Do Budgeting Apps Work?

Ah, budgeting. It’s a word that makes most of us cringe (myself included).

The concept of budgeting really emerged once our financial system began to more readily use credit, particularly credit cards. Until then, if you didn’t have the cash to pay for something, you didn’t buy it.

Cash also makes teaching children about money much easier, because they are very sensual – tangible money they can see and keep in their wallets. If their wallet is empty, then they can’t buy anything. If they want to save up for something, they can see it getting bigger and bigger. Then, when they have saved up for what they want, there is a greater impact felt when they have to hand over that hard-saved pocket money to buy the thing they want.

Nowadays, kids see us grown ups wave a piece of plastic, or even our watches over a screen and bingo, they get to go home with “the thing”!
On a trip to Sydney when my daughter was 6 years old, she had some pocket money with her that she could spend. All I said I would buy her on the trip was food, drink and maybe an ice cream here or there. That’s it. Everything else she wanted, she would have to buy for herself with the pocket money she had. So, we come to Taronga Zoo, and there is a toy she wants to buy. They no longer take cash, which meant I wave my piece of plastic, and then she gives me the cash. It’s not quite the same though.

What has this got to do with Budgeting Apps you might be asking yourself?

Well, quite a bit. Because we no longer hand over the cash and see what we do and don’t have left, it makes keeping track of our spending even more important.

What with multiple bank accounts and credit cards, there is money going out all over the place. Then comes the debt repayments as well.

Because we all live a pretty fast-paced life, who has time to keep hold of all your receipts (if you even get them these days – especially with so much online shopping), then write or type them up, add them all up and compare this to what income is coming in?

NO ONE!

With so many apps around these days, there must be at least one that is helpful at managing spending and budgets…

So, something I’m often asked, is “what is the best app for helping me with staying on my budget?”?

Like with most answers when it comes to money, “it depends”.

Firstly, what does having a budget actually mean to you? What do you want to know or track?

Personally, I’m not a fan of detailed budgeting. It’s important to know what you spend your money on and to understand what wise spending is for you. This is something that looks different for everyone.

Do you love eating out and dislike cooking? Well, factoring in eating out instead of buying groceries is something that might work for you.

Or, do you have a large family and need to buy more in bulk?

Or, is your household largely vegetarian, or mostly meat eaters?

So many different scenarios that will impact what you budget for and how you budget.

Then comes the level of detail that you like to operate at. Do you want to know every cent that is coming in and going out? Or, would your prefer buckets that help you stay on track?

Most banking apps will show you what money is coming in and what money is going out each month. This helps with the big picture (once you factor in any money transfers which aren’t real income or expenses), so you can see what your money net position is (in terms of more going out than coming in, or vice versa).

Apps that are specific to budgeting will link to your bank accounts and credit cards and then attempt to categorise what you are buying. This is where many of them fall down, and in my experience I was spending quite a bit of time correcting the incorrectly categorised expenses (not a fun exercise).

The app I used to love (Money Brilliant) no longer exists, and the alternatives all have their ups and downs.

Probably one of the best known and highest ranked is Frollo. Instead of trying to go too micro with categorising, it categorises into buckets, like income, living, lifestyle and savings. You can also set a budget, create financial goals, and view upcoming bills. You can also see what your overall financial position is, which is important. Unfortunately, if you wanted to take this information further and analyse it, you can’t export the data.

Another well known budgeting app is WeMoney, which has a free and paid version. It is very similar to Frollo, however, attempts to categorise at too micro a level, which often results on mis-categorisation.

This makes it difficult to then get an accurate picture on what you’re spending on.

The Raiz app, which I use for micro-investing, also has a spending tracker (because your accounts are already linked to go the round up investing). The categorising has 2 levels, so you can go into the detail if you want, or keep it at levels such as Shopping, Food & Drinking, Transport & Auto, Entertainment, etc. It doesn’t give you the overall view of your net worth, but from a spending monitoring perspective it, it’s helpful.

If you want to manually add your expenses and use an electronic version of the old-fashioned “envelope system” of budgeting – where you assign dollar amounts to groups of expenses each week or month, then GoodBudget could work for you.

Budgeting is a very personal, individual process. There is no absolute right or wrong, so don’t be too hard on yourself. So long as you are aware of your spending and have the intention to improve, find what works for you and take it one step at a time.