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How To Use Money Management Tools The Right Way

  • October 5, 2020

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How to Use Money Management Tools the Right Way

What money management tools are you interested in using?

So many blogs and articles about getting your household finances together focus on using money management apps to get on track and stay organized. Software like Quicken and Mint have pre-made templates for budgets and have handy tools for calculating cash flow, taxes and other elements of personal finance. These tools are popular because they are helpful — but they are only helpful if you know how to use them the right way.

Money management software is functional, but it isn’t foolproof. Here are some ways to use these tools to ensure your household finances get better, not worse.

Recognize the Limitations of Free

There are dozens if not hundreds of so-called free financial tools available in mobile app stores and across the web — but just because something is free doesn’t necessarily mean it is the right fit for you. There is an economic principle that states: “There is no such thing as a free lunch,” which essentially means that every purchasing decision comes with hidden or implicit costs, even if the purchase purports to be “free.” For example, if a friend offers to buy you lunch, the costs include spending time with that person, being limited to food from the lunch spot they choose and perhaps fulfilling some unknown future favor.

Related: 7 Tips for Better Money Management

Free Finance Apps Come With A Price

A finance app you believe to be free could have limited functionality that requires you to pay to unlock better features; the app could be packed with advertisements, which might interfere with usability; or, the app’s authors might farm and sell your user data, which is particularly concerning when user data is associated with financial habits. Because you might not know the cost of utilizing a free financial app, it might be safer to invest in a discrete tool that has a clear and upfront cost as well as defined features.

More on money management tools:

Research What You Really Need

A bigger financial tool isn’t always a better financial tool. It is easy to get bogged down trying to manage features in financial software, and if you don’t benefit from those features, devoting time and energy toward understanding and manipulating them is a significant waste.

One-Income Households

If you are a household of one with straightforward cash flow — one income source and minimal expenditures — you probably don’t need to bother with an enterprise-level application. Then again, if you are juggling multiple income streams, dependents, debt and other complex issues, you probably want a more robust money management software.

Related: 7 Money Management Tips for Single-Income Families

Before acquiring any money management tool, you should do some preliminary work to understand your financial situation and develop your financial goals. Then, you will have a good sense of what features will be of aid in your pursuit of financial health. You shouldn’t be afraid to try different financial tools, especially if they are available in low-cost software-as-a-service formats.

Related: Money Management for Couples: Don't Let Your Wedding Day Derail Your Finances

Don’t Get Obsessed With Tinkering

You shouldn’t make the mistake of conflating tinkering with your financial program with achieving financial success. As mentioned above, spending too much time and energy managing the features of your financial software is a flaw; it means you aren’t devoting sufficient effort toward changing your financial habits or generating wealth.

Often, tinkerers develop because they are pursuing some idea of perfection within their financial system, but the truth is that the perfection doesn’t exist, especially within personal finance. Undoubtedly, your financial plan will change over time, but that doesn’t entitle you to wasting time scouring your spreadsheets for errors or indications that you need to change.

Work Your Financial Plan in the Real World

Money doesn’t exist as a number in a column on your budget. The money you gain through work should work for you by paying for necessities like your shelter, utilities, food and transportation.

Do You Have An Investing Plan?

You might also develop a financial plan that concerns investing. And this will put your money to work generating even more money--which will go to improving your lifestyle in various ways.

Instead of worrying overmuch about whether you have chosen the right financial tool or whether your budget is as perfect as can be, you should focus on living your financial plan every day and observing over time what can and should change. Then, you will find financial comfort and success.

What Money Management Tools and Personal Finance Apps Do You Use?

Using a financial app could revolutionize your financial situation — but only if you are using it the right way. By opting for a money management tool that works and working it properly, you can gain greater financial independence and stability.