The world has been through numerous massive crises over the past century. Some notable events include the Great Inflation of the 1970s, the dot-com bubble, and the Great Recession.
While these did not last longer than the Great Depression, their effects have lingered for many years. Take the Great Recession as an example—the world took at least five years to stabilize. And even after over a decade, 33% of Americans still had not regained their lost money.
Indeed, these unfortunate events taught us a remarkable lesson—that wealth can vanish in just a snap. And even people and businesses at the society’s top rank were not exempt.
In fact, some of them went bankrupt—Washington Mutual, Lehman Brothers, and Patricia Kluge, to name a few.
Most importantly, these crises showed the importance of prudent financial management and investment diversification. We can protect and multiply wealth with correct budgeting methods and investment techniques. By being aware of economic events and market changes, we can avert or at least cushion the blow of a crisis.
More recently, we have witnessed how the pandemic recession and the turbulent economic condition in 2022 have turned the global economy upside down. From mass layoffs and business shutdowns to gradual recovery, the world faced new challenges amid overwhelming prices and interest rate hikes.
At the end of 2023, 40% of Americans had already used their pandemic-era savings to keep up with inflation. Worse, some had to borrow despite skyrocketing interest rates due to a lack of emergency funds.
Given all these, we must become more cautious of our spending, investing, and borrowing patterns.
We can utilize many tools and apps to improve financial literacy and awareness. These can help us allocate our income to consumptions, investments, and savings. These can also help us check and improve our behavior toward money. This article will list some tools for personal finance management.
The Essence of Personal Finance in Our Daily Lives
People everywhere race to increase their savings, invest, and buy insurance policies. Yet, many still can’t determine how to do all these simultaneously and effectively.
Some cannot allocate resources, while others cannot manage their monthly income. This can be very expensive; one day, you’ll be stuck in financial quicksand. And while we are too anxious about building funds for our retirement, our plans and goals remain ambiguous.
A recent survey shows that 34% of Americans do not have enough savings. Among the remaining 66%, the majority have less than $1,000 in emergency savings. Even worse, 60% of American households do not have a monthly budget plan, while 72% have no written financial plan. It’s no wonder 1 in 5 Americans see their spending exceed their income.
Moreover, over 30% of Americans have revolving credit card loans, which can be risky amid the still elevated interest rates.
Additionally, over 30% only pay the minimum required monthly payment, the other 30% make full payment, while the remaining percentage is in default. Loans have been the life buoy of Americans in the past two years amid skyrocketing prices.
Yet, they may trap you in debt quicksand if you fail to pay on time or only pay the minimum amount. For example, you borrowed $20,000 to be paid within a year with an interest of 2% monthly. You must pay the $1,670 monthly principal and $400 interest.
At the end of the year, you paid $24,800, 24% higher than the original amount. If the Fed suddenly raises rates by 25 bps, your loans will bear an interest of 2.25% or $500 monthly.
That is why it is essential to have a concrete plan of credit monitoring to pay your loans at the cheapest rate possible.
Personal finance also applies to your savings. It’s not just how you allocate your income to your monthly bills and luxury items. Personal finance helps you find ways to increase your savings without compromising your monthly budget. You can make some adjustments, like shifting from the 80-20 Rule to the 50-30-20 Rule, to make your spending and saving technique more defined.
It also guides you in your investing journey. The self-discipline and prudence you practice in your monthly budget also apply to investment diversification. It allows you to evaluate your risk appetite and find the optimal investment combination to optimize risk-reward management.
Personal finance also helps us understand and distinguish our needs and wants effectively. It is our monthly financial framework that determines priorities. We will know what we need to increase, reduce, and improve. If we do it consistently, we will see significant changes in the long run. We may increase our savings and investments and eliminate loans.
At the end of it all, personal finance teaches us things we cannot master overnight or even a week. Self-discipline is a crucial aspect of personal finance. It can also be challenging to learn and practice religiously. It will give us a spanking we deserve to correct our bad habits. It will help us say No to big and small temptations and distractions.
Most importantly, we will learn delayed gratification to fix our gazes on our goals. Hence, it will redirect our mindset, nurture our overall well-being, and enable us to help our loved ones during crises.
