An Introduction To Budget Tech

Posted: Jan 30, 2019 1:17 PM
An Introduction To Budget Tech

The Importance of Budgeting in the Age of Technology

Money is less tangible than it once was, but just because the bank keeps your cash in the form of ones and zeroes instead of crisp stacks of bills doesn’t mean it’s a whole new ballgame. However, the way we think about our money has changed significantly with the financial sector’s embrace of technology, and not necessarily for the best. As financial institutions move increasingly into the digital realm, maintaining control over your budget is more important than ever, but new challenges beg a measure of tech savviness in addition to the always-present need for budgetary diligence.

The fintech sector has leapt to the rescue in recent years, and with a surfeit of tech-sourced ingenuity, makes keeping a budget easier even for those who have resisted initiation into the digital era. Interestingly enough, many of the world’s new and convenient financial technologies have also introduced challenges to budgeting that didn’t exist a decade ago.

A Paradox of Digital Proportions

Technology is both a benefit and a detractor to the idea of intelligent budgeting. New ways to pay and mobilize our money have trained our brains to think differently about these subjects and have made it both easier and harder to comprehend the full financial picture. A handful of trends exemplify the idea that it's easier to give in to our worst spending impulses, with so many online services charging small yet significant subscription fees. Monthly fees for video streaming memberships, online periodicals, video game networks, and other “must have” frivolities pile up quickly and aren’t immediately recognized for their long-term impact. 

Moreover, the millennial and young adults’ culture of borrowing that was reinforced by student loans has been habit-forming at the very least and routine practice at the very worst. Much of this can be attributed to a lack of financial literacy and weak education in the area of budgeting. Although this generation perceives themselves in a much more diligent light, the data highlights a starkly different picture, and these factors are just the tip of the iceberg for this relevant demographic.

Social media tugs on our emotions constantly and forces us to compare our financial situations to those of our friends and family, with younger generations especially throwing caution to the wind just to show off their latest toy on Instagram. The pleasure derived from a healthy savings account is nothing when compared with the prospect of hundreds of likes and other arbitrary forms of recognition from anonymous peers.

Social media and messenger apps also represents powerful channel for payments, with 47% of millennials using popular apps to shop before making a purchase—and these platforms don’t give financial context for these decisions either. When was the last time you were reminded of your connected account’s balance before making an online purchase? Additionally, the move to a cashless society and more part-time and online self-employment exasperates the issue. This trend has seen individual income levels become more volatile, even as micro-finance makes it easier to split spending into multiple payments and keep kicking the can down the road.

However, technology has also made it easier than ever to keep a tidy financial house, as long as you have the wherewithal to prevent your online spending from escaping into the ether. Banks have digitized their decades of paper records and are now, thanks to regulations like GDPR, forced to make this trove of data available. The fintech industry thrives on it, and to its credit has produced an impressive variety of tech-based financial services that help people find custom credit options, consolidate their business’s finances, exchange gift cards, integrate new payment systems, and most importantly: manage their budgets better. 

What Can Budget Tech Do for You?

For an individual who is losing control of their finances under an avalanche of online subscriptions, impulse buys and Venmo payments, budgeting is crucial. The cheap (read: expensive) highs that you get from short-term pleasure purchases are extinguished by the stress of necessity when the inevitable emergency arrives. Medical procedures, auto repairs, home improvement needs, and unanticipated debt collection are common examples. Budgeting applications are vital for preventing this scenario. When doing your research on which apps are best, it’s vital to include guidance like this YNAB review and other sources of fulfilled due diligence, which help you pick the functionality most relevant to your finances. Not only can these budgeting apps quickly identify and reveal bad spending habits, they can also send alerts when you make a purchase beyond your monthly allocation and sync all your accounts and expenditures into one ecosystem. 

The trick to budgeting applications and software platforms is that they tickle the same pleasure centers in the brain as small online purchases do, effectively utilizing positive reinforcement, enticing visuals, and frequent updates to keep you on the path to more fulfilling financial goals. Paying off a mortgage or buying a new car in cash is infinitely more satisfying than the combined gratification of even a thousand video game “loot boxes”, and this is something many immersed millennials miss out on. While it’s never too late to begin budgeting, the idea of compound interest and opportunity cost are also in play, so don’t delay.

Budgeting apps also help businesses, especially smaller ones which don’t optimize their finances and are instead focused on keeping the operation afloat. Budgeting can mean turning that small profit margin into a medium-sized margin, and therefore more effectively reinvesting for maximum growth. New business tools are expensive to embrace initially, but when integrated promptly can recoup investment costs in no time. With the extra cash to afford a CRM platform or VoIP system, your employees can work smarter and boost the business’s potential.

Budgeting for Well-Being

The most important reason to budget, besides planning for the future, is to feel a sense of personal accomplishment in an age where coveting your neighbor’s new car or phone is the new normal. It doesn’t matter if your bank account is busting at the seams or if it’s skin and bones: a smart and synced budget means you’ll never be unprepared. While ignoring a bank account provides momentary relief from unsustainable habits, a bevy of new budgeting technologies allows you to gain long-lasting satisfaction and full transparency with just a little work.