Personal finance is a headache everyone has to contend with, and management of it, is not something taught in school for most people. Managing your finances can turn into a nightmare if you don’t put any conscious thought and effort into it. Planning for your money is essential for your mental wellbeing and financial success. All too often people find themselves under mountains of unplanned, and sometimes unnecessary debt; or with what appears to be a “suddenly empty” bank account.
Managing your money doesn’t have to be a nightmare though. The interaction of mobile devices and computers with technology and the internet are making it incredibly easy to get a handle on your finances. Web and mobile apps built to help you manage your finances are a dime and dozen, you just have to find the right one for you. But what exactly can an app do for you, and why should you use one?
When you have money in your bank account or your wallet (although in Zimbabwe we favour electronic money) it can be tempting or easy to spend it on unplanned purchases, sometimes even recklessly. Without any way to keep track of your money usage, you could deplete your bank balance faster than you intended, without realising it.
The good thing is, there are apps to help you do this. An app like this will tell you where you spent your money, when and how much. Provided that you took the time to fill in all the necessary details, the app will categorize the information for you. Some apps can be linked to your bank account, automating everything, or you could enter in the details manually every time you make a transaction.
Acquire insights on your spending habits
Tracking your purchase habits, whether for goods, services, or simply gifting someone with your hard-earned money, will give you some insights on which areas you spend most on. This should help increase your self-awareness and enlighten you about your best and worst spending habits. Most importantly, this information is necessary when setting up a budget, and sticking to it. Knowing your areas of weakness means you’re better prepared to deal with tempting situations when they arise, or avoid them altogether. This will help you stick to the budget that you would have set for yourself; more on that below.
Track your income streams
This mostly applies to people who have set up more than one income stream, or those in the gig economy. People who are not under salaried employment will often have multiple ways of earning money through, for example, selling a product, freelancing, trading bitcoin or forex, doing artisanal work and so forth. Sometimes they’ll have a combination of many different methods, or, as with the case of freelancers, different clients.
Additionally, when you have passive income flowing into your bank account, you also want to keep track of this cash flow. With financial management apps, this becomes incredibly easy. The information is also necessary for setting up your budget.
Set up your budget
One of the most popular functions of financial management apps is budgeting. In fact, there are dozens of apps on the internet specifically created for that function, called budgeting apps. Some applications will have a lot more functions that I haven’t mentioned, but the core of many financial management apps is to track your spending, and to set up a budget.
A budget is basically a chart representing your expenses, income, and savings with the allocated figures for each. Your personal budget is a plan on how you’ll manage your money for a given period in time. Some people have weekly budgets, others monthly or quarterly budgets, and brave souls will have yearly budgets. The most popular kind is the monthly budget. A yearly budget for personal finance may not be the best because it assumes everything remains constant from the initial point of budgeting.
The multitude of apps created for this purpose will make it easy for you to outline your cash flow. With the insights from tracking your spending, you can identify which areas to allocate more or less money on. It’s also easy to identify where to cut your spending if you are short on cash or trying to save more.
Now that you have a plan for your money and how to manage it, it’s up to you to follow through. Financial management apps can do many things, but unfortunately they can’t, for example, stick to your budget for you, or give you extra money when you need it. Apps are useful tools, that if used, coupled with the right habits, could make your personal finances a breeze to organise and manage.