Personal Finance Organization For Smarties

This is not a post for dummies or idiots: this is for smart people who want to take control of their personal finances. I’m inspired to start a series on personal and small business productivity based on the positive response to my post on a paperless small office – I use exactly the same methods for keeping paperless personal files as well, so that’s a good place to start.

This post is about keeping your personal finances organized, not about budgeting or investing (which you can read about in a variety of other places), so covers more about the paperwork and tracking of finances.

Here’s how I keep my personal finances organized:

  • I use credit or debit cards for almost all purchases. Since these transactions are downloaded and categorized (see next point), it lets me see exactly what I’m spending on what. If you’re going to do any budgeting, this is essential.
  • I enter/download every financial transaction into Quicken. You can use a different package, but my point is, get it all in one place. I’ve been using Quicken for many years, and once I got over the initial chore of setting up my accounts and got into the routine of updating it frequently, it’s become my primary source for information about my finances as well as a huge timesaver when I’m doing monthly expense reports and annual tax returns. It tracks my bank accounts, credit cards, investment accounts (both taxable and retirement), lines of credit, money owing to/from my small business, and even my assets such as my condo. It’s really valuable for seeing when I need to move funds from one account to another, such as from a savings account to a brokerage account to make a new investment. One thing that I do not track is what I do with cash once I withdraw it from the bank: I just show the withdrawal transaction. I’m not that anal, and since I use credit or debit for most purchases, my cash spending is pretty minimal.
  • I monitor my finances frequently, usually only spending a few minutes at a time. Once I was organized, it was really easy to just start monitoring any changes to my finances:
    • I download bank and credit card transactions directly from my banking site into Quicken and check for any unusual transactions every couple of days, rather than waiting for my monthly statement. Several years ago, when I was just moving back from the US to Canada, this helped me spot a forged cheque drawn on my US bank account and uncover the underlying identity theft before it could spread, all within two days of the cheque being cashed. Recently, although this is quite rare, I found a duplicate transaction for an airport limousine service on my credit card, which I then called Visa and had reversed. If I hadn’t been tracking the transactions, and had a way to search through old transactions, I likely wouldn’t have noticed the transaction on my monthly statement since I take a lot of airport limos and occasionally misplace receipts.
    • I apply meaningful categories to transactions in Quicken. Since this is my primary source of financial information, I make sure that (for example) a business expense on my personal credit card is categorized as such, so that I will catch it in my month-end expense report. Quicken is smart enough to auto-categorize transactions that it recognizes when downloading, so it knows that a charge from Fido is a business telecommunications expense, not a personal expense.
    • I enter investment transactions manually (my discount brokerage doesn’t support manual downloads of these) at least once a week. If I actively make a trade, then I enter it immediately, but I use the other times to record things such as dividends and fees on my accounts. When I notice that the cash balance of any investment accounts gets above $100 from accrued dividends, I immediately reinvest it into a money market fund since my brokerage doesn’t pay interest on a cash balance, which earns me a bit of extra cash each month.
  • I reconcile my investment accounts to the monthly statements. Although I regularly enter transactions, I still reconcile to the statement since it allows me to compare the number of shares/units held of an investment as of the statement date, to ensure that I didn’t miss any transactions during manual entry. I don’t do this with bank statements, since I have them set to auto-reconcile every time transactions are downloaded, which alerts me to any difference between the online and Quicken balance.
  • I use automated debit for recurring payments whenever possible. This includes everything from property taxes to phone bills to my credit card, which I pay in full every month. I set these up as recurring payments in Quicken, which then reminds me when these are coming up in case I need to move funds around to cover payments. I never pay late fees or interest charges because I forgot to pay something on time.
  • I track expenses as they occur, and capture the receipts. I use a spreadsheet for tracking business expenses, although there are a number of good applications out there such as Expensify. I haven’t found one that’s quite flexible enough for me, since I often have multiple currencies as well as monthly recurring expenses such as internet. If a receipt is available online (usually), I download it right away, or I scan the paper receipt. By the time I get to the end of the month, usually all I need to do is check Quicken for any business expenses that I might have missed (I have a custom report saved in Quicken to display transactions from the business expense categories), create a PDF of the expense report and attach the scanned (or downloaded) PDF receipts. For personal expenses, I only scan the paperwork if I might need it, such as for a product warranty. An example: today, I received my property tax bill in the mail. It’s already set up for pre-authorized monthly payments, so I opened Quicken and added the five recurring payments noted on the bill: they will automatically show up as a reminder in my Quicken cheque register three days before the automatic payment is made, giving me time to transfer funds if I need to. I then scanned the bill, added the resulting PDF document to my condo tax folder, and shredded the document. Total time, less than five minutes, and this was a complicated transaction because it involved recurring payments for a half-year of taxes. I also discovered by reading a bill insert that I can receive future tax bills via, so I signed up for that: from now on, I’ll receive my tax bills electronically and won’t need to scan them.
  • I use online money transfers for one-off payments whenever possible. Between this and using credit/debit, I no longer write personal cheques. I have some stashed away just in case, but typically only use them as proof of my banking information when I’m setting up for automated debits. It’s easier than writing cheques, and all the details of the transaction are right there in my bank account and downloaded to Quicken for easy tracking.

