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Last week's thread.

This week's Free Software Application of the Week is GnuCash, a free accounting program.

Now, I get the feeling that some of the die-hard anarchists here might be pissed with me for choosing this program as Free Software Application of the Week, because they think personal finance is for bourgies. That's not true. If you interact with money at all, then recording your cash flow is useful, especially if you're working class. Before I started recording all of my transactions, I had only a vague idea of my net assets (how much money I had) and net income at any given time, so I would have to estimate how much money I could spend or give away to homeless people, without it negatively impacting me. Sometimes, my estimates were wrong, and I would have to skip meals to compensate.

Recording your cash flow avoids those problems, because you will always know exactly how much money you have available. In the old days, people did this by hand. They would draw a table, and log every transaction they did in the table, adding or subtracting the amount from their net assets. This was a pain to do by hand, because it required a lot of writing, and it required you to calculate the new total every time.

Nowadays, computers can do all of this, so there's little sense in writing it all out by hand. Some people choose to create a spreadsheet for this using LibreOffice Calc or slimy proprietary MS Excel, but that's really using the wrong tool for the job. GnuCash is what you should use.

In brief, GnuCash lets you keep a complete record of all your transactions. The default settings for a personal account give you 3 accounts for your assets (the amount of money you have) - the cash in your wallet, a checking account, and a savings account. When you first create the GnuCash account, it will let you fill in the opening balance for each one. Then, GnuCash has other "accounts" for income and expenses (I put accounts in quotation marks, because they aren't really accounts, just logs of transactions). For income, GnuCash has accounts for salary, gifts received, income from interest, and a couple of others. It also lets you add or delete accounts (so, for example, if you don't have a salary, but you do have wages, you'd delete the salary account and add one called Wages). When you receive a paycheck, you'd log the date and the amount in the respective income account, then say which asset account you deposited it in (usually checking or savings, but if you got paid in cash, you'd put it in the wallet, then transfer it to checking or savings if you later deposit it in the credit union). Same goes for when you buy something, or donate money - log it in the respective expense account, then say which asset account it should be deducted from.

What's the purpose of doing all of this? Well, once you've been using GnuCash for a month or two, you can make use of the many reports GnuCash can produce for you. The most useful one for me is the Expense Piechart (go to Reports -> Income & Expense -> Expense Piechart). This creates a piechart showing you what your biggest expenses are (duh). This is especially useful for deciding what you need to cut back on for spending. If you work multiple jobs, the Income Piechart is similarly useful. The Net Worth Linechart is also useful for tracking how much money you have over the course of the year. Basically, use these all as you see fit.

Another useful feature is the ability to create a budget. The basic idea of a budget for most people is to determine how much money they want to have left over at the end of the month. This is accomplished by starting with your net assets at the beginning of the month, then estimating how much income you'll have that month, and how much money you must spend. If you have a goal for how much money to have left over at the end of the month, this tells you how much money you are allowed to spend at your discretion throughout the month. GnuCash lets you set up a budget manually, but another great feature it has is the ability to estimate certain parts of your budget, based on your past transactions. For example, if you always get paid $300 per month from one job, GnuCash will recognize the pattern, and factor that into the budget (that is, if you ask it to). Once you've created a budget, all you have to do is stick to it.

One more potentially useful feature of logging every transaction is the ability to spot fraud. If you get statements from your credit union (hopefully nobody on Raddle is using a for-profit bank), but you see a transaction that you didn't record in GnuCash (and you know you've been diligent about recording everything for the month), you'll know that someone has your debit card number, and you can take appropriate action. Or, if you record the hours you work for a certain pay period (in a program separate from GnuCash), and you multiply that by your hourly pay, then subtract things like income tax, you could tell if your boss is stealing your wages, or if they stole your wages in the past (assuming you have the record). Calculating the amount of income tax withheld from a paycheck isn't a feature of GnuCash as far as I know, so you'll have to do that yourself. I plan to write an article on Raddle for how to do that. Here's the article.

So, GnuCash is an incredibly useful program, and it's very good at what it does. Out of all the programs I've reviewed here, this one is probably the most useful for working-class people. If you'd describe yourself as "not good with money," GnuCash is your friend. All it takes is self-discipline to stick to the budget you set for yourself.

One last note: GnuCash saves your records as an unencrypted file. The developers of GnuCash have stated that each program should do one thing, and it should do it well. The function of GnuCash, they say, is to help you manage your money, not to encrypt files. I agree with their assessment, but this is something you should be aware of. If you don't want other people to be able to see your financial records, be sure to save them on a fully encrypted filesystem (hopefully yours is already encrypted). And if you are on a computer used by multiple people, make sure that only your account has read and write permissions for the .gnucash file.


And that's it for this week's Free Software Application of the Week. Join me again next Monday, for a review of SuperTuxKart!

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josefStallman wrote

I love GnuCash, I use it in my personal life and it makes it a lot easier to make sure I have enough money for groceries and utilities and everything at the end of the month.

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LucyParsonsRocks wrote

cool, I actually need to start doing my taxes this year.

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