In my previous post I wrote about how envelope budgeting does a good job of preparing for large, periodic expenses, like property tax or car repairs. Today I'm going to argue that using Quicken can fool you into thinking that you're taking charge of your money, when you really are just tracking your money after it's already spent.
I first started using Quicken back when I was young, dumb, and single. I was making good money, I didn't have much in the way of expenses, and I frankly didn't balance my checkbook terribly often. Quicken was a huge leap forward for me. It was super easy to enter in transactions, it felt really good to assign categories to expenses, and that happy alert box you got congratulating you for balancing your checkbook was very validating. I geeked out for a while, creating an elaborate taxonomy of expense cateogories, and there was even a brief period where I was keeping track of my cash expenses down to the penny. (I had a lot of time on my hands).
Fast forward a few years, and things are more complicated - I'm married, I have kids, a mortgage, and some much more significant expenses. I still dutifully entered all of my transactions into Quicken, categorizing away, balancing monthly, but it was just arranging the deck chairs on the Titanic. We were falling into debt, and quickly.
How could this happen? Wasn't balancing my checkbook keeping us in control? Well, no. Sure, I could run a report and tell you how much we were overspending, and it what areas. In fact, I would do that from time to time. My wife loved it, as I'd run this sort of report, reality would come crashing down, and I'd be just a delight to be around for the next couple of days. "We can't go on like this! How could we spending all of this money?"
Using Quicken to enter and categorize transactions was giving me the illusion of control, but there was no control. Sure, I could do some forensic accounting, and I could tell you to the penny how far in the red we were, but on a day to day basis it was not helping us manage our expenses.
In order to have control of your money you need to know what you're doing with it before you spend it. At the time that you're spending some of your money, you need to know that it's not going to mess up the rest of your month. Envelope budgeting does this for you. Relying on Quicken's built-in reports is like getting in your car and driving for a while, and then using your GPS to figure out just how lost you are.