How To Set Up QuickBooks Online for Personal Use
This article is part of a larger series on Accounting Software.
QuickBooks Online can help individuals organize and track their personal finances, just like it helps small businesses manage their accounting tasks. We’ll show you how to use QuickBooks Online for personal use by walking you through the steps of setting up your expense and income accounts, adding vendors and customers, creating balance sheet accounts and budgets, and more.
You can follow along in your account if you already have a QuickBooks Online subscription. If you don’t have one yet, visit the provider’s website and request a 30-day free trial or get a 50% discount for three months when you sign up right away.
Step 1: Create Income & Expense Accounts (Chart of Accounts)
The chart of accounts in QuickBooks is a list of all the accounts you will use to manage your personal finances. By default, QuickBooks Online has no special chart of accounts for personal use, but you can add accounts to fit your needs.
Expenses in QuickBooks Online are the things you spend money on. Later, you will also need to record your “vendors” or those people whom you pay for the services or expenses you enter in QuickBooks. Expenses will be recorded in the chart of accounts, while vendors will go to your vendor list.
Below are examples of personal expenses and “vendors.”
To add a new expense account, click on the cog wheel in the top right corner of your dashboard and then select Chart of Accounts under Your Company, as shown below. Remember this step, as this is also where you’ll add your other accounts, including assets and loans.
From the Chart of Accounts window, click on the green New button on the top right, and complete the form in the new account panel. Name your new account, choose “Expenses” as the account type, and select the appropriate detail type that best describes the account. You may also add a description if needed. When you’re done, Click Save and Close.
Income accounts are basically your income sources. While the income accounts show you where the money came from, you will also need a separate list of people whom you received the money from, which QuickBooks refers to as “customers.”
Below is a list of sample income sources and “customers” that you may add in QuickBooks Online.
Using the same form we used in expense account creation, we must create an income account with appropriate details. Name your new income account, select “Income” as the account type, and pick the appropriate detail type. Click Save & Close to finish.
You will need to add all income and expense accounts so that you can properly record all transactions you enter in QuickBooks Online. If you need further help and guidance, check out our tutorial on how to set up a chart of accounts in QuickBooks Online.
Step 2: Add Vendors & Customers
After recording all your income and expense accounts, you must record your “vendors” and “customers.” As specified earlier, vendors are those to whom you pay your bills or expenses, while “customers” are the people or entities from whom you get your income. Vendors are recorded in the vendor list, and customers will go to the customer list.
To add a new vendor or supplier, navigate to Vendors or Suppliers under the Expense menu (other QuickBooks software calls it Get paid & pay).
From the new vendor or supplier form, provide the required information, such as the name of the vendor, company if applicable, address, and contact details. At the very least, you must provide the name and the display name.
To record a new customer, go to the Customers menu and click on New customer. Complete the form and then click Save.
It’s vital to record all your vendors and customers to set up QuickBooks for personal use. Also, note that whenever you make a transaction for a specific vendor or customer, QuickBooks Online will automatically populate the fields based on the information you entered when you set up that vendor or customer. If you enter a transaction for a vendor or customer that is not set up, you’ll be able to set them up at that time.
Step 3: Create Balance Sheet Accounts
In addition to tracking what you earn and spend, QuickBooks will track what you own and owe with a balance sheet. Compile a list of everything you own (assets) and everything you owe (liabilities) and record them in QuickBooks Online through the chart of accounts.
Examples of assets are cars, jewelry, computers, and financial accounts, while liabilities may include private student loans, mortgages, and lines of credit. You don’t have to include every asset, but I recommend at least including all financial accounts.
From the chart of accounts creation window, name your asset, select Current Assets as the account type, and choose the appropriate detail type. Also, select the starting date (as of field) and the current value of your asset account (balance field). Click Save and Close when you’re done.
To record a liability account, select Current liabilities as the account type, specify the name, detail type, and the unpaid balance as of date.
You can later run a balance sheet report which will provide you with meaningful insights into your financial situation. You can follow our step-by-step tutorial on how to create a balance sheet in QuickBooks Online.
Below is a sample balance sheet in QuickBooks.
Step 4: Create Classes
Classes in QuickBooks Online allow you to track all your activity by very specific elements of your finances. This feature is particularly useful if you have several income sources and expense accounts and want to track them separately.
Here are examples of classes you may use in QuickBooks Online.
- Personal: Any transaction without tax deductions can be tagged as “Personal.”
- Itemized Deductions for Schedule A: You may create “Schedule A” classes for items that are eligible for deductions, including qualified medical expenses, mortgage interest, sales tax payments, state and local taxes, and charitable contributions.
- Part-time gigs: You can create a separate class for each part-time job (i.e. “Bartending,” “Delivery driving,” and “Landscaping”). You can even create a subclass, like “Delivery driving-nightshift” and “Delivery driving-dayshift.”
