Personal finance management is the process of planning and budgeting for how your money is saved or spent. Managing your personal finances involves setting financial goals, such as saving for retirement, and working hard to achieve them. The first step in managing your money is to determine your long-term goal. Having a clear goal, or goals, in mind will determine what all you need to do to get there. Thankfully, there are a wide range of options for software and services that can help you achieve your objectives.
After determining a goal, the second step in personal finance management is to create a budget. This involves understanding your financial spending and savings trends and determining how to align the two with your long-term goal. There are many options for producing a proper budget. You can do this manually through pen and paper or an Excel spreadsheet, or you can utilize software, such as those found through online platforms that are often linked to existing bank accounts. Whichever method you use, you should be sure to consider how much cash flow you have coming in and how you want to go about paying off debt. For example, if your goal is to reduce debt and increase your credit score, it is important to pay off credit card debt. Some people choose to pay off credit cards with the highest interest rate first, while others will pay off those with lower balances so they can more quickly reduce the number of payments they must make each month. You must decide for yourself which option works best for you and your financial plan. Proper budgets will also account for income taxes and emergency fund contributions to make you more financially secure and increase your overall net worth.
For businesses such as banks and financial institutions, it is important to provide options that allow for personalized financial management. New technologies allow for individuals to have more access and control over their financial information than ever before. Empowering individuals to make smart financial decisions can benefit a company through:
- New customer acquisition: It is possible to attract new customers that might otherwise not patronize a particular bank. By having tools that enable customers to control and understand their financial information, financial institutions are offering a powerful incentive to utilize their services.
- Increased cross selling: After a customer begins using your financial software, it is easy to offer relevant services that apply to their personal situation. Machine learning enables financial software to learn which products and services are most likely to appeal to a particular customer based on their current financial situation.
- Capitalize on open banking: As more options appear that utilize open banking technologies, it will become more important than ever for financial institutions to ensure they have suitable service offerings. By utilizing open banking to gain financial information around what services an individual uses at other institutions, financial institutions can set themselves apart and get a return on open banking technology investment.
