What to know about budgeting apps and personal finance software

Woman accessing budgeting apps on mobile phone

If you were asked to rate your own personal financial management habits, how do you think you would compare to the average American? Where do you think you excel, and what aspects of personal finance could use some improvement? According to recent studies in the U.S., the bar for excellent money management habits is not all that high - a Gallup poll from 2013 found that only around one-third of American households even had some kind of a budget in place.

"Only one-third of U.S. households utilize a budget to plan expenses."

Other, more recent studies demonstrate why more of us could benefit from even the most basic financial planning. Based on several recent surveys, Marketwatch reported last year that perhaps half of all U.S. households lived paycheck-to-paycheck, while 31 percent had less than $500 in savings on hand for emergency expenses.

Financial frustration is a fact of life for too many, and there is no one-size-fits-all solution to anyone's specific money management concerns. But one thing that everyone can agree on is the importance of budgeting. Fortunately, there are several smartphone apps, online tools and services from your local bank that simplify the most common budgeting tasks. Take a look at some of these tools and how they might fit into your financial routine.

First steps

Making a detailed and effective household budget takes time and effort, but that's not always a bad thing. As financial software writer Kevin Purdy explained in a guide to budgeting apps for Wirecutter, most experts agree that taking the time to create a budget from scratch - and getting into the habit of regularly adjusting it - is the secret behind getting a firm grip on your expenses. Of course, the time and effort this can take is the primary reason why most of us don't have a budget in the first place. 

Short of hiring a personal financial manager, there are a few apps and services - most of them free - that can provide something like an introduction to the key components of effective budgeting. Many of these tools connect with your bank and credit card accounts to automatically pull in data on income and expenses, and then help you categorize those so it's easier to understand where your money is going each week or month.

One of the most popular of all personal finance tools is a free app called Mint. By connecting to your various bank accounts, Mint will analyze your expenses and help create targeting savings goals. It can alert users when they are starting to go over-budget in a certain category, or just help them visualize how they performed over the last month.

Mint is often praised for being an intuitive, simple tool for tracking expenses, and there are a variety of other similar services available for free. But as Purdy at The Wirecutter remarked, this is only half of the budgeting battle. Mint won't move your money around for you, and it doesn't necessarily help users understand how to prioritize certain expenses and savings. Essentially, Mint and spending trackers like it are a great stepping stone to the best form of budgeting, the kind that fits perfectly within your own needs and priorities.

BudgetThere are several apps and services that can provide something like an introduction to the key components of effective budgeting.

In-depth tools

Like so much else in life, making a budget work requires an investment - either of time or money. If the former is on your side, this tutorial from Instructables is one of many online guides that explains how to create a personalized budget using Microsoft Excel. There is also a wide variety of Excel templates available to make this even easier, but just like the automated apps, this might not be the ideal solution to creating a really stellar budget.

If you can afford to put some extra cash toward an intuitive budgeting app, YNAB (You Need A Budget) is one of the most recommended. YNAB does cost $84 per year, and users can access a free trial for 30 days (or even get a free year if they are a college student). In return, you'll get a budgeting app that many financial experts say is perhaps the best on the market.

YNAB receives so much praise in part because it picks up where tools like Mint leave off. After automatically pulling in data from your accounts, YNAB walks users through the steps involved in creating a personalized budget and savings goals. It can also provide advice on how to actually achieve those goals, whether those involve prioritizing essential expenses or planning for one that's on the horizon. 

Maybe the solution that works right for you is more personal, rather than a digital tool. Working with your local bank might be the best first step toward understanding where your money is going and how you can make the most of it.

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