- Rental expenses: If you have both personal rent and business rent expenses, then you can create classes for “Personal Rent” and “Business Rent” to track them separately.
By default, the class tracking feature in QuickBooks Online is disabled. To turn it on, click the cog wheel, select Accounts and settings, and select Advanced on the left menu panel. Under Categories, toggle Track classes to on and then click Save.
After you turn on class tracking, click on the cog wheel and select All Lists from the Lists section.
From the Lists window, click on Classes, and from here, you’ll be able to add a new class and see existing classes. Select the green New button, and then name the new class. If it has a parent class, then click the Is sub-class button and enter the parent class. Click Save to continue.
By setting up classes and assigning them to your transactions, you can create detailed profit and loss reports by class. This customized report breaks down your income and expenses into specific groups, helping you better track where exactly your money is going and coming from.
Below is a sample report on profit and loss by class in QuickBooks.
Step 5: Connect Bank & Credit Card Accounts
While you can manually add banks in the chart of accounts, you might prefer to connect them to QuickBooks Online to save time. When you connect your bank and credit card accounts to QuickBooks, the program will download your transactions automatically every day. Connecting your bank account helps you know your current balance easily, track which transactions have cleared, makes reconciliation chores easier, and find errors without waiting for your bank statement.
To connect your bank and/or credit card account, navigate to Transactions under Bookkeeping on the left panel menu. Click Connect account or Link Account and find your bank on the display list. You may also enter your bank if you don’t see your bank on the list.
Follow the prompts until you connect your bank or credit card account successfully. The steps may vary depending on your bank or credit card provider. On rare occasions that your bank is not supported by QuickBooks Online, you can manually add them through the chart of accounts.
If you wish not to connect your bank account to QuickBooks, you can choose to import your bank statements manually. To do this, follow our guide on how to enter banking transactions in QuickBooks Online.
Step 6: Classify Imported Transactions
Now that you have connected your bank and credit card accounts, QuickBooks Online will download the latest transactions automatically. The program is smart enough to match downloaded transactions with those you’ve already entered into QuickBooks. If it doesn’t find a match, it generates a new transaction record. You just need to review the transaction and approve it.
To categorize transactions imported to QuickBooks Online, navigate to Transactions under the Bookkeeping tab. If you don’t see the Bookkeeping tab because your account is set up for personal use, you should see Banking transactions or something similar. It will take you to the Banking tab showing a list of your connected banks, along with three tabs: For review, Categorized, and Excluded. Transactions awaiting review are found in the For Review tab.
When QuickBooks finds a match, you will see a 1 match found green button under the Category or Match column. Click the Match button under the Action column to match the transaction to an existing one. If there’s no match, you’ll see an Add button which allows you to record the new transaction.
You can also categorize transactions from uploaded receipts. After you upload a receipt using the mobile app, QuickBooks will create a transaction, and you can review it and categorize it properly.
For more detailed instructions, head to our tutorial on how to manage bank feeds in QuickBooks Online.
Step 7: Create a Budget
You can create budgets in QuickBooks Online to gain better control of your finances. A budget in QuickBooks is simply a datasheet with the predicted amounts of your transactions for a certain period (each month, quarter, or year). For personal finance, it’s usually a monthly budget. To generate a forecast, you must enter the estimated or predicted amounts for each period, and QuickBooks will compare it to the actual transaction results.
To set a budget in QuickBooks Online, click on the cog wheel and click Budgeting under Tools.
From the New Budget window, provide the budget name, select which fiscal year it’s for, and leave the interval as monthly. You may leave out the Pre-fill data and Subdivide by fields as they are not applicable for personal finances. Once done, click Next.
Next, enter your estimated amounts for each month and click Save to finish.
To compare your budget to the actual transactions you’ve already recorded in QuickBooks, Click on the Run Budget Overview report drop-down arrow, and then select Run Budgets vs Actuals report.
The report will show you the differences between your estimated and actual costs for each month, allowing you to determine which months you are healthy financially and identify areas of concern.
Below is a sample budget vs actual report in QuickBooks Online.
If you have a small business or are planning to start one, you can use QuickBooks Online, our overall best small business accounting software, to organize your finances. Read our detailed QuickBooks Online review to see how it can help you manage business accounting.
Other Ways You Can Use QuickBooks for Personal Finances
You need to keep track of freelance business income and expenses separately from your personal transactions to report your income for taxes properly. This can easily be done in QuickBooks by creating a separate Class for each freelance gig, as discussed above. By having separate classes, it’s not necessary to create separate expense accounts for each activity. For instance, you can have one “Gas Expense” account and use it for both personal gas and business gas, as long as you specify the appropriate Class every time you enter a transaction. Track charitable and medical mileage
If you do volunteer work and often drive for charitable and medical purposes, you should have clean records of your mileage. The easiest way to track your charitable mileage is by using the QuickBooks Online mobile app. Simply launch the app while driving, and it will automatically log your mileage using GPS tracking instead of manually recording your vehicle’s odometer. The app is available for both Android and iOS devices.
