record income and expenses for a particular account (a specific checking account, savings account, and so on). That makes sense, right?

Here’s the next thing you want to know about using these accounts: In general, you work with an individual account by using the register window, shown in Figure 2-5. I talk about using the register window a lot more in the chapters that follow, but in a nutshell, it’s where you enter account transactions in the register. Entering transactions in a register is the basic Quicken recordkeeping task.

Here’s another thing you need to know about working with a particular Quicken account. You use the Accounts bar, which appears along the left edge of the Quicken program window (shown in Figure 2-5), to tell Quicken which account you want to work with in a register window.

To use the Quicken Accounts bar, you click its hyperlinks. In other words, select the account you want by clicking the account name. Quicken displays the register window for that account.

You can collapse and expand the Accounts bar by clicking the small arrowhead button marked that’s just to the left of Accounts. If the arrowhead button points down, clicking the button collapses the Accounts bar. If the arrowhead button points right, clicking the button expands a previously collapsed Accounts bar.

Whipping Your Category Lists into Shape

Quicken supplies categories to…well, categorize your spending. For example, you would probably use the Rent category to categorize all the checks you write to pay rent.

The predefined categories list may be just what you want. Then again, it may not. Table 2-1 shows the all-inclusive Personal Income and Personal Expenses category list.

Your category list may vary somewhat from the one shown in Table 2-1. Quicken may customize your starting category list based on the version of Quicken you install. For example, if you install the version of Quicken that supports tracking rental property, the category list may include Rental Property Income and Expense categories.

Take a minute to look through the category list. If you find categories you don’t need, cross them off the list in the book. You can delete them from Quicken in a minute or so. If you need categories you don’t see, add them at the bottom of the list. You can add them in about two minutes or so.

• To track a certain income or spending item for income tax purposes — wages, property taxes, and so on — you need a Quicken category.
• To track a certain income or spending item because you’re just interested in knowing how much you spend on it (for example, renting DVDs), you need a Quicken category.
• To budget by categories (because you need a category for any income or spending item that you want to budget), you need a Quicken category.

Table 2-1 The Category List

Subcategories … yikes, what are they?

You surely didn’t buy Quicken so that you could spend all day Saturday sitting at your computer instead of taking the kids to the zoo. I realize this and want to make Quicken easier for you to use. To do so, I figure I should tell you which Quicken features you can ignore if you’re feeling a bit overwhelmed. Subcategories are among those things I think that you can ignore.

“Subcategories?” you ask. “Yikes! What are they?”

Subcategories are categories within categories. If you look at the Auto & Transport expense category in Table 2-1, for example, you’ll notice a bunch of categories that follow the category: Auto Insurance, Auto Payment, Car Wash, Gas & Fuel, Parking, Public Transportation, Registration, Service & Parts, and Tolls.

When you use subcategories, you can subcategorize a transaction that pays, for example, auto and transportation expenses; you can further break down this category into subcategories such as Insurance, Fuel, Service, and so on. If you want to see a list of the ways you’ve spent your money, Quicken summarizes your spending both by category and, within a category, by subcategory. On a Quicken report, then, you might see this level of detail:

No doubt about it: Subcategories are useful tools. But they make working with Quicken a little more complicated and a little more difficult. As a practical matter, you usually don’t need them as you start off. If, later, you want to track a spending category in fine, granular detail, you can go ape on the subcategory thing then, okay? For these reasons, I’m not going to get into subcategories here.

If you get excited about the topic of subcategories later — after you have the hang of Quicken — you can peruse the Quicken documentation for more information.

If you do want to use the Quicken subcategories, don’t delete the subcategories shown in Table 2-1. If you don’t want to use the subcategories, go ahead and delete them. (I tell you how to remove categories in “Removing categories you loathe,” later in this chapter.)

Category groups … double yikes!

Category groups, which were known as supercategories in a previous version of Quicken, combine categories into sets that you can use in reports and in your budgeting. Sure, they’re sort of cool, but you don’t need to worry about them if you’re just starting with Quicken.

If you’re dying to know more about category groups, you can refer to Quicken online Help. Quicken Help works like Help in other Windows programs. If you don’t know Windows all that well — or at least not well enough to use Help comfortably — see Appendix A.

