FARGO – In a world where technology is king, finance apps have taken over. While financial software and online banking were once the trendsetter of their time, in 2016, they seem rudimentary compared to the fully functional apps the world now has to offer.
Whether users are looking to save, invest, track spending or plan a budget, there’s an app for it. But some aren’t aware of all their options.
Here, finance experts dive into the most popular apps, highlighting the advantages and disadvantages to mobile money management and tips for users who want to make the plunge.
Mint: Created by Intuit, the company that also fathered Quickbooks and TurboTax, Mint has become one of the most popular personal finance apps. It links bank and loan accounts, tracks spending, suggests budgets and provides credit scores. The app encourages users to create specific goals, such as saving for a new car or emergency funds, or paying off loans.
Mint Bills, a sister app, also links accounts like utilities and cell carriers to alert users when bills are due while also allowing them to pay in-app.
Level Money: Similar to Mint, Level Money helps with financial planning. The app analyzes income, subtracts fixed expenses and shows “spendable” income left over for non-essential categories like dining out and entertainment. The app can also auto-save, taking the temptation away from the user to spend money they otherwise should save.
Acorn: Acorn focuses on investing. To put it simply, the app automatically invests spare change. To do so, the user connects their credit and debits cards. As they spend, Acorn rounds up transaction totals to the next dollar and invests the money for them. Users can also set up one-time, daily, weekly or monthly recurring investment contributions.
Digit: Digit uses the same strategy as Acorn but instead of investing, it deposits spare change into a savings account. By analyzing spending habits, the app confidently transfers a small amount money it deems the user won’t need into savings. Its motto sums up the idea: “Save money without thinking about it.”
Credit Karma: Though not considered a financial planning app, Credit Karma allows users to track their credit score. Alicia Kellebrew, a financial counselor at The Village Financial Resource Center, stresses the importance to keep up with scores; a dropped score may indicate missed payment or possible fraud. The app provides access to free credit monitoring, reports and insights as well as tools that help users understand their score, giving suggestions for how to maintain or increase credit score.
While various financial apps provide many positive features, as with any product, there are downfalls. “Finance apps can aid in awareness of spending, saving and investing habits,” says Hannah Sorenson, a financial associate at Thrivent Financial. “They also can be set up and never looked at again.”
Awareness seems to be the No. 1 complaint about financial apps from money management professionals. “You need to develop that awareness,” Kellebrew says. “No amount of app or computer program is going to be able to do it for you. A lot of people want that app to do the work for them. It can do some, but you have to meet it partway.”
Once a budget is in place, users must frequently observe spending habits and tweak the budget as they go.
“It’s easy to set up accounts to populate charts, but you have to put in the time to actually look at them, observe what they mean and possibly change your habits to reach a goal,” Sorenson says.
Because apps cannot track cash, users must also be aware of the money they are spending that isn’t digitized.
One complaint users have of Mint (and other apps that track spending) is that purchases are often inaccurately auto-categorized. At big-box stores like Walmart or Target, consumers often buy products from several budget categories. Unfortunately, apps — not knowing what was bought — lump the transaction into one category. Doing so doesn’t give the user an accurate indication of what’s being spent.
To make the categorizing process easier in-app, Kellebrew says consider making separate transactions at the store for each category, such as groceries, household items, clothing, etc.
Despite the disadvantages, Kellebrew and Sorenson admit the apps aren’t all that bad. “If that’s what it’s going to take to get people to (track finances), I would rather have somebody use them than not do it at all,” Kellebrew says.
While budgets and expense tracking can be done via paper, the digital aspect of apps gives them visual appeal.
“(Apps) are kind of nice because they give people something to look like charts and graphs and those kinds of things,” Kellebrew says. “It’s hard to get a mental picture or understand unless you can see it.”
Sorenson agrees; the financial reports apps generate can be helpful. “Pie charts help you visualize how much money you are spending in various areas when you don’t even realize it,” Sorenson says. “It’s an ‘ah-ha!’ moment for many people.”
Financial apps create accountability for users who don’t have the discipline to invest, save or budget themselves. With a little nudge (from app notifications), users might find they can meet their goals.
Practice makes perfect
For those who struggle with where to begin, finance apps may give them a starting point.
“People look at (financial planning) and they’re so overwhelmed that they don’t know where to start,” Kellebrew says. “You’re never going to be 100-percent perfect and on-target with your budget, but that doesn’t mean you throw it out the window. You just continue to work to get better.”
No matter what strategy or medium a person uses to manage their money, it takes work. Staying on budget, putting money aside for savings and reducing debt all takes time.
“Wherever you got, you didn’t get there overnight and you won’t get back out overnight,” Kellebrew says. But practice makes (almost) perfect.
“It’s kind of like a muscle: the more you do it, the more it’s going to become automatic.”