Helpful Tools for Personal Finance Management
Personal finance management can be complex, especially for those with at least two income streams. Thankfully, many personal finance management tools come in handy. These will ensure consistency by giving you constant updates and accurate insights. These are some tools to assist you in personal finance management.
Screenshot from Microsoft 365
Microsoft Excel
We’ve been hearing about mobile apps and AI tools for personal finance management. They have become prolific and ubiquitous over the years.
However, some still doubt their reliability and accuracy. Also, they may be prone to hacking and fraud. We recommend going back to basics—use MS Excel instead.
Excel has always helped integrate and compare overall income and expenses, whether monthly, semi-monthly, or weekly. Of course, its drawback is the need to update it manually. Otherwise, you may lose track of your spending and saving patterns.
Even so, this requires you to be consistent no matter how dull it may be. Excel gives you a full picture of your monthly budget, allowing you to control your allocation to consumption and savings. Items are specified, so you will see every amount you spend on them. You also do not need to change the items repeatedly. You can keep them blank when no amount has been spent on them.
Moreover, you can add formulas and copy-paste them to other sheets. You just need to input the amount, which will automatically compute the total. You can separate your monthly spending per sheet.
Pro-tip: you can integrate it with other apps like Python and Tableau to generate interactive charts and tables for better data representation.
Screenshot from Trim by OneMain
Trim
The events since the pandemic led us to various visual and audio streaming services, such as Netflix, Amazon Prime, Hulu, Disney+, and Spotify. In turn, spending on these platforms has risen by 70% or $100/month since 2021.
More interestingly, nearly half of American consumers subscribe to at least four streaming services. If you’re learning and having fun, there’s no harm in subscribing to them.
However, you must know that you don’t use all of them to their total capacity or potential. Instead of subscribing to four, why not cut it down to one or two? This could be an avenue to increase your savings.
Can’t still picture it? No problem. Trim is there to help you analyze your spending pattern and strategize to save money. Suppose you signed up for Netflix to watch Bridgerton and have been letting it stagnate since the show ended; Trim can help you eliminate or reduce that cost.
Trim doesn’t only focus on streaming platforms to help you save money. It can also negotiate your internet and cable bills with your bank to get refunds and waive interest costs. As such, you will not have to wait in line to talk with customer service representatives.
Screenshot from Credit Karma
Credit Karma
Credit Karma is a user-friendly credit monitoring tool for existing and paid loan accounts. It also browses curated recommendations based on your credit profile. Of course, it will only suggest offers with high approval odds since it can be crucial for your credit score.
Moreover, it provides insights into your borrowing patterns. These insights allow you to analyze your borrowing frequency and importance. That way, you can look for ways to improve your borrowing habits or look for better alternatives to your current and prospective lenders.
Lastly, it provides customized suggestions to help you use your credit wisely.
Screenshot from Mvelopes
Mvelopes
Mvelopes targets to change our negative perception of budgeting difficulty. It can make budgeting as easy as spending your income with its plan created in less than 15 minutes.
Mvelopes use the envelope system with a digital spin on it. Once you choose your financial goals, add your bank account and input your income level. Then, you must create different envelopes for your corresponding spending, such as electric, groceries, water, gas, and entertainment bills.
After setting up your plan, it will keep track of your spending and display the remaining amount per envelope. As such, you will have control over every dollar you save.
Screenshot from Betterment
Betterment
You may not be well-versed in the financial market and investing strategies. But Betterment is there to bridge the knowledge gap that holds you back from reaching your goals. It guides you through various portfolio options to help you evaluate your risk tolerance and goals.
Instead of investing in familiar stocks, the app’s robo-advisor will select stocks and ETFs consistent with your investment profile. It will choose various industries so that your investments are well-diversified without breaking a sweat.
Additionally, it has an automated savings plan to help you control your investment spending. Also, you only have to pay 0.25% of what you earn in a year instead of paying high fees to brokers.
Interestingly, it has automated tax strategies to help you save every tax season.
Lastly, you can use the “Socially Responsible Investing” feature to make a positive impact with your investments. You can do all this while deriving income in your investment portfolio.
Key Takeaway
Personal finance management is no easy feat. Achieving your goals takes a lot of effort, time, self-discipline, and consistency. But with these excellent tools, you can efficiently budget, save, and invest. They will help you improve your spending, saving, and investing habits to increase your money over time and enhance your way of living.
