Everyone raves about financial apps in place of offline budgeting strategies, but do these tools really help us budget better? Do online budget apps cause us to lead more disciplined financial lives or are they merely flashy upgrades over old-fashioned pencil and paper?
Let’s discuss the pros and cons of budgeting apps.
Pros of Budgeting Apps
Easy to Set Up
Signing up for a budgeting app is as simple as verifying your email address and linking your financial accounts. How many accounts you have will determine how quickly you’re set up and tracking your economic life.
Accessible
Any online budget tool comes with a mobile app, so you’re never more than a few taps from checking your financial health. Apps like Mint, You Need a Budget (YNAB), and Clarity Money in particular offer easy-to-use dashboards and mobile experiences.
Real-Time Notifications & Bill Reminders
Paying with plastic and buying things online are convenient, but they’re vulnerable to fraudulent behavior. Most people with a credit card has had their card number stolen at least once. While financial institutions have protocols in place to notify you in the event of fraudulent activity, some are better than others. Most budget tools alert users of possible fraudulent activity as well as reminders for credit card due dates. Notifications don’t always have to be cause for alarm, you should setup notifications for good things as well such as winning a bid, or hitting an investment milestone in your forex trading – just more insights into your wins/losses when it comes to your budget in real time.
Long-Term Visibility
An obstacle many people have when it comes to saving is envisioning what they want their future to look like and setting goals accordingly. Budgeting apps break down your overall net worth, debts, savings goals and other metrics that let you know where you stand at all times. These details may seem like common sense, but plenty of user reviews of debt settlement services would tell you otherwise.
Cons of Budgeting Apps
Ongoing Maintenance
A lot of budget apps offer the simplicity of integrating with all your financial accounts and consolidating your activity into one dashboard. However, to get accurate analytics and forecasts, you’ll probably need to do some tweaking. Mint, for example, promises to categorize your spending automatically. But unless their predefined categories work for your budget, you’ll have to create your own sections and review your monthly transactions to ensure they’re being labeled correctly.
Doesn’t Correct Behavior on Its Own
A budget app can tell you how much you’re spending each month, how far over-budget you are or your progress with savings goals—but it won’t make decisions for you. If you can’t carry out the plan a budget app lays out, you might have more success with the cash-envelope budget. This method gives every dollar of monthly income a destination by putting cash in different spending envelopes.
Ads & Data Sharing
People are starting to realize that using free products carries drawbacks, namely the fact that if the product is free, the user is the product. This is no different with free financial apps, which usually serve a lot of ads and “personalized” recommendations for banking products and institutions advertising on the platform. Some budget apps may serve less, or no, advertisements, but these will probably cost money via in-app upgrades or monthly membership.
Security Concerns
On top of having some of your financial and personal information shared, using online budget apps means one more account for a cybercriminal to hack potentially. This is less a reflection on the companies providing these apps and more in tune with the realization that cyberattacks cannot be prevented, they can only be minimized. That’s why if you do use an online budget, make sure to use a secure password manager to store your login.
At the end of the day, budget apps will be as effective as the person using them. If you need an accessible system that’s easy to use and gives clarity over your situation, then a budget app will probably do wonders for you. But if you’re looking for the app to solve your mindset, never need any fine-tuning and pose no security risks or data sharing, you might be better off with a notebook and calculator.