Keeping track of your money and how you spend it is important. Everyone should have a budget because without one it’s easy to spend too much, leaving yourself with nothing to save or struggling to cover your bills at the end of the month.
One popular way for people to build a budget and keep track of their finances is to use a budgeting app. There are dozens of finance apps out there that you can use to follow your spending, view your recurring expenses, and help you manage your money.
Why Use a Budgeting App?
If you’re not sure whether a budgeting app is right for you, there are plenty of reasons why you should consider signing up for one.
1. Real-time Information in One Place
These days, people have a lot of financial accounts. You might have a checking account at a local bank, an online savings account at CIT Bank for your emergency fund, a brokerage account with Robinhood, and a couple of 401(k)s or other retirement accounts from previous employers.
That doesn’t even start getting into the number of credit cards people have. The average American has four credit cards, according to the 2019 Experian Consumer Credit Review reported by CNBC.
All told, you might have half a dozen, a dozen, or even more accounts to keep track of. Without a budgeting app, if you wanted to check your balances, you would likely need to log in to three or four different websites to view all of your accounts.
Budgeting apps pull information from each of your different accounts and aggregate that information on one dashboard. You can click one button to open the app and get real-time balance information for all of your bank, investment, and credit card accounts.
This makes it much easier to know where you stand financially and to figure out if you can afford a purchase that you want to make.
2. Automatic Alerts
Budgeting apps can help you keep track of your finances, but that’s only helpful if you remember to look at the app on a regular basis. To that end, another feature of most budgeting apps is automatic alerts that inform you of important events even if you don’t open the app.
For example, an app can send you a notification if a large, unusual transaction occurs in one of your accounts, giving you a chance to check for fraud. Apps can also notify you of impending due dates for bills, helping you avoid missed or late payments that can tank your credit score. They can also let you know if your checking account falls below a threshold that could lead to costly overdrafts.
Most apps let you customize the alerts they generate, which means you can tailor the experience to your needs. If you have automatic payments set up for your credit cards, you might not need to be informed of every impending due date. If you want to keep your checking account balance above a certain threshold, you can set up alerts to tell you if its balance ever falls below that amount.
Customizable alerts mean you can get notified of the events that you care about, making these apps useful even if you aren’t checking in on them every single day.
3. Easy Budgeting
One of the hardest parts of managing your money is building and following a budget. Beyond the discipline required to stay within your budget, you also need to track every single purchase you make, writing down how much money you spent and what you spent it on.
Personal finance apps handle half of the job for you, automatically tracking your spending and categorizing purchases for you. When you set up the app, you can enter your expected spending on different categories, such as groceries, rent, gas, and entertainment.
Whenever you use one of your linked accounts to make a purchase, the app notes that expense and categorizes it for you. You can view your budget any time to see how much you’ve spent and how much you have left to go in your budget for the month.
With the app tracking and categorizing your spending, that means that all you have to do is stay disciplined and stick to the spending limits you set for yourself.
4. Track Your Progress
Many budgeting apps will keep track of your finances over the long-term, which can help you track your overall financial progress as well as your progress toward specific goals.
For example, most apps will let you set saving goals. For example, you might want to set aside $500 to go on a weekend trip. You can create the goal in the app, designate the account you’ll use to save, and track your progress. Each time you make a deposit to the savings account, the app will track that progress toward your goal so you can easily see how close you are to going on your trip.
You can also use the apps to track your general financial progress. Many apps will track your net worth over time so you can follow how your finances have changed over the months or years since you’ve started using the app.
5. Avoid Mistakes
Nobody likes making mistakes, but financial mistakes can be especially costly. An overdraft in your checking account can turn a $5 purchase into a $40 expense after you add the overdraft fee. A missed credit card payment can cause immediate pain through interest charges and missed payment fees but also long-term financial damage in the form of a reduced credit score and higher loan rates.
If you use a budgeting app and set up effective alerts, you’ll have a better awareness of your own money. This can make it easier for you to keep track of payment due dates and your checking account balance, which means making fewer mistakes. Given the high stakes of managing your money, using an app to help avoid mistakes is a good idea.
Popular Budgeting Applications
There are so many budgeting applications out there, it can be hard to pick the right one.
Mint is one of the best-known budgeting apps on the market and is completely free to use. It’s offered by Intuit, the company behind TurboTax and other popular finance applications.
