We All Need To Budget
We all desire to live debt-free. To do so, we take up jobs, save, start businesses, and so on. It is part of the strategic plan to become financially independent at a particular time in the future. But finding a source of income alone is not enough to deliver the objective. One must find a way to translate the strategy into targets and budgets.
We all need to budget. But what is a budget? A budget is an estimation of one’s income and expenses over a particular future period. We could also say that a budget is a deliberate plan drawn up to guide future spending. A budget gives you the power to determine where your money goes. It gives you an idea of the amount of money you need and whether you are liquid enough to accomplish the items on your to-do list.
Today more than ever, a budget is critical to ensure prudence in matters finance. Online shopping and other avenues for spending money have made it easy to get the cash out of our hands. Unfortunately, this behavior is getting many of us into major financial problems. To put this into context, consider credit card debt in the United States. Over the past five years, credit card debt in the United States has been on a relentless upwards trajectory. In Q4 2019 alone, Americans amassed $930 billion in credit card debt.
Why Budgeting Apps Are Handy
From the foregoing, Americans need to learn how to spend money responsibly. If they cannot do it by themselves, then budgeting apps come in handy. Question: How do budgeting apps work? Are they effective? Read on to find out.
A budgeting app is smartphone software with which users can create a future spending plan. Besides, the app tracks the user’s expenditure and notifies him/her appropriately – usually based on the preferred parameters. For instance, the app could warn the user when the money spent threatens to surpass a preset threshold.
Whether budgeting apps are effective or not is a question with a million variation answers. It is because different people have different experiences with the apps. One user might have the best experience, where the app helps to save big. However, others might not see the use since nothing seems to change even with the app installed and utilized.
According to a study, people seem to show enthusiasm in the initial period after installing the apps. However, the desire to save wanes as time goes by. A Forbes article noted that budgeting apps often fail to achieve their objectives because users easily ignore them. On the other hand, CNBC argued that budgeting apps fail to be effective because no one can hold users to account.
Nonetheless, herein lies the power of the budgeting apps. The apps use cooling techniques such as gamification to make planning for finances a cool thing. Unlike a system of holding people to account, gamification makes budgeting fun. It incentivizes people to save more. Through games such as scratcher tickets or sweepstakes, users are launched onto the path to self-discovery. Some apps award users badges for hitting certain milestones. Ultimately, users learn more about their spending behavior, which is the first significant step towards self-discipline concerning budgeting.
5 Best Apps for Budgeting
The practice of using apps to help in budgeting is remarkable, especially in the United Kingdom. According to a survey, the majority of the UK’s under 30 population uses budgeting apps. The survey found that the majority of the users – 18% – relied on budgeting apps more than once a week. Americans are not far from this statistic.
Some of the best apps in use include:
Mint is not just a spending planner but also a tracker of users’ spending behavior. That app does three major tasks. In the first place, Mint provides a platform that unifies all of the users’ financial activities. All bills, balances, and more are reachable in one place. Secondly, the app helps users to create budgets. Users follow great suggestions that make the budgeting process fun. Thirdly, Mint users can check their credit score for free as many times as they wish. It is like a one-stop-shop for everything to do with personal finance management.
No wonder Mint reviews come loaded with a lot of positive feedback. On Google Play, the average rating of Mint is 4.5/5. Besides, a PCMag review declared Mint to be a safe application that provides fast, easy, simple, and highly automated budgeting tools to users free of charge. Similarly, a Business Insider review declared the app as the best in the market.
You Need A Budget (YNAB)
Many reviews place YNAB just below Mint in terms of usability, convenience, and utility. Unlike Mint, YNAB requires a fee to access full features after 34 days. The cardinal unique selling point of YNAB is that it discourages users from budgeting based on unearned funds. It is to say that YNAB users can only live on their income. For this reason, users have applauded the software for enabling them to pay down their debts.
For YNAB, every single dollar in your income has a purpose. It could be for vacationing, buying stocks, or whatever task you want to put the dollars to. This simple principle makes you see the whole concept of planning for spending in a new light. Besides compelling users to budget in a zero-based manner, the app obligates users to put a certain percentage of their income in investment every month. It doesn’t matter where the money goes, but one has to invest.
Wally is, primarily, an app for tracking spending. The app has unique features, such as capturing photos of receipts for record-keeping purposes. Wally’s ability to balance users’ finances won its 2020 Best Current Account accolade. Users can access all budgeting services without parting with a cent. However, you can go Wally Gold if you wish to experience the higher end of the app. It would cost you at least $4.13 monthly fee.
Most of the budgeting apps today rely on Open Banking – where the apps access users’ banking data easily. The biggest selling point of Open Banking is that it avails a wide range of services to users. However, the privacy sticklers like old folks might not be at ease with such functions. That is, they seem to embrace Wally more because it does not support Open Banking. Instead, users have to input every bit of information manually. As such, the app allows users to take full charge of how they manage money.
As the name suggests, PocketGuard lets you know the flow of funds from your account. Users get notifications about the amount of money they have left as they wish. The app uses smart algorithms to gather data concerning the user’s bills and other expenses vis-a-vis the available income. This information is crucial because it makes users alert to their spending behavior.
Often, budgeters want to know if they can spend money, and how much. Without a budget, this question is impossible to answer. PocketGuard tells users exactly what to do with their money in the present after discounting all expenses and crucial bills. The app is particularly apt for users who have a regular paycheck. Besides safe spending, PocketGuard lets you see the big picture in terms of your financial situation in the present. For this reason, reviewers such as PCWorld award the app 4 stars out of 5.
Tycoon is the antithesis of PocketGuard. The app recognizes that many budgeting apps assume users have a constant and regular flow of income. That is why an app such as YNAB will obligate users to make a monthly contribution to investment. Contrariwise, Tycoon takes into account users whose paychecks are irregular, a good case being freelancers. Such users cannot handle many projects on the app, hence the need for simplicity.
Tycoon’s USP is the ability for users to arrange their finances in a way that makes it easy to cover taxes and other crucial expenses. The app considers potential gigs offered to the freelancer, does the calculations and outputs the take-home. If the numbers do not add up to something worth breaking a sweat, then the freelancer knows what to do. From the freelancers’ perspective, Tycoon is the best budgeting app in existence. Many of them rate the app above four stars.
It is never easy to plan future spending. It is getting even more difficult with the proliferation of cheap deals online. Further, increased interconnectivity of ecosystems such as finance and commerce is making it easier to shop. The good thing is that there is always a solution for every new problem that arises from new technology. Budgeting apps are remarkably transforming the personal finance niche. Besides facilitating financial discipline, the apps are enabling users to learn their spending behavior. Some of the most popular apps for budgeting, money management, and debt avoidance include Mint, YNAB, PocketGuard, Wally, and Tycoon.