By: Sean Gallagher, CFP®
Old ways of tracking finances included using a pen and paper combined with envelopes to “bucket” different spending needs. Then came along Excel, where people began using spreadsheets to keep their budget and spending. Today, we have apps available on our phones with software to create the budget for you and even track each transaction on your credit card.
As the world continues to evolve, we’ve seen personal finance and budgeting methods follow a similar transition. One concept that has remained unchanged – the importance of tracking your cash flow and monthly spending.
Having a clear grasp of your income and expenses can open opportunities for saving and building healthy financial habits. Unfortunately, far too many people do not track their spending and are left overpaying for unnecessary items or missing out on savings and planning opportunities. What if I told you that tracking your finances could be easy and fun?
Without tracking monthly expenses, the average person is unsure how much they are spending and can only use their bank account balance as the primary judge of their monthly surplus or deficit.
After collecting and analyzing a client’s cash flow, we review it with the client, for whom it is typically the first time they have seen the details. Inevitably, the client will point to one or two categories saying, “I spend how much a year on dining out?” After seeing the actual spending, people can make informed decisions about their lifestyle spending choices. This newfound awareness may increase your net cash flows and allow you to save towards financial goals, pay down debt, and live with more financial freedom.
The main reason people don’t track their finances is that it’s too time-consuming. There’s no single way to best track your cash flow since this comes down to personal preferences.
However, there is an increasing number of websites and phone applications that do this all for you, and after taking the time to set them up, they will not require a lot of your time. From tracking actual spending to monitoring upcoming bills and subscriptions to developing personalized savings plans, todays’ apps have taken most of the work off your shoulders.
Below are some solutions to assist with budgeting and cash flow monitoring. These apps use data aggregation from secure websites to link up your financial accounts and track transactions, sending you alerts when you’ve gone out of your allotted budget. These may be useful for people who struggle to track their spending or need to keep their expenses below their income.
Apps That Can Help You Track Your Finances
Mint – allows you to link up your credit cards, bank accounts, and investment information to the app for real-time updates and tracking of balances, deposits, and withdrawals. On top of building out charts for net worth and account balance information, it helps categorize expenses and shows your average spending across critical areas. It even reminds you about upcoming bills and gives you a periodic update of your credit score.
Mint is free to use and does not require any software to be installed. It will highlight or send advertisements and recommendations for outside services that are not free.
You Need A Budget (YNAB) – assists in creating a budget and savings plan by using its “Four Rules” to create financial stability. The app will help categorize income directly towards specific spending goals and keep you on pace to pay larger, less-frequent expenses (i.e., annual insurance premium; holiday gift spending).
YNAB is free for the first 34 days, then charges $11.99/month or $84/year.
Truebill – helps provide an overall picture of your finances by including account balances and spending all in one place. It does help manage subscriptions and can even cancel unwanted subscriptions for you on your behalf.
Truebill is free to use but includes several optional services for a fee. Truebill Premium can cost between $3 - $12/month or $36 - $48/year. Bill Negotiation includes a charge for successful negotiations.
Even if your cash flow leaves you at a surplus at the end of the month, you still need to optimize it towards your savings goals or debt repayment. Below are some solutions to assist with savings and reaching financial goals. For people who struggle to accumulate savings or need assistance developing a plan for using their extra cash, the following apps use “games” and analytics to engage the user.
Qapital – turns savings into a game. You can set a savings goal and create rules for that goal (i.e., save $5 every day you reach your step goal; save $1 every time you go to Starbucks). This feature takes away the mental reluctance of saving to a point where you don’t even realize you’re doing it.
Qapital is free for the first 30 days, then charges between $3 - $12/month depending on the membership plan.
Digit – you set your savings goals, link your accounts, and let the app do the work. Digit uses an algorithm to monitor your monthly income and expenses and automatically adds to savings during low spending periods. It calculates a savings amount you won’t feel and keeps you in line to reach your goals.
Digit is free for the first 30 days, then charges $5/month.
Acorns – although other apps have caught up with a similar feature, Acorns links to your credit card and automatically adds to your savings on every purchase. It rounds up every transaction and lets you choose what to do with the money (i.e., a $5.05 purchase would charge $6, with the $0.95 going towards savings, paying down debt, or whatever you choose).
Acorns charges between $1 - $5/month depending on the membership plan.
While many of these apps have overlapping features, it’s worth seeing if they could be a good fit for you. No matter how you do it, tracking your cash flow opens up all sorts of opportunities. Getting in front of your finances has never been easier!
DISCLAIMER: We do not make any money from listing these apps. The descriptions do not cover everything each app offers, and some explanations could be subject to inaccuracies. Some apps do charge a subscription fee or recommend products that charge fees.
Sean Gallagher is a CERTIFIED FINANCIAL PLANNER™ at HIGHLAND Financial Advisors, a Fee-Only financial planning firm that offers comprehensive financial planning, retirement planning, and investment management. Sean graduated from Virginia Tech’s financial planning program in 2018 and successfully passed the CFP® national exam in 2019. As a Financial Planner at HIGHLAND Financial Advisors, Sean works on developing comprehensive financial plans and investment management for all clients.