Four tips on categorization

I have just four tips for categorizing:

• Cross off any category you won’t use.

  If you don’t pay state income taxes in the state you live in, for example, get rid of the State Tax category. Extra, unneeded categories just clutter your list. I think it’s great if you can get down to just a handful of categories.

• Don’t be afraid to lump together similar spending categories.

  Take your utilities expenses, for example. If you pay water, natural gas, electricity, and sewer, why not use a single Utilities category? If you pay different utility companies for your water, natural gas, electricity, and sewer, you can still see what you spend on just electricity, for example, even with a single catch-all category for utilities.

• Be sure to categorize anything that may be a tax deduction.

  Categorize alimony, educational, medical, and dental expenses; state and local income taxes; real estate taxes; personal property taxes; home mortgage interest and points; investment interest; charitable contributions; casualty and theft losses; moving expenses; unreimbursed employee expenses; and all those vague, miscellaneous deductions. (By the way, the foregoing is a pretty complete list of itemized deductions in the United States at the time this book was written.)

• Don’t sweat this category stuff too much.

  In spite of the preceding three tips, don’t let these category lists or the work of customizing them scare you. If you want to spend a few minutes cleaning up the list, hey, that’s great. If not, or if you’re starting to get anxious, just skip to Chapter 3.

Ch-ch-changing a category list

You should now be ready to fix any category list problems. Basically, you need to do three things: add categories, remove categories, and change category names and descriptions.

Adding individual categories you’d love to use

Adding individual categories is a snap. Here’s all you have to do:

1. Choose Tools⇒Category List.

   Quicken displays the Category List window (shown in Figure 2-6). This window lists the categories available and the accounts you’ve set up. Careful readers may notice that the categories shown in Figure 2-6 include those shown in Table 2-1.

   

2. Click the Add Category button in the Category List window.

   The Add Category button, by the way, appears in the upper-right corner of the window. Quicken dutifully displays the Set Up Category dialog box (shown in Figure 2-7). You probably aren’t surprised that you use this puppy to describe the new category.

   

3. Enter a short name for the category.

   Move the cursor to the Category Name text box and type a name. Although you can use up to 15 characters, use as short a name as possible to clearly identify the category. Why? Because you use this category name every time you want to tag a transaction to fall into the category.

4. Enter a description for the category.

   Move the cursor to the Description text box and then describe the category. Quicken uses the category description on reports that show the category. If you don’t add a description, Quicken just uses the category name. You don’t need a description, obviously, if your category name is…well, adequately descriptive.

5. (Optional) Identify the category group.

   If you disregarded my earlier suggestion to not worry about category groups, click the Options button at the bottom of the Category List window and choose Assign Category Group from the menu that Quicken displays. When Quicken displays the Assign Category Groups dialog box, click the Add Custom Groups button to create a new category group. Then, with the Assign Category Groups dialog box still displayed, select the category you want to group from the Find the Category You’d Like to Re-Assign list box (shown on the left half of the dialog box) and then the category group you want to use from the Assign It to a Custom Category Group list box (shown on the right half of the dialog box). Click Done when you’re…well, done.

6. Indicate whether the category is an income category or an expense category.

   Select the appropriate Income, Expense, or Subcategory Of option button; just select the appropriate option button with your furry little friend, the mouse. If you’ve totally blown off my admonition not to use subcategories just yet, use the dialog box’s drop-down list to indicate into which income or expense category a new subcategory falls.

7. Indicate whether the category tracks an amount you will use on an input line on next year’s tax return.

   By line, I mean the actual tax-return line — such as the line on the U.S. 1040 form that tracks alimony.

   If a category does track a tax deduction, click the Tax Reporting tab of the Set Up Category dialog box, move the cursor to the Tax-Related check box, and then select the check box if the category is tax-related or deselect the check box if the category isn’t tax-related. Just to clear up any confusion, vacationing in Hawaii probably isn’t a tax deduction — even if your neighbor promises that it is. Then identify the form and line by opening the Tax Line Item drop-down list box and selecting one of its entries.

8. Click OK.

   Quicken adds the new category in the Category List window (refer to Figure 2-6) and then redisplays the window. Now that you understand the stuff in the Category List window, note that it shows the category name; its type; notations concerning the category’s tax-reporting status; and, golly darn, even its description and group. (The tax information about on which tax-return line a category gets reported appears only if the Show Tax Line Item choice below the option button is selected.)