A huge part of my personal finance organization is around my use of Quicken. I also use QuickBooks for my small business, since it has better accounting features such proper double-entry accounting and a general journal, but that is completely separate from my personal finances since my company is incorporated. Transactions between myself and my company – payroll and expenses – are the same as with any employee and business, although the timing of my paycheque is a bit more sporadic. I do most of my company purchasing using my personal credit card (for the airline points) and submit an expense report each month.

As with the paperless office (and home) methods that I discussed in the previous post, this might seem a bit daunting to start. There’s really just two things to do, however: first, start changing habits to use direct debit, online payments and the other paperless (and automated) techniques; this is a one-time effort, probably spread over a couple of months as you figure out where all your transactions are occurring. Second, start using personal finance software such as Quicken by picking a point in time – like January 1st – and entering your account balances as of that date, then all new transactions from that date forward; there’s an initial effort to set this up, but then it’s just a matter of setting aside 30 minutes each week to download or enter new transactions, and reconcile accounts.

Internet Serendipity: NCIS And Wi-Fi SD Cards

I love the internet. I really don’t understand people who say that they need to get away from the internet in order to take some time off: my time off is enriched by online access to a wide variety of services and information, and I wouldn’t want to lose that even if I am not taking the time to respond to (or even read) business-related email. For me, the key is avoiding email and phone calls, not avoiding the internet: there are too many things on the internet that I use as part of my leisure activities to turn it off altogether.

Case in point: last night, we decided to watch an hour of TV. We both like NCIS, and since we cut the cord on cable TV over three years ago, I pulled up the latest episode on the GlobalTV iPhone app (Global syndicates CBS shows for Canadian broadcast) and sent it via AirPlay to the AppleTV. That’s right, nothing but an internet connection, an iPhone and an AppleTV, and we’re watching this week’s episode of NCIS on our own TV. If I bothered to set up a US proxy for the AppleTV, I probably could have done this without the iPhone app, but this works just fine. Without the internet: not possible.

