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Making a budget and living that budget are two very different things, and it can often be challenging to stick to a spending plan.
According to a 2023 Forbes Advisor survey, 40% of respondents live paycheck to paycheck. Using a budget app is one option you might consider if you’re ready to break the paycheck-to-paycheck cycle.
Budgeting apps promise convenience and simplicity when it comes to staying on top of your money. But just how effective are they? And is a budgeting app worth your time?
How Budgeting Apps Work
Every budgeting app is different, but they mostly work along the same lines to help you manage your money. These apps can sync with your bank and credit card accounts to help you keep track of spending and manage your financial life virtually anywhere.
The main function of these financial apps is to help you create a workable budget that you can stick to based on your typical income and spending. Some apps use a specific budgeting approach, like the 50/30/20 Rule. Others take a more general approach, allowing you to create different budget categories and assign money from your paychecks to those categories.
Some of the other things you may be able to do with a budgeting app include:
• Tracking spending. Budgeting apps that link to your checking or credit card accounts can automatically record new purchases and other debit transactions for you.
• Paying bills. Similar to the automatic bill payment feature your checking account or credit card might offer, you may be able to use a budgeting app to pay bills on autopilot each month.
• Tracking bill due dates. Due date trackers can help you avoid late or missed bill payments and this is another feature you can find with budgeting apps.
• Saving toward financial goals. Some budgeting apps have savings features. For example, you may be able to set up savings “buckets” and schedule automatic deposits or “sweep” money you don’t plan to spend into a savings account.
The main idea behind these apps is to put you in control of your money while offering simplicity and convenience.
What’s Good About Budgeting Apps
The best budgeting apps have some pros that can make them attractive to use, especially if you’ve tried other budgeting methods or are just learning how to budget. Some of the benefits budgeting apps can offer include:
• Convenience. Compared to using a budgeting spreadsheet or writing down your budget on paper, an app that you can download to your phone or tablet is easier to manage. You can literally take your budget with you anywhere you go and keep tabs on what you’re spending.
• Ease of use. Budgeting apps take the hassle out of making a budget and tracking expenses. You have to sync up your accounts to the app and tell the app about your income and expenses initially. But once you get your budget set up, the app can manage it for you.
• Financial awareness. Using a budgeting app isn’t necessarily something you can do once. You still have to pay attention to what you’re spending each month. But having that information on hand all the time can help you become more conscious of what you’re spending.
• Comprehensive view. A budgeting app that links to your bank, credit card, loan and investment accounts in one place can offer a complete snapshot of your finances at any given time. That’s helpful if you’re working on paying down debt or want to easily track your net worth month to month.
Another plus of many budgeting apps is that they’re free to use. While some can charge a one-time fee or a monthly fee, there are plenty of free budgeting apps you can download to start managing your money.
Do Budgeting Apps Really Work?
Using a budgeting app can help you stick to your budget and spending plan. The challenge is knowing how to use the app to your advantage. With that in mind, here are five reasons why budgeting apps can end up falling short:
1. Lack of Commitment
Downloading a budgeting app and syncing up your accounts can help you get started on the path to managing your money better. But it’s not just a once-and-done thing.
To truly make a budgeting app work for you, you have to be prepared to follow through with the spending plan you set for yourself.
2. Lack of Attention
Budgeting apps can make things like automating bill payments and tracking spending easier. But that can backfire if you’re not tuned in to what’s happening with your accounts.
For example, if you’re not logging into the app daily to check your balance, you run the risk of overdrafting your account when an automatic bill payment is posted. This could mean paying steep overdraft fees.
Setting up due dates or low balance notifications can help you avoid that. But if you’re ignoring the notifications, you could still end up with an overdrafted account because you weren’t paying attention.
3. Budgeting Method Mismatch
Budgeting apps don’t all work the same. If you choose an app that doesn’t match up with how you’re used to managing your money, then your budgeting efforts could end up being a total fail.
For example, say you download an app that uses the zero-based budget method. This method requires you to assign every dollar in your budget a job so there’s nothing left over at the end of the month.
Only, perhaps you’re self-employed as a freelancer so your income isn’t always the same month to month. This can make assigning out the dollars you’re earning much more difficult.
The end result is that you may get frustrated and give up on the budgeting app altogether. This is why it’s important to choose the app that’s the best fit for your unique financial situation.
4. No Accountability
Budgeting apps give you the tools you need to manage your money. But they don’t enforce any consequences if you don’t use those tools.
At the end of the day, it’s up to you to analyze your spending and figure out where your money’s going and what you might need to change to improve your finances. A budgeting app isn’t going to require you to do that.
So again, it comes back to being committed to using the app and following the spending plan you set for yourself.
5. Doesn’t Address Financial Behaviors
If someone is in the habit of overspending, then using a budgeting app alone may not be enough to change that.
While a financial app can point out to you where the holes in your budget are, it can’t help you pinpoint what’s causing you to overspend in the first place. So unless you’re willing to address those poor financial habits that need breaking, a budgeting app may not work for you.
Tips for Using Budgeting Apps
If you understand why budgeting apps may not work for some people and you still want to give them a try, these tips can help you make the most of them:
• Know what you need. Before downloading any budgeting app, consider what you hope to get out of it. This can help you set realistic expectations for using the app.
• Compare app features and benefits. It’s also important to look under the hood to learn what a particular budgeting app is all about before you download it. This can help you avoid a budgeting method mismatch or paying for a pricey app that has features you won’t use.
• Commit to regular check-ins. A budgeting app can only take you so far if you’re not regularly checking in with your money. So commit to logging in at least once weekly—if not daily—to see how you’re doing.
• Think big picture. If you’re using a budgeting app because you want to stop blowing your budget or want to pay off your debt, consider the bigger picture: specifically, the habits or behaviors that may be causing you financial headaches. That can help you get perspective on what else you may need to change, beyond using a budgeting app.
Also, pay attention to what you’re paying for a budgeting app. If your goal in using a budget app is to save money, it may not make sense to pay for one when there are free versions.
Bottom Line
Budgeting apps continue to be a popular money management option for people who want to feel more in control of their finances. Using budgeting apps effectively starts with knowing what they can (and can’t) do for you and choosing an app that meshes well with your spending style and overall money situation.
And if you find that a budgeting app isn’t working for you, don’t give up on budgeting completely. You may find that a budgeting software program or budgeting spreadsheet is a better fit. Regardless of how you choose to budget, the important thing is finding a system that works for you and sticking with it.
