The COVID-19 pandemic has affected the daily lives of many Americans, particularly in how they handle personal finances. According to a Bank of America survey on spending habits, 64% of respondents said their spending habits have changed since the beginning of the pandemic. Commuting, dining, gym memberships, travel, online shopping, and other expenses have seen substantial changes, as more people spend time at home. These short-term changes in habit may lead to some struggle, especially if you have savings goals for specific outcomes.
Smartphone apps are tools that can help. One research article from the Briefings on Entrepreneurial Finance notes that personal finance apps can increase your self-confidence in financial decision-making and financial literacy. Moreover, the app can help cultivate positive behavioral changes, such as delayed self-gratification. Here are three ways budgeting apps can help you transform your spending behavior:
Keep tabs on your bills
Budgeting apps can be helpful, even if you don’t open them. Automatic alerts and push notifications can inform you of important events, like when a large and unusual transaction occurs in one account. These apps can also notify you when it’s the due date for your bills, so you can avoid missed or late payments that can ruin your credit score. You may even prefer to program the app for automatic credit card payments, so you don’t have to worry every month. Prism is a free app that pulls in due dates and balances for more than 11,000 billers, ensuring you don’t rack up any late fees.
Some apps are smart enough to actively help you lower your bills by cancelling unnecessary subscriptions. In West Monroe’s poll on subscription services, an average consumer said they spend $274 per month on subscriptions for mobile phone services, home Wi-Fi services, and TV or movie providers — and most consumers don’t actually know their full total. Apps like Clarity Money use artificial intelligence to find and cancel any wasteful subscriptions, which will save you hundreds of dollars in the long run.
Track and manage your expenses
The most difficult part of managing money is, of course, building and following a budget. It requires a lot of discipline and organization, especially to keep track of your expenses. According to a guide by AskMoney on budget balancing, budgeting boils down to knowing where your money needs to go and making sure it gets there, without unnecessary spending. Budgeting apps can help you by automatically tracking your spending through linked accounts, then categorizing purchases to set a spending limit on your behalf.
There are a number of effective apps for this. PocketGuard ties together various accounts like banking, credit card, loans, and savings to give you a number you’re allowed to spend; it also checks for potential savings across recurring bills. The Digit app, on the other hand, analyzes your income and spending habits to determine how much you can afford to save, then automatically pulls small amounts into an FDIC-insured Digit account. This soon gives users a little nest egg.
Set aside money for investments
As budget apps oversee your overall financial progress and net worth, you may want to take your finances further through investments. Acorns is a popular example for this. As a micro-investing mobile app, you can link your accounts to Acorns then turn on their round-up feature to start your virtual piggy bank. The app will round-up all your transactions to the nearest dollar, then automatically deposit the spare change into a diversified portfolio recommended for you — growing a few cents into a stockpile of cash.
This is not the first time fintech has moved towards investments. A few years ago, payment app PayPal’s entrance into the cryptocurrency market allowed users to buy and sell virtual currencies, thereby allowing virtual coin users to easily transact over the app. Now, PayPal is no longer focused solely on payments. Some new features include high-yield savings and a shopping tab for coupons and loyalty programs, so we can expect other budgeting and fintech apps to evolve into more complex tools for the future as well.