Digital money tools help people see what they spend their money on; help them figure out their spending; and help them keep track of their bills and goals. By providing some level of organization and visibility, digital tools help eliminate some of the “guesswork” of managing money by showing the user’s history of transactions, including patterns and trends, and even provide alerts and reminders to alert the user to potential problems before those problems become larger issues.
As well, these tools can help individuals develop better financial habits, such as saving on a regular basis, paying off debt faster, and making other smart financial decisions. Which digital money tool works best will depend upon an individual’s method of earning money, their methods of spending money, and where they store their money. Some individuals may need simply to follow a budget; while others may require a digital tool that provides investment information, the ability to share family money-tracking information, or stronger levels of privacy control. Regardless of the digital money tool selected, the ultimate goal should be to help the user manage their money in a way that is clear and consistent.
1. Budgeting Apps for Daily Spending Management
Budgeting apps allow the user to set up categories, set limits within each category, and view their actual spending in real-time. Most budgeting apps are designed to connect directly to a user’s bank account(s) to enable automatic updates of all bank transactions. As a result, this allows users to identify potential areas of over-spending at an early stage.
The level of structure provided by a budgeting app may vary. While some tools are structured around specific, rigid categories, other tools provide the flexibility to plan and budget as desired.
Typically, budgeting apps will assist the user with:
Creating a budget categorized by type (e.g., food, travel, bills, etc.)
Providing spending alerts as the user approaches a limit within each category
Displaying monthly summary and trend views of spending activity
Enabling shared budgeting for couples or families
Ultimately, a good budgeting tool helps make spending more visible and eliminates the “money surprise.”
2. Banking and Wallet Features for Automatic Updates and Alerts
Increasingly, many banks are offering digital money tools that provide a certain level of money tracking functionality without requiring the user to download and install additional apps. These digital money tools typically include features like a breakdown of spending by category, detection of recurring bills and payments, and notifications for low balances, unusual transactions, and overdue bills.
Since these tools are integrated into the bank app, they are relatively easy to use and provide instant updates. For many users, the primary advantage of these tools is their simplicity.
Some common banking features include:
Automatically categorizing expenses and displaying charts and graphs
Providing alerts for low balances, large transactions, and missed bills
Allowing the user to set up multiple “goal pots” or sub-accounts for saving
Notifying the user of upcoming recurring payments
For many users, the banking features provide a solid foundation for further developing their personal money management capabilities through the addition of other apps.
3. Expense Tracking and Receipt Tools for More Detailed Financial Recordkeeping
For some users, particularly freelancers, small business owners, and anyone who needs to track and report on reimbursable expenses, tracking expenses beyond the basics is necessary. Expense tracking tools enable users to capture receipts electronically, tag or categorize expenses, and generate reports and exports.
Expense tracking tools save users time spent collecting and recording paper receipts and supporting the creation of clean, organized financial records. Expense tracking tools also enable users to obtain a more accurate picture of their monthly expenditures than was possible using only a budgeting tool or bank app.
Some of the helpful features that are often included in expense tracking tools are:
Capturing receipts electronically and storing them for later reference
Enabling users to assign custom categories and tags to their expenses
Generating reports that can be exported to spreadsheets or accounting software
Supporting tracking for items such as travel, mileage, and client-related expenses
Maintaining clean financial records helps users create more informed plans and reduces the anxiety experienced during tax season or audits.
4. Investment and Net Worth Dashboards for Long-Term Planning
Managing money is not limited to budgeting. Managing money also involves creating savings, tracking debt, and monitoring investments. A net worth dashboard displays all of your financial accounts together in a single location and shows your overall net worth (the total value of your assets less liabilities) over time.
Net worth dashboards help users understand the “big picture” of their financial situation rather than just focusing on daily spending. In addition, they can help users determine if they are on pace to meet their financial goals and whether adjustments are necessary.
In addition to investment performance and portfolio allocation, dashboards often track:
Your overall net worth (total value of your assets less liabilities)
Your debt repayment progress and the interest you have paid on those debts
How quickly you are likely to reach your retirement or other long-term goals
To gain confidence in your long-term financial position, knowing exactly where you stand financially and having the visibility to track changes over time is just as important as maintaining the discipline to adhere to a long-term financial plan.
Conclusion
Top digital money management tools fall into four distinct functional categories: budgeting apps, banking features, expense tracking tools, and investment/net worth dashboards. Each category provides a different element of financial management, ranging from the daily management of spending to the long-term management of investments and overall net worth. The most effective tool will be one that is both simple enough to be maintained and detailed enough to guide decision-making.
When digital tools are used consistently, they serve to clarify financial confusion; develop healthy financial habits; and provide evidence of ongoing progress toward achieving financial goals. Clear tracking and transparency build confidence in the user’s ability to manage finances effectively, since decisions are made based on actual data rather than speculation.