But that’s not all. I’m planning a trip to visit some friends for a few days, and will take only my Nexus Android tablet (for reading), my iPhone and my Nikon Coolpix camera – no netbook. Although it’s a short trip, I was a bit concerned about uploading the photos during the trip: when I have my netbook with me, I copy photos from the camera SD card to the netbook daily as a backup, and upload them to Dropbox if I have internet access. If I fill the memory card, I can delete photos from it since they’re backed up, and if my camera (or even my netbook) were lost or stolen, ditto. You’re probably wondering what this has to do with watching TV on the internet, but in that particular episode of NCIS, the murder victim had a wi-fi memory card in his camera that was automatically transferring photos to his tablet in the back seat of his car; the killer wiped the memory card but didn’t find the tablet. “Wi-fi memory cards? OMG FTW!” I thought (thereby missing a few minor plot points), “Where do I get one of these?”. Since my iPhone was busy serving up the TV show, I grabbed my Nexus and searched around. Eye-Fi was apparently the first to offer these, but Transcend offers higher data transfer speeds (during photographing, not the wi-fi connection) and is putting them out at a lower price. I bookmarked a couple of sites for later, and went back to NCIS. After the show, I searched around, found the Eye-Fi cards on Amazon, then found a camera shop in New York selling the Transcend cards through their eBay storefront, with shipping to Canada. I ordered the Transcend 16GB card, scheduled to arrive before I leave for my trip, and downloaded their iPhone and Android apps in preparation. Product research, comparison and purchase within an hour of discovering that a particular product type even existed: again, not feasible without the internet.

Taking full advantage of on-demand internet (rather than the internet having you on-demand) is a bit like turning off your phone ringer, and only using it when you want to: it only controls your actions if you allow it to. Turn off your push notifications, and your ringer if you like, but don’t disconnect if the internet adds value to your leisure time.

Going Paperless On A Small Scale

This post is cross-posted from my business blog. Because of the positive reaction over there, I’ve decided to write a few personal finance, organization and productivity posts here, based on my own experiences. Although I am not obsessive about organizing, having run my own small businesses and household for 25 years has taught me a lot about keeping things in order.

Earlier this week, I linked to the Paperless 2013 website, a vendor-sponsored initiative that encourages businesses to cut paper, ostensibly for environmental reasons. The products featured by the sponsor vendors – Google Drive, HelloFax, Manilla, HelloSign, Expensify, Xero and Fujitsu ScanSnap – can certainly assist with this, although I run a completely paperless office using only one of those (Google Drive), and that one only in a secondary role. The interesting part was a conversation that ensued with another small business owner, although she was primarily interested in going paperless with personal documents (which I have also done), which made me realize that most small businesses are a bit clueless about how to go about this in a secure and legal fashion. I’ve been involved in large-scale document scanning projects since the 1980s, and I’ve gathered a lot of ideas about how to do this on a scale suitable for organizations of any size, so I thought that I’d lay out a plan suitable for small businesses.

Keep in mind that although I run a single person business, it’s incorporated, so I have the same paperwork requirements as any other private company: invoicing, payroll, government filings, income tax and all. I also do some amount of document collaboration with other small businesses, as well as for some non-profits with which I’m involved.

Here’s how I keep paperless:

  • If I receive a document in electronic form, I leave it in electronic form unless I absolutely need to print it.
  • If I generate a document, I leave it in electronic form unless I need to physically sign it (such as a contract) or take it to a client meeting (since many of my clients have not embraced the paperless way). This is not just Microsoft Office documents, but any document including things such as invoices, which I generate from my accounting software (QuickBooks) directly as a PDF and email to clients: I keep a copy of the PDF invoice, but it is never in paper form in my office. Services such as Freshbooks pride themselves on offering electronic invoicing, but you don’t need to switch if you’re happy with what you have, just install a good PDF generator and send it via email.
  • If something is in paper form but I can get the electronic version instead, I do. Although my bank doesn’t provide electronic bank statements for commercial accounts, many other banks and service providers do. Most of my monthly expenses receipts, including travel and telecommunications, arrive in PDF, since most airlines, hotels and car rentals will email a receipt to you if you ask. My most common question at a client site when they hand me a huge printed document or presentation is “can I get that in electronic form"?”
  • As a last resort, if I receive something in paper form (or have to print it in order to sign it), I scan it and shred the paper as soon as possible. This is the crux of most document imaging projects, but in reality is a fairly minor part these days if you do most of your communication electronically and can keep paper out of the mix altogether. Yes, it’s legal (more on that below). Since my volume is very low, I use an inexpensive Epson scanner that I picked up at Costco, and the software that came with it. That’s fine for a few pages a day, but anything more than 10 pages at a time gets tedious because it doesn’t have a sheet feeder. I would highly recommend a sheet feeder if you have a backlog of paper to convert, or if you regularly receive large paper documents. For smaller receipts when I’m travelling, I snap a photo with my iPhone, back it up to the cloud, then destroy the paper document.
  • I use automated backup to replicate everything offsite. This eliminates the risk of losing documents, and allows me to access documents from my netbook when I’m travelling.
  • I use online backup/sync services for shared content management when I collaborate on a project with other small firms and independents. Even if I were working with people in the same office, I would use the same methods since there’s no need to own your own servers.
  • I manually maintain retention policies on the electronic documents, and delete them appropriately. In Canada, that means I need to keep all corporate and tax-related documents for six years past the end of the fiscal year: I just deleted my 2006 files and shredded the paper files, since that was the last year that I kept any paper records. For any files with a retention policy, I keep them in dated folders so that I can quickly purge them without having to search through files; this means a bit of electronic reorganization at the year end, but it takes only a few minutes.