Adding categories from a situational list

Quicken keeps lists of categories that are standard for people in certain situations, including Quicken users who are married, homeowners, real estate investors, and business owners.

To use these situational lists as a source of new categories, follow these steps:

1. Choose Tools⇒Category List.

   Quicken displays the Category List window (refer to Figure 2-6).

2. Click the Options button and then choose the Manage Categories command from the menu.

   Quicken displays the Manage Categories dialog box. This window lists the categories that may be useful in certain situations.

3. Select one of the situational lists.

   Open the Available Categories drop-down list box (you can do this simply by clicking the box) and select the situational list of categories you want to display: standard, business, investment, or rents and royalties. Quicken displays the categories from the situational list selected.

4. Select the categories you want to add.

   Click the categories in the Categories list that you want to add. Quicken marks the categories you select with a check. You can, by the way, mark all the categories shown in the situational list by clicking the Mark All button. You can unmark all the “marked” categories by clicking the Clear All button.

5. Add the selected categories.

   After you mark the categories you want to add, click the Add button. Quicken adds the categories to the Categories to Add list. To complete the addition of the categories, click Add.

Removing categories you loathe

Removing categories takes only a couple of keystrokes. With the Category List window displayed, follow these steps:

1. Click the category you want to remove and then choose the Delete button that appears.

   If no transactions are in the category, Quicken displays a message that asks you to confirm your decision. You can’t remove any categories you’re using for some old transaction. Accordingly, you may first need to recategorize transactions that use a category you want to nuke.

2. If you want to remove the selected category, click OK.

   Otherwise, press the Esc key or click the Cancel button.

Changing category names and descriptions

You can change a category name, its type, its description, and its tax-related setting if you later discover that you made some mistake, such as misspelling a word in a description.

To change a category name, follow these steps:

1. Display the Category List window (refer to Figure 2-6).
2. Use the arrow keys or click to select the category you want to change. Click an Action button, and then click the Edit button.

   Quicken displays a dialog box that has text boxes and option buttons describing the selected category’s information: its name, description, type, and tax-related settings.

3. Make the changes you want by replacing text box contents or changing option-button settings.
4. Click OK to save your changes and return to the Category List window.

Want to Play Tag?

Using categories isn’t the only way that you can summarize your financial records. Quicken provides tools called tags that let you summarize transactions in addition to the way you summarize transactions with categories. (In previous versions of Quicken, tags were known by another name: classes.)

Now, typically, tags aren’t something you need to worry about — especially if you’re just using Quicken to regain control of your personal finances. However, tags can be very useful if you’re using Quicken in a business or if you’re investing in rental real estate.

For these reasons, I want to quickly describe how you set up tags.

To set up a tag (or several tags), take these steps:

1. Display the Tag List window.

   To do this, choose Tools⇒Tag List. Quicken displays the Tag List window (not shown).

2. Click the New button in the Tag List window.

   Quicken displays the New Tag dialog box (shown in Figure 2-8).

   

3. Enter a short name for the tag.

   Move the cursor to the Name text box, and type a name. Use as short a name as possible to clearly identify the tag. You use this tag name every time you want to tag a transaction. (If you’re using tags to identify real estate rental properties, which is probably their most common use, you may want to use the street name as the tag: Winston as the tag for the duplex on Winston Street, Roosevelt as the tag for the cottage on Roosevelt Avenue, and so on.)

   The reason real estate investors tag transactions is straightforward. When you tag each income or deduction transaction with (for example) the property name, Quicken easily produces a profit-and-loss statement for each property, using the categories and tags to slice and dice the data.

4. Enter a description for the tag.

   Move the cursor to the Description text box and then describe the tag. Quicken uses the tag description on reports that show the tag. If you don’t add a description, Quicken just uses the tag name. You don’t need a longer description if your tag name is descriptive enough.

   The technical editor, David (who’s also a CPA), wants me to tell you that you should just ignore the Copy Number box. He’s probably right. But if you’re just dying to know what this box does, click the Tell Me More link.

5. Click OK.

   Quicken adds the new tag in the Tag List window and then redisplays the window. And that’s that.