The management of money used to be so much more work than it is today. Each financial transaction would be added to the running total in the person’s checkbook, paper receipts for financial transactions would be collected in a folder, and on occasion a trip to a bank’s physical location would be required in order to complete a financial transaction. Each financial transaction would require time to review the latest financial statements. Each of the person’s accounts would require the time to move money between accounts, and in order to find out the current balance in an account, the person would have to review the latest financial statements for that account.
That has changed quickly.
Financial tools for online money management make it possible to manage most parts of your financial life on your phone or computer. With banking apps, budgeting apps and online payment services, you can also calculate savings, manage investments or set up notifications. All of these financial tools have greatly reduced the amount of hassle involved in money management.
Just because there are online tools that can organize your financial information for you does not mean you can not make smart financial choices and become good with money. However, online financial tools can make it a lot easier to keep track of your money and make smart financial choices by making it a lot easier to organize, understand, and manage your financial information.
Financial Information Is Easier to See
Online money management tools have also enabled greater visibility of a person’s financial situation, than ever before.
Money is laid out before our eyes in a way that our ancestors could only have dreamed of. Rather than waiting until the end of the month to review the previous month’s activity and get a sense of how we spent our money, today we can view our most recent activity in seconds. We can view our current account balances and see what payments are still pending. We can even review and verify the deposit of funds that have been made to our account.
This immediate access changes how people respond to their finances.
For example, you can see that your spending on food is getting out of control halfway through the month, and respond to it immediately. Also, you can immediately find out whether a mystery charge was a legitimate transaction or not, and respond to it immediately. You can also immediately verify whether a bill has already been paid, or not, and respond to it immediately.
In addition to viewing your recent transactions, you can also see how your spending has been organized for you into categories, such as food, dining out, and so on for household expenses (e.g. utility bills), and also into categories to track your various recurring subscriptions, and so on.
The system will probably fail to categorize some transactions correctly, but this is a small price to pay for the work being done for you.
Instead of asking, “Where did all my money go?” at the end of the month, people can see the answer as they go.
Budgeting No Longer Requires a Spreadsheet
The Financial Planning Software still needs to be connected to a spreadsheet in order to be useful.
New budgeting tools are increasingly enabling users to set limits for different categories of spending and then track their spending in real time against those limits. In practice, therefore, there is less need for a spreadsheet and for a lot of data entry and ongoing update, as new tools organize users’ online transaction data and display information for them.
A useful budget does not need dozens of categories.
Someone with basic needs will monitor major expenses like housing, food, transportation, entertainment, savings etc. Online budgeting tools can continuously track such spending and signal when spending in certain categories is getting out of hand.
That feedback can be more useful than a complicated financial plan.
Budgeting online turns into a ‘check-up’ instead of a ‘data entry’.
Information on other financial topics can be found on the website of the Consumer Financial Protection Bureau. The Bureau provides practical information about budgeting, and banking, as well as about credit and debt, for instance, in order to help consumers in their financial decisions.
More important than the charts and tables created by new financial tools is their ability to help their users make better financial decisions.
Moving Money Has Become Much Faster
Moving Money Has Become Much Faster
Years ago, moving money around would have involved a trip to a branch, writing a check or waiting a few days for transactions to clear. Today, online transfers can be set up and moved in a matter of minutes.
There are many reasons that a person may keep money in different accounts for different purposes. A checking account is for everyday expenses. A savings account is for an emergency fund. A third account can be for money that will be used for a future purpose, such as for taxes, for
One account can be set up for everyday expenses, like a checking account. Another account can be set up for saving such as for an emergency fund and even other accounts for specific purposes like for future purchases, for taxes, for travel and for home expenses.
Online transfers between banks for financial management are possible. The Money is moved where it is needed, without having to reorganize all financial affairs.
These transfers are faster than ever. However, convenience is not always equivalent to instant access. The speed of online money transfers depends on a variety of factors, including the type of account you have, transfer limits, and processing times. Some online transactions are processed within minutes, while others can take a few days to be transferred to the recipient’s account.
The important change is control.
Transfers between accounts can be initiated and monitored by the account holder, no longer having to rely on a branch or paper to process the transfer.
Automated Tools Reduce the Number of Things You Have to Remember
Good money management often depends on consistency.
These processes become even more complex and less consistent when all financial actions have to be remembered by hand.
Online tools can automate many of these repetitive actions.
Bills can automatically be paid. A constant amount can be transferred to the savings account. Credit card payments can be scheduled in advance to prevent late payment charges. The user will receive a notification when the account balance drops below a specified amount.
None of these features is especially dramatic on its own.
Together, however, they can prevent common mistakes.
Missed payments and late charges can have severe and lasting consequences. For example, a missed credit card payment can result in late charges and additional interest being applied to the outstanding balance of the credit card account. In addition, a missed payment can also negatively affect your credit score. Furthermore, a savings plan can also fall by the wayside if it is dependent on the user remembering to transfer money on a regular basis to save for their future.
Automation removes some of that friction.
Saving money can be as easy as pressing a button. Instead of remembering to transfer $100 each month to your savings account, you can schedule it to happen every month for the next year, instead of having to remember to do it twelve times that year.
That simple difference can make financial routines easier to maintain.
Calculators Make Financial Decisions Easier to Understand
Many people use online financial calculators to assist with determining the answer to various money questions.
How much could monthly savings grow over five years?
What might a loan payment look like?
How much money should be set aside for an emergency fund?
What happens if an interest rate changes?
Calculators can be extremely powerful at making it easier to see the financial implications of your financial decisions.
They are particularly useful for comparing scenarios.
A person could enter in a variety of scenarios to see the effect of larger payments or savings. For example, someone considering how much they should save each month could experiment with different monthly savings amounts and time frames to see the impact of their decisions.
This doesn’t mean to use the online financial tool to get financial advice, because even though it’s great for research of financial matters before you take action, it’s best to get advice from experts when it’s very important.
Many financial concepts can be made easier by the immediate impact that they have.
Money Management Is Becoming More Accessible
Tools for personal finance, such as managing money online, enable easier organization of finances by making tasks to manage money faster, more comprehensible, and more organized.
Real time spending tracking, automatic payment of bills, transferring money between accounts, creating a financial model, and even alerts when some action is required.
That represents a huge change over the paper-based money management tools of old.
Most financial tools are not useful in virtue of having lots of features. The best tools eliminate lots of unnecessary work for the user, and keep the user informed.
Money management has not changed fundamentally; managing money still requires a great deal of judgment, planning and discipline.
This is important because what has changed is how much easier technology has made it to put these financial practices into effect.