One of Mint’s benefits is that it integrates with Intuit’s other apps. If you use TurboTax to file your taxes, you can link your Mint account and have TurboTax check your bank and brokerage accounts for tax forms automatically, saving you the effort of manually inputting some of your tax information.
There are numerous alternatives to Mint that offer different ways to help you manage your budget and various other aspects of your financial life, ranging from helping you save money to monitoring investment accounts.
Mint is completely free to use, producing most of its income by advertising relevant financial services to its users. For example, Mint users can get recommendations for credit cards or loans that might be a good fit for their financial situation.
A drawback of Mint is that it is purely a place to view your financial information. Although you can track your spending and create goals that Mint tracks for you, you can use the service to manage your accounts or move money between them.
The support offered by Mint’s support team also leaves something to be desired. Connections between Mint and some financial companies — especially smaller banks — sometimes break, and it can take a few days or even a week or two for the connection to get fixed.
1. You Need a Budget
You Need a Budget, also called YNAB, is a budgeting app that uses four rules to help people get their finances on track and keep them there.
YNAB’s four rules are:
- Stop living paycheck to paycheck
- Give every dollar a job
- Prepare for a rainy day
- Roll with the punches
Like Mint, YNAB lets you link your financial accounts into the service so it can automatically track your spending compared to your stated budget. You can also use the app to create saving goals to help you follow your progress toward them. You can use YNAB’s reporting functions to view charts and graphs that let you visualize changes in your finances over time.
One drawback of YNAB is that the app isn’t free. There are two payment plans to choose from: an $11.99 per month plan and an $84 per year plan.
2. Clarity Money
Clarity Money is a budgeting app managed by Marcus, by Goldman Sachs. Like other apps, it can help you keep track of your many financial accounts and see how much money you’re spending on different spending categories.
One unique feature of Clarity Money is the app can negotiate with companies that send you bills to try to save you money. Most people have services like a cellphone or home Internet that involve paying a monthly bill. Sometimes, you can convince your provider to reduce your rate by calling to negotiate, but it’s a lot of effort and few people actually bother to do so.
Clarity calls these companies on your behalf to try to negotiate a lower bill. If Clarity convinces the companies to charge you less, it takes one-third of the savings as a commission, meaning you still save a good amount without having to lift a finger. Clarity can also cancel services for you with the press of a button, making it easy to cancel subscriptions you aren’t using.
Another perk is that you can initiate transfers between accounts through the Clarity app. That means you don’t have to move back and forth between Clarity and your bank’s app if you want to move some of your money around.
3. Personal Capital
Personal Capital lets you aggregate all your financial accounts in one place, giving you a dashboard that you can use to track your money. However, it isn’t a typical budgeting app that is focused on making it easy to track your spending. Instead, Personal Capital focuses more on investment management, giving you a way to view your investment portfolio and its performance compared to various benchmarks.
If you have sufficient assets, you can also sign up for Personal Capital’s investment management service. If you do, Personal Capital’s managers will handle your investment portfolio for you based on your risk tolerance and investing goals.
If you’re looking for a hands-off way to invest with advice from professional managers, Personal Capital can fit the bill while giving you some valuable extras in the form of an app that makes it easy to track your day-to-day finances in addition to your portfolio.
Read our Personal Capital review.
Is There a Low-Tech Solution?
Personal finance and budgeting apps are a great way to keep track of your money, but they work best if you’re somewhat tech-savvy and tend to make most of your purchases using a debit or credit card. For people who regularly use cash, manually entering transactions into the app can get tedious.
If you prefer a low-tech solution to budgeting, you can use the tried-and-true envelope method.
Get a bunch of envelopes and label them with different spending categories: groceries, gas, entertainment, meals at restaurants, and so on. At the beginning of each month, put cash into each envelope equal to the amount that you’ve budgeted for that type of spending.
Throughout the month, take money out of the proper envelope whenever you make a purchase. You can look at an envelope to see how much money you have left to spend on that type of purchase for the rest of the month. When an envelope is empty, you’ve exhausted that budget for the month and will have to wait for the next month to replenish it.
This low-tech solution is easy to use and provides real-time feedback like a budgeting app, but in a physical way that an app can’t do.
Keeping track of your money can be difficult, but it’s important if you want to take control of your financial life. A budgeting app can make it much easier to track everything by letting you view all of your accounts in one place.
Once you’ve set up your budgeting app to automate your budgeting, you should consider automating other aspects of your financial life, such as moving cash into a savings account or investing. Automation makes it easy to save without having to think about it.
Do you use a budgeting app? Which one is your favorite?