The result: I have no paper files in my office, except for a small pile in my in-tray waiting to be scanned. No filing cabinets, no boxes of documents in storage. As an added bonus, I have offsite backup, which most people with paper files don’t.

Quelling the nay-sayers:

  • “I don’t like to read on a screen”. Get a bigger/better screen, or dual monitors, and a tablet for taking it with you. Cheaper in the long run.
  • “It’s not secure”. Back everything up offsite, not just locally, in case of a physical disaster (fire/flood/theft). I use Jungle Disk (a division of RackSpace), which encrypts my data on the desktop, then uploads it to an encrypted Amazon S3 bucket. I hold the key, not them, so they can’t decrypt my data. My backup runs automatically, so I don’t need to do anything to make this happen.
  • “It’s too hard to create electronic documents”. Get a good PDF printer/document assembly application. I use CutePDF Pro, which allows me not only to generate PDFs from any application that can print, but also to assemble multiple PDFs into a single document, rearrange pages and other functions. This is useful when I need to append a timesheet to an invoice before sending to a client, or to concatenate all of my expense receipts to attach to a monthly expense report.
  • “I can find things easier in my filing system”. Easier than searching through full-text documents? I don’t think so, unless you have a really trivial number of files. Learn how to use search capabilities of your desktop environment (built into Windows, for example), install a third-party search utility, or (if your company is large enough) use a shared content management system.
  • “I need to keep these paper documents for legal/regulatory reasons”. Probably not. Most government taxation bodies have long accepted digital copies (scans of paper, or original digital documentation such as an invoice received as a PDF) in place of paper – what they refer to as "electronic record keeping". You can see the Canada Revenue Agency’s take on this at //, and similar policies exist for the IRS and other agencies. The Canada Labour Code has similar requirements for human resources records. You may need to research for your type of documents in your jurisdiction, but electronic record-keeping is most likely allowed.

If you’re starting from ground zero of a paper explosion, this might seem a bit daunting. Keep in mind that you can do this on a day-forward basis, since many of your old paper files can be shredded as they pass their 6th birthday: just go paperless starting today (or from the beginning of your fiscal year) and let the old paper cycle out over time. If you really love it and want to get ambitious, you can start doing some back scanning, but it may not be worth it. When I started in 2007, I was already keeping everything electronically that originated that way, but added in scanning of expense receipts (my biggest single paper volume) and government documents, which was not a big change. I still didn’t start scanning contracts for another few years, since they’re big and I don’t have a sheet feeder, but eventually went back and scanned all of the old ones just to clean out the last of the paper files.

A lot of these ideas, of course, are not limited to small business, but form the core of any ECM initiative. Things get more complex when you add in automated business processes to move those documents around between people, but the basic concepts, motivations and nay-saying are the same.