Another benefit of QuickBooks Online is that it provides reporting tools to help you manage your personal finances. To create a report in QuickBooks Online, click on the Reports on the left menu bar, and then find the report you wish to create. You will see the most frequently used reports on the Favorites tab, as shown below. Simply click on the report you want to create, and QuickBooks will show a datasheet containing the report. You can customize the report to cover a specific period, what details you want to include, and compare it to another period.
A basic profit and loss (P&L) report is an easy way to get started, but some individuals prefer to compare their reports to previous periods. If needed, you can also print your reports.
Below is a sample profit and loss report in QuickBooks Online.
If you bought something with a receipt and you’re afraid of losing that piece of paper, then you can use QuickBooks Online to make a digital copy of that receipt. Simply take a photo of the receipt from your smartphone using the mobile app and then upload it on QuickBooks. The program will extract information from it and generate a transaction for you to review. Then, you can edit the receipt, match it to an existing transaction, or create a new account if needed.
It’s not recommended to upload receipts with personal or sensitive information, such as credit card numbers.
QuickBooks Online not only allows you to enter a new bill, but you can also pay the bill directly from the platform. QuickBooks Online even lets you schedule bill payments in the future, helping you reduce late or missed payments. Another feature you can use is recurring billing, which allows you to automate payments for bills that you pay on a regular basis. This may be a monthly telephone bill or a subscription fee to software. You can specify the frequency and the number of occurrences and set an end date.
Regular reconciliation of your bank and credit card transactions is a good practice as it helps you identify any discrepancies. The easiest way to look at this is that you’re making sure that your personal finances and books match. By regularly clearing your transactions, you can easily spot and account for any discrepancies. You might want to perform reconciliation each week or at least once every two weeks.
Who Should Use QuickBooks for Personal Finance
- Individuals who are saving for important things like a new car: QuickBooks Online’s budgeting feature helps you map out your spending plan for six months or one year. This way, you can easily forecast which months your finances are steady and which ones you’ll need extra money. This helps you determine how much money you will be able to save for important things like a new car.
- Individuals who want to work their way out of debt: Since QuickBooks allows you to create a spending plan, you can track whether you have money for the things you need and things that are not that important. This will help you keep out of debt or get out of it if you’re currently in debt.
- Individuals who volunteer for charitable institutions: If you often use your car for charitable purposes, you can use the mobile app to track your mileage for potential tax deductions.
- Partners or business owners with a qualified home office for income taxes: If you have a small business, you can use QuickBooks to organize your business finances. By using classes, you can track personal and business income and expenses separately in QuickBooks even when they’re paid from the same bank account.
- Individuals with several part-time gigs: If you work as a delivery driver during the day and as a bartender at night, you can track each job separately using classes to see how much money you make and spend on each job.
- Households with a nanny or gardener: If you have a nanny or a gardener who is an employee, you can pay them and file all the necessary returns using QuickBooks Payroll.
- Individuals who want to pay bills online: You can pay your bills directly from QuickBooks Online. You can even pay bills with a credit card, even if the vendor doesn’t normally accept credit cards. For a fee, QuickBooks will accept your credit card payment and then issue a check to the vendor.
Who Should Not Use QuickBooks For Personal Finance
- Individuals who need to track investments: QuickBooks Online doesn’t have any feature for tracking investments. If you have assets, like stocks, bonds, and mutual funds, then you should consider Quicken as an alternative. It allows you to track investment performance with tools like Portfolio X-Ray and provides you with the latest news about the assets you have. You can also use its portfolio analysis features and compare your investment returns with the market averages. Head to our review of Quicken to learn more about its features, or explore our QuickBooks Online vs Quicken comparison guide to see how they differ.
Frequently Asked Questions (FAQs)
Is QuickBooks suitable for personal use?
Yes, as it helps you manage personal finances in different ways. You can create a budget to help you avoid overspending, track expenses and pay bills, keep your business and personal expenses separate, and run simple reports to track your cash flow.
Which QuickBooks features can I use to manage personal finances?
Some of the most useful QuickBooks features you can use for personal finances are budgeting, class tracking, receipt scanning, online banking, and bill payment automation.
Can I use QuickBooks for my small business?
Of course! If you are planning to start a business or already have one, then you can use QuickBooks to organize your finances. QuickBooks is our overall best small business accounting software.
Now that you’ve learned how to use QuickBooks for personal use, you’ll understand where your money is going better every month. Also, you’ll be able to develop a plan for personal saving and reach your long-term financial goals.