Between online banking and digital budgeting apps, money management and tracking personal finances is easier than ever in today's digital age. But according to a 2020 survey by Mint, only two-thirds of Americans are actively using a budget.
With inflation reaching 7 percent in January, it might be time for more people to crunch their numbers and step up their money management. The U.S. Senate Committee on Finance estimates that the average American will spend an additional $3,500 this year just to keep up with inflation on standard annual expenditures.
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Start Tracking Everything
In a digital world, you don't have to save paper receipts, organize file folders and keep a meticulous ledger to track your income and expenses. With your bank account and debit card transactions available through online banking and credit card activity viewable 24/7, it's not too difficult to gather the pieces you need to get a picture of your spending habits and financial life.
If you aren't a budgeter yet, the idea of seeing your money habits in the light of day can feel scary. But it's riskier to stay in the dark. Financial literacy and wealth management start with tackling your personal finances.
Get a clear picture of where your money comes from, where it goes and how you pay for it. Don't forget to account for those Amazon purchases and streaming subscriptions. To do this right, you need to take a close look at all of the payment systems through which you spend digital money.
Today's new technology and widespread online accessibility make apps a popular and convenient choice for money management.
Brush Up on Budgeting Basics
Enhance your knowledge of how and why budgeting works to get a strong start:
- Next-Gen Personal Finance (NGPF) has a free curriculum to increase the financial literacy of the next generation by teaching kids about personal finance. The budgeting unit has informative guidance for budgeters of any age looking for a refresh on the basics.
- The Consumer Finance Protection Bureau (CFPB) offers informative background information, as well as trackers for income and expenses.
- The Federal Deposit Insurance Corporation (FDIC) offers several podcasts and online resources for personal finance and financial literacy.
The knowledge you need to get started is out there and will help you know what you are looking for when choosing the personal finance tool that is right for you.
Consider also: Flexible Budget vs. Static Budget
Choose Your Money Management Tool
It's not difficult to find a tool that can do what you need. A wealth of new technology, referred to as fintech, is available with the financial services and functionality anyone would need for money management. It's just a matter of finding the one that fits your needs and can be easily integrated into your life.
Most personal finance apps will be able to connect with your checking and savings accounts, credit cards, loans and investments. They will track your spending habits and develop a spending plan based on your money habits and financial goals. Some may gamify the experience with challenges and goals to make financial planning more fun. And all offer a real-time view of your financial life at any given moment.
An increasing number of apps also allow you to track digital currency and cryptocurrency investments:
- Mint currently supports 15 different crypto platforms. If you have a Coinbase account, you can connect it straight to your Mint account.
- Personal Capital and Monarch offer financial planning and retirement insights along with standard budgeting tools, with dashboards that let you track investments in financial markets and other aspects of wealth management.
- Simplifi, by Quicken, creates your spending plan and tracks your progress in real-time so you can peek at your budget's progress at any time.
The pricing of these and other financial planning apps varies. Many are free, while others charge up to $100 per year. If you choose a paid plan and follow it, you will quickly make up for that cost in the savings you'll reap through better management of your personal finances.
Competition among fintech money management tools is pretty strong, so you're likely to find free trial offers for most apps.
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The Updated Envelope System
Today's new technology and widespread online accessibility make apps a popular and convenient choice for money management. But if you feel like you just don't want one more app or are looking for a low-tech solution for tracking and managing personal finances, you have options – and they can even be updated with a new twist.
Envelope budgeting in its most simple form is a financial system that helps you monitor and control spending habits by using a physical envelope for each expenditure category, like rent, groceries, utilities and so on. Each envelope is labeled by category and filled with the amount of money allocated to that expense for the month.
When it's time to pay a bill or fund a grocery trip, the money is taken from the corresponding envelope. You track your money habits by trying to spend wisely from the envelopes. The idea is to improve your money management and end up with some savings.
Since we don't pay for much of anything in cash anymore, some fintech apps like YNAB (You Need a Budget) and Goodbudget use this same system, updated for a digital world. You can set up a similar process for yourself with a spreadsheet and multiple bank accounts, debit cards or credit cards:
- Create your "envelopes" or budget categories.
- Assign a dollar amount to each one.
- Set up the payment method(s).
- Track when you overspend or underspend.
- Have a plan for what to do with savings.
Perhaps the money saved goes into a savings account, is rolled over into an entertainment fund or gets turned into digital currency or another investment
If you like your trusty old-school spreadsheets for financial planning and tracking, you can update this personal finance system with new technology.
Platforms like Smartsheet allow you to use the same familiar formulas and formatting, updated with the ability to upload and store receipts, online banking statements, tax documents and invoices.
Smartsheet offers a personal budget template that lets you hit the ground running. You can also set up alerts for payment deadlines and create a dashboard to see your real-time budget at a glance.
Stick to It
There is a budgeting system out there that works for you. Whether you take advantage of the powerful functionality of digital apps or track your spending habits through a spreadsheet or notebook, it's essential to incorporate budgeting into your financial life – and maintain it.
You can get an app and connect it to all of your banking services, but you won't reap the benefits if you don't fully integrate it into your life.
The digital age has the next generation of money management tools, but you still play the most critical role in your financial literacy and wealth management. Starting with a tool that works for you is the first step toward being mindful of your money habits and taking control of your personal finances.
Consider also: How to Use Your Credit Score to Improve Your Finances
- U.S. Senate Committee on Finance: Average Americans Will Pay $3,500 Inflation Tax in 2021
- Social Security Administration: Money Mondays: Managing Money in a Digital World
- Consumer Finance Protection Bureau (CFPB):Budgeting: How to create a budget and stick with it
- International Monetary Fund: Making Electronic Money Safe in the Digital Age
- Digit - All-in-one Money App
- Simplifi by Quicken: Stay on top of your money in under 5 minutes per week
- Mint.com: Managing money, made simple
- You Need a Budget (YNAB): Gain Total Control of Your Money
- Goodbudget: Budget with a Why