Or at least my part in it…
So in my previous post, I set the stage for my lifelong indebtedness, my desire to get out of it, and my general incompetence in doing so. Today we track a short history of my attempt to understand money.
Notice , I said I needed to “understand” money not “manage” it. This is a personal quirk of mine. I have never been particularly good about remembering things (ask my wife). Instead, I understand things and then simply recreate in my mind how to deal with them. Failing to understand the issue at hand leaves me at the mercy of a faulty and disinterested memory.
My first attempts to understand money revolved around a hand written check register. Looking again at one, it begs the question why double entry accounting isn’t fundamentally obvious to everyone who has ever had a check account. After all, a checkbook register is arranged EXACTLY like a double entry accounting journal. It has columns for date, transaction id, payee, payment (debit), deposit (credit) and a running balance. Yet, making practical use of this for family money management continues to baffle me (and most people).
Thinking I needed something more, I began using Quicken by Intuit. I was a HUGE fan of Quicken for a great many years. It really upped my game on financial tracking and accuracy. Of course, this does not mean it improved my money management. I remember once taking a trip to California with friends. Every time we stopped for gas, I quickly produced my deck of credit cards, representing nearly every gas station and department store known at the time and charged our gas. I then collected cash from my friends for their part. Only a complete fool would think I saved that money to pay my bill with later.
No, all I did was get better at tracking where my went, not where I needed it to go.
It did however lay the foundation I needed to decide I needed to do something and dive right in. My first attempt at proactive money management was to use the budgeting tools built right into Quicken. I examined my transactions, made my categories, set my limits and was stunned when Quicken told me I had a monthly surplus of a thousand dollars! I can tell you I breathed a HUGE sigh of relief when I saw that. I was getting desperate and realized with this kind of surplus, I would wipe out my credit debt in no time at all.
Equally stunning to me was when I got to the end of the month and no thousand dollars. What the hell? I reviewed, reviewed and reviewed again. I spent months trying to figure out what I was doing wrong. I was reasonably good at sticking within the boundaries of my budget, but at the end of every month, no leftover money to throw at my credit cards.
In desperation, I went to the internet. In those days, that meant UseNet News and the AltaVista search engine. Eventually I found the answer. Quicken’s budgeting was fundamentally broken. Well crap. Now what…?
Now I’m sure there are some who have successfully used Quicken budgets to manage their money, but it did not work for me and it turns out it was simply due to the fact Quicken’s budgeting did not use proper, double entry accounting. Because of this, you could only use Quicken budgeting to mange your money in a somewhat backhanded manner, but it would never properly “add up.” I won’t bother you with the detailed description, because I could barely understand it. All I knew was it would not work.
In fact, the entire approach is wrong as it is generally reactive, rather than proactive. In essence, Quicken budgets were nothing more than a pretty report on what I already knew, which is where my money went, not where it should go.
At this point, I started looking at other tools. For various reasons, GNUCash was top of my list. At the time, there were very few, personal software packages using double entry accounting. Most followed the Quicken model and were generally feature-for feature comparable. In other words, they would work no better for me than did Quicken. I would make several attempts to use GNU Cash, but the very double entry accounting I knew I needed continued to be a barrier to my usage.
I continued using Quicken to a least track my data. I knew I wanted to keep it if I could and at the very least, I would need it to create a budget when I finally found some way to do it. Eventually, I had probably a decade or more of data.
Eventually, I stumbled onto the Envelope method for budgeting. Some form of this is all the rage in personal debt management seminars, books, webinars, etc today. The basics are remarkably simple. Cash your check, divvy it up between envelopes marked with categories, take your envelope when you go shopping. When the envelope is empty, you are done shopping until you put more cash in.
The drawback is obvious. Who uses cash anymore? Even those who try, find it impractical at some point and that point is where it breaks.
Fortunately, most debt management gurus have developed systems and software to help you create virtual envelopes that manage credit cards, etc. This is important, not only because of today’s world, but because this is ultimately why all my Quicken Budgets failed. I did not properly track the cash flow of the credit card. These virtual envelope systems generally have pseudo accounts that hold your money until it is time to pay your credit card bill.
Still, certain problems remain. The first is in how this whole process works. It works by using double entry accounting! Well, mostly. And therein lies the second problem. To get anywhere with these virtual envelopes, you have to suck in the salt water of double entry accounting, already the bane of my financial existence. However, because that tends to hurt people’s heads, most of these systems try to obscure a certain amount of the process. Which means even if you start to feel like you are understanding the process, every now and then it goes pear shaped and it is not obvious (to the novice such as me), why. At least it did for me.
The leader at the time was Mvelopes and I jumped into a life long subscription. Over the years though, their attempts to simplify the process kept throwing me for a loop. Like I said, I never truly grasped double entry accounting. So when the UI changed, and certain accounts disappeared to be handled magically by the system, the cash flow vision I had got muddled.
It did not help that the product suffered technical problems as well. First and foremost, the change from a desktop application to a web based one is a shift I’ll never forgive them for. I understand the business reasons for doing so, but as a Software Professional, I have maintained from the beginning, and still do, that the Web Browser is the single, most horrific application deployment platform possible. I’ll save the details of that rant for another day, but the change from HTML/Javascript, to Flash, to HTML5 continued to prove the app was just to big to fit inside the resource constraints of a browser.
In addition to the UI, the back end was plagued with problems. Mvelopes never seemed to get the same level of cooperation from banks as Intuit. Grabbing your transaction data was a web scrapping process that broke constantly (as one would expect given how often web sites change) and the worst offender was American Express. For me, this was particularly destructive, as one of my other, backhanded approaches to budgeting was to use my AmX card as my primary credit card, for the simple reason that I HAD to pay it off monthly. Mvelopes’ continued problems with American Express meant I was constantly, manually, dedupping records, adding missing records, etc.
Then they went out of business. Bringing us to where we are today.
Stay tuned for our next adventure, where I craft my latest solution/attempt/folly…