Micros Change Face of Money Management: Banks, Armed with Planning Software, Can Cash in on Customers' Service Needs

By Porter, W. Thomas | American Banker, September 17, 1984 | Go to article overview

Micros Change Face of Money Management: Banks, Armed with Planning Software, Can Cash in on Customers' Service Needs


Porter, W. Thomas, American Banker


Most banking customers probably do not view their personal financial affairs as a system project, but maybe they should. Because if they have income, spend money, invest money, or borrow money (and that is just about everybody), they have a need for a personal financial system to satisfy three objectives:

* To provide information to compare how they are doing in relation to their goals and budget, and how much they are putting aside for long-term objectives, such as retirement:

* To provide information for short-term decisions, such as what investments to choose, or what tax planning technique to implement, and for long-term planning in areas such as educational financing, retirement and financial security;

* To provide information requested by exterman sources, such as a bank where they borrow money or the IRS.

The advent of the microcomputer has significantly affected personal financial systems. The sheer speed, storage, computational, and retrieval capabilities of the microcomputer obtained at an affordable price have completely changed the nature of personal financial management activities. What Can It Do?

The microcomputer enables the user to have up-to-date information for decision-making. By entering your transactions on a regular basis, your computer can summarize and print out your transactions with the press of a few buttons.

Such summarized information can significantly aid in tasks such as year-end tax planning, evaluating the impact of the purchase of a new house or car on your budget, and accumulating tax-deductible expenditures for the preparation of your tax return.

It enables the user to perform "what if" analyses with pre-programmed, sophisticated analytical routines.

For example, what if you want to send your daughter to college in seven years -- how much do you have to start setting aside each year to have sufficient funds for her education? Or, what if you want to retire at age 60, what annual rate of return do you need on your investments to have sufficient capital to retire comfortably? Or, what if you die prematurely -- is your present life insurance adequate?

It enables the user to process information using "expert" systems designed to provide an appropriate structure, analytical techniques and processing routines that most people can use effectively but could not develop effectively. Such systems enable you to do a range of financial analyses, such as investment analysis, tax planning, educational financing, and retirement planning.

It allows you to get more done in less time. You can operate your computer-assisted system faster and more accurately than manual methods.

It opens up avenues of information that were previously closed due to the inordinate amount of time required to handle manually the many calculations and transactions involved in most personal financial planning situations. Available Packages

A number of cost-effective, relatively easy-to-use personal finance software packages are available. They can be grouped into four categories:

* Transaction-oriented packages to enable you to collect, store and summarize information and report summarized data for performance measurement and decision-making;

* Planning-oriented packages to enable you to comprehensively play the "what if" game relating to areas such as tax planning, educational financing, retirement planning, insurance planning and estate planning;

* Special purpose packages to handle a specific requirement, such as tax return preparation or the management of your investment portfolio;

* Spreadsheet packages to create financial planning models for specialized requirements you may have, such as detailed cash flow projections, or real estate investment analyses.

More banking customers are not home computer users and many will not be in the foreseeable future. …

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