One of the most common questions posed to our Financial Guides is, “What personal finance app should I use?”
Personal finance is, of course, personal. So it follows that what may be a killer app for one person is completely useless for another. When deciding on smartphone financial apps, the starting point should be, “What am I trying to get out of it? What do I need an app to do?” Just as you have set specific financial goals, you need a goal for your app. What is it for exactly?
If you are looking for “budgeting apps,” presumably, you are seeking a financial wellness tool that will help you to limit your spending. But that’s really only a starting point…
Are you looking for an app that tells you, after the fact, how you have spent your money? This may be all that you need if you are looking for insight into your spending habits and gathering data that you will use to guide your actions in the future. But beware: research has shown that this type of app may have an effect that is the opposite of what you intended!
Or do you want an app that could actually stop you from making a transaction? Some apps dynamically monitor your cash flow and tell you how much money you have remaining available to spend within the specific budget categories you have set. There is even an app that links to your bank account debit card and actually prevents a transaction from going through at the checkout counter if your virtual envelope for that spending category is empty.
Do you want an app that links to your bank and credit card accounts, downloading and categorizing your transactions as they happen? Or do you prefer a “dumb” app whereby you enter each transaction manually? This is a key difference when your goal is to monitor your spending. The advantage of a “smart” app above is obvious; you don’t have to do any additional work, and no transaction is missed. But the disadvantage of such an app is perhaps less obvious. The physical act of entering the transaction into an app – analogous to writing down what you spent in a notebook – is a powerful way to build mindfulness around your spending at that moment.
You may find that at the beginning of your budgeting journey, you could benefit from the friction of using an app that does not automatically track your spending. But later, as your new spending habits have become internalized, you are comfortable with an app that automates the tracking and that you only need to review your spending regularly after the fact.
Are you saving towards a specific spending goal and want a financial goal tracker? If you are someone motivated by visuals, an app that compellingly displays your progress toward a savings goal can be just the motivation that you need to keep to your plan. Many apps have this feature, as do a number of banks that offer it as an account feature.
Do you want an app that moves money automatically into a savings or investment account? “Round-up” apps round-up each transaction amount to the next whole dollar, depositing the extra cents into a savings or investment account.
Do you want an app to track your investment accounts across multiple platforms? Many people have investment accounts scattered over several investment firms. Would it be useful to see everything aggregated together in one place?
Are you willing to pay for an app? The more sophisticated an app is, the higher the monthly subscription fee. However, there are quite a few free financial wellness apps available that will accomplish most of the functions described above.
All that said don’t sleep on the OG app, a plain old spreadsheet. Building your own spreadsheet to track your spending, investments, net worth, etc., is a powerful way to understand your spending habits and path to success much deeper, allowing you to play with different “What if?” scenarios.
But here’s the thing: there is no app that can “make” you spend less or save more if you don’t want to. Apps are great for building awareness, nudging you to greater accountability, and even inspiring you to push forward to meet a bigger goal. But they can’t replace the mental work that underpins a change in behavior. At its best, an app can remind you of your commitment, but partnering with a financial wellness platform will give you resources available to make sure you are making the best possible decisions.
A financial wellness software like Your Money Line offers 1:1 coaching with financial experts, resources, education, and more to ensure your employees' financial lives are taken care of.