MATIASGUARRO

If you’re struggling to manage your money or simply want an accurate view of your finances, a budgeting app could be a worthwhile tool. Let’s consider the pros and cons of budgeting apps to help you decide if you should use one.

Benefits of Budgeting Apps

Whether you’re learning how to budget for the first time or want to switch to a new personal finance management platform, budgeting apps can help you improve your financial health. These are some of the benefits of using a budgeting app.

Streamline Your Financial Activity

One of the main advantages of using a budgeting app is that you can see all of your financial activity in one place. By connecting your various bank accounts, investments, loans and more, you’ll have a streamlined view of where your money is going.

Automatically Track Spending

Many budgeting apps let you sync your financial accounts so transactions automatically appear in the app. This means you can easily monitor your expenses and adjust accordingly.

Get a Big-Picture View of Your Finances

Our financial lives often have many moving parts, from credit card payments to loans to retirement savings. The best budgeting apps make it easy to see where you stand, often giving you insight into your net worth and where you are relative to your long-term financial goals.

Access Your Budget From Anywhere

The beauty of a budgeting app is it goes wherever you go. You can conveniently access your budget on your phone and also get payment reminders, spending alerts and other helpful insights in real time.

Plan for the Future

To work toward a financial goal, you need an understanding of your current situation. It’s easy to lose sight of expenses and spend more than you should, but budgeting apps can help you plan for the future by guiding you to live within your means and save what you can.

Drawbacks of Budgeting Apps

Despite the many conveniences and benefits of using a budgeting app, there are some negatives as well.

Initial Setup Requires Effort

When you start using a budgeting app, you’ll have to spend some time setting up your account. Depending on the app, this could involve syncing accounts or manually importing transactions, as well as assigning categories or setting budgets for specific expense types. There might also be a learning curve at the start, especially for budgeting apps with comprehensive features or more complex interfaces.

Regular Check-Ins and App Management

Some budgeting apps are more hands-off than others, but no matter which one you choose, you’ll have to regularly check your activity and make adjustments for the app to be effective. Whether it’s a daily review of your transactions or a monthly look at your bills, you’ll need to pay attention to your budget and maintain it.

Some Apps Cost Money

Free budgeting apps exist, but many require subscriptions. You may find that the app that makes the most sense for you comes with a monthly or yearly fee. Though one of the main reasons for having a budgeting app is to save money, an effective app that costs money might help you save more in the long run.

Potential Security Concerns

Budgeting apps by nature have access to some of your most sensitive financial information, especially if you sync your bank and investment accounts. You’ll want to consider the security measures an app has in place and decide whether you feel comfortable using it.

How Budgeting Apps Work

Depending on the budgeting app, you’ll come across different features and capabilities. However, there are some common elements that budgeting apps share. Here are some general components that explain how a budgeting app works.

Track Transactions

At the heart of budgeting apps is the ability to track your spending and payments. Depending on the app or plan you have, you may be able to sync your accounts so your transactions are automatically imported. Otherwise, you’ll have to manually add your transactions to the app.

Some apps let you track just your banking transactions, while others support investment and retirement accounts, providing a holistic view of your finances.

Separate Expenses Into Categories

Budgeting apps often prompt you to assign categories to your expenses. For example, you can add a supermarket transaction to your “Groceries” category or add a movie ticket purchase to your “Entertainment” category. Some apps assign categories automatically and let you modify them if needed.

Keep an Eye on Recurring Payments

Your budgeting app will likely track recurring payments, like utility bills or car payments, helping you monitor these regular expenses. The app may also help you stay organized by sending you alerts via push notifications or emails, letting you know a payment date is coming up.

Check Subscriptions

It’s easy to forget about a subscription you signed up for years ago and never use. Some budgeting apps help you keep track of recurring subscription payments so you can cancel what you no longer need.

Monitor Your Credit

A common feature of budgeting apps is the ability to get regular updates on your credit score. This can be helpful if you’re working on improving your credit.

Share Your Budget

Some budgeting apps let you share your budget with one or more household members. This makes it easy to plan and budget more effectively with a partner or other loved ones.

Work Toward Savings Goals

Whether you’re saving to buy a car in a year or you want to build up your retirement funds, a budgeting app can help you automate savings and provide you with insights on how you can reach your goals.

Get Analytics and Insights

One of the most helpful features of budgeting apps is you receive insights on your spending habits. These can offer guidance on how you can lower expenses and save more.

How To Choose a Budgeting App

As you’re researching budgeting apps, ask yourself these questions:

What features are available? Think about the features listed above and what your requirements are. Make sure the apps you’re considering support those features. For example, if you want to factor investments into your budgeting, find out whether an app lets you connect investment accounts. If you plan to budget with a partner, make sure the app supports sharing.

Which budgeting method does the app use? Some apps are designed according to a specific budgeting method. YNAB, for example, uses the zero-based budgeting method. You’ll want to make sure the method used aligns with your preferences.

How much will I have to pay? Take a look at app costs and keep in mind that while some apps are completely free, others offer a free version with limited capabilities compared to the paid version.

How much effort is required? Consider how hands-on you want to be with your budgeting. Some apps are designed to be passively managed, while others require more time and attention.

What security measures are in place? Do some research on how the app ensures customer safety, through methods like data encryption and multifactor authentication. Also, find out what personal information, if any, the app stores on its developers’ servers.

Are Budgeting Apps Safe?

Because budgeting apps require access to sensitive personal and financial information, safety is paramount. The best budgeting apps spell out their security measures on their websites. These usually include bank-grade data encryption, biometric or multifactor authentication, reputable data partners and strict data retention policies.

These measures make budgeting apps relatively safe to use. However, just like with any app or software, the risk is never zero.

Alternatives to Budgeting Apps

If you’re concerned about security or simply prefer not to use a budgeting app, you can still make an effective budget.

1. Use a spreadsheet (or pen and paper). The old-school method of budgeting takes more effort and requires you to be thorough, but it’s a powerful way to keep track of your expenses.
2. Use envelopes. The envelope method of budgeting—also called cash stuffing—involves taking your cash for the month (or week, if that’s easier) and physically putting it into separate envelopes. Each envelope represents a category like groceries or bills or entertainment. This method helps you visualize how you spend and allows you to make modifications if necessary.
3. Use your bank’s budgeting tools. Your financial institution might offer its own budgeting tools and insights. Whether it’s automated reports based on your spending habits, a downloadable budget template or a budget calculator, these could be helpful alternatives.

Frequently Asked Questions (FAQs)