We live in a digital world. There are so many different mobile apps and user-friendly software options available to everyday people. For almost every dilemma you can think of, there’s an app available that solves it. The personal finance space isn’t exempt from this phenomenon. While some of the personal finance technology available to consumers is incredibly helpful, other pieces of tech can hinder your financial success or add an extra step in a process that should be simple. Still, that doesn’t mean you shouldn’t try to leverage the technology that’s out there. So, how do you know what’s worth your time, and what’s not?
What Financial Technology is Out There?
First, it never hurts to understand what kind of technology is available for you to leverage. Although not all of these tools may be ideal for your financial situation, you may find one or two pieces of tech that make sense to start implementing.
Apps like Mint and You Need A Budget are available to help the average American build a budget that’s easy to stick to. These apps have the capability to track your spending in different budget categories each month and let you know when you’re over (or under) spending on one area or another. You can also track your goals, like debt repayment or savings.
Self-Guided Saving, Investing, and Robo-Advisors
There are several robo-advisors out there that help consumers get started with investing or saving. Some tools, like Digit, are simple to use. Digit takes a small portion of funds from your checking account using an algorithm that ensures they’ll never take too much. The app automatically deposits these funds into a separate savings account. Before you know it, you have built a small but respectable savings account without trying at all.
Some applications take it a step further and help consumers begin self-guided investing. Acorns, for example, rounds up each transaction you have with a debit card to the next even dollar amount. The “spare change” is put into an investment account that you set up through them and invested accordingly.
The next step up is a full-fledged robo-advisor, like Betterment or Ellevest. There are countless robo-advisors out there, and they each tend to specialize in something different. Ellevest, for example, focuses on helping women achieve self-guided investment success. Robo-advisors can help you on several levels: they assist you in investing, help you to build a long-term financial plan, and automatically adjust your portfolio based on market trends and your ever-changing risk tolerance.
They do this with little to no human interaction – everything is self-guided, and their portfolio adjustments and investment decisions are done almost exclusively by a computer using carefully crafted algorithms. While they can be an excellent way to get started investing, they certainly aren’t foolproof. As is the case with any piece of technology, they have both benefits and drawbacks.
Other technology tools can help you to minimize spending and pursue a leaner budget – like TrueBill. TrueBill (and apps like it) identify monthly subscriptions or bills that are recurring, and notify you when they come across them. This can be helpful when you’re trying to pare down on subscription services like Hulu, Netflix, or Spotify.
When Doesn’t Financial Tech Work?
Although all of these technology tools sound amazing, it’s important to remember that there’s a lid for every pot. A tool that works for one person may or may not work for the next. The two biggest things to keep in mind when incorporating technology into your financial plan are:
- Remember to check your tech. A human set of eyes can help to sidestep a number of tech-related mishaps. Unfortunately, technology doesn’t always work the way it should. This is where some robo-advisors, budgeting tools, or automated financial technology can fall down. Keeping an eye on your tech can make sure that everything continues to run smoothly.
- More isn’t always better. Although it may seem like a tech-based tool is a great way to streamline or “advance” your financial plan, this isn’t always the case. In some cases, technology simply adds an additional step in our process and slows us down.
How Can You Simplify?
In a world full of new technology that’s advancing and improving by the day, it can feel counterintuitive to take a step back and go the old-fashioned route. However, simplifying your financial plan whenever possible helps you achieve several things. First, a simple financial plan makes it easier to execute. In other words – the easier you can make things on yourself, the more likely you are to stick with a strategy for an extended period of time. Second, a simpler financial plan can help you to streamline your process to achieve your goals in a more efficient manner.
If a tech tool isn’t helping you to achieve a simpler way of doing things, it’s likely not worth your time and energy. Additionally, if a piece of technology isn’t helping you achieve the financial goals you’re working toward in an efficient way, it may be time to contact a financial planner. Robo advisors, or automated savings tools, can be helpful for a period of time. However, eventually having a human look at your financial situation and evaluate what strategies make the most sense based on your unique goals is something a computer can never provide.