Over the past century, the world has witnessed numerous financial crises that have put a lot of households and businesses into the gutter. These unexpected events proved that wealth could be depleted in the blink of an eye.
Even society’s top-tier individuals and businesses were not spared. Some even had to file for bankruptcy—Lehman Brothers, Patricia Kluge, and Washington Mutual, to name a few.
Indeed, the Great Depression, the dot-com bubble, the Real Estate Market Crash, and the Global Financial Crisis (GFC) taught us a hard and unforgettable lesson. That is to be prudent with resource management and portfolio diversification.
Even a decade after the GFC, 33% of Americans had still not recovered.
More recently, everyone has seen how the pandemic recession and the 2022 hyperinflation have upended the global economy. Many people had difficulty coping with mass layoffs, skyrocketing prices, and interest rate hikes.
As of December 2023, 40% of Americans had their pandemic-era savings eroded by inflation. Even worse, some lacked savings to cover the rising cost of living, forcing them to turn to loans.
Of course, not all bankruptcies were caused by economic crises. Some were due to bad investment decisions, overspending, and bad debts that trapped many people in financial quicksand. Predatory lenders also contributed to these.
Given all these, we must become more watchful of our spending, investing, and borrowing habits amid a still-challenging macroeconomic environment. Tracing cash flows, estimating monthly budgets, calculating loan repayments, and timing investment moves should be done carefully. These are paramount to ensure monetary safety as prices and borrowing costs remain elevated. Doing these can help maintain or increase liquidity.
Thankfully, technology continues to evolve to address the needs of the global economic system. The innovation of banking and finance may assist in improving personal finance management. With that, planning our monthly consumption, investment, and savings will be easier. This article will cover some tech tools shaping the future of personal finance.
The importance of having enough savings and financial protection has been highlighted in the last four years. The overwhelming hospital bills amid the pandemic have shocked the whole world.
This was amplified in 2022 and 2023 as the inflation surge prompted central banks worldwide to implement a series of interest rate hikes. In the US, for instance, bankruptcy filings rose by 13% in 2023. Meanwhile, credit card delinquencies rose by 50% as consumer loans ballooned to $17.5T.
These figures can be alarming, given that macroeconomic indicators have yet to stabilize. On a lighter note, we have seen sprinkles of hope recently as inflation started to cool down. Plus, the Fed targets to make three rate cuts this FY24.
Things will be better for millions of American households and businesses if all these materialize. This can be supported by the slight improvement in job openings and employment rate from December 2023 to January 2024. Hence, purchasing, saving, and borrowing powers may also increase.
But what’s more noteworthy is the increasing financial awareness of many people in recent years. Whereas these crises pushed many people to the brink of bankruptcy, they taught us the value of resilience. It is more significant today as we face notable challenges. In a few years, another pandemic may come, so preparedness is a helpful tool to survive it.
This is evident in the increasing financial literacy of the general population. In 2022, the rate climbed to 87% compared to 84% ten years before and 82% pre-GFC years. This shows the increasing income levels, educational attainment, and occupational status. This further highlights how monetary literacy has already become a part of core policy objectives globally.
An example is the increased number of people getting insurance in recent years. In 2022, the percentage of Americans with health insurance rose to 92.1% from 91.7% in 2021 and 84% in 2010.
Meanwhile, 52% of Americans already have life insurance. Whereas coverage varied with income levels and policy costs, more people realized its importance.
People rush to increase their savings, multiply investments, and get insurance. Yet, many seek assistance figuring out how to do all this effectively. Some cannot balance their allocation, whereas others cannot manage their finances, forcing them to borrow. And when many are busy creating a bright future for our retirement years, their goals remain unclear.
In fact, 72% of households do not have a written financial plan. Meanwhile, 60% still need a monthly budget plan. So, it’s no surprise that about 20% of Americans spend more than they earn. And even if many Americans have enough bank savings, 44% have no emergency savings.
Worse, nearly 40% of the population have more credit card loans than emergency funds. Interestingly, over 30% are only paying the minimum amount due, and only 30% are making full payment of the total balance.
This can be risky since interest rates remain elevated. Even a 0.25% uptick by the central bank can cause a big change.
Suppose you have loans of $4,800 to be paid within a year and bear an interest of 2% per month. You must pay the monthly principal of $400 and the interest of $96. For the whole year, the total payment will be $5,952, 24% higher than the original amount. If the central decides to raise rates by 0.25%, you must pay 2.25% on top of the principal amount. It will increase to $508 per month or $6,096.
Thankfully, the Fed may make three rate cuts this year. Even so, we must not let our guard down as prices remain elevated than in the previous year. This can make consumption and borrowing costs higher.
Having clear goals and financial plans is noteworthy since these will give a sense of direction to personal finance management. Without them, we risk making bad decisions that can lead to bankruptcy.
Personal finance helps us manage our resources and understand our needs and wants efficiently. This will be our monthly blueprint to know our priorities and allocate our income to monthly bills, food, non-required items, savings, and emergency savings.
Moreover, this will let us determine what needs to be increased, improved, or reduced like in a business.
If we practice it religiously, there will be a significant change in the long run. We may see higher bank savings and adequate emergency funds.
Plus, we can multiply and shield them by investing and buying insurance. It may guarantee financial freedom and even safety during a crisis.
Most of all, personal finance can give us valuable lessons we cannot learn overnight. Self-discipline is an integral aspect that we must learn, maintain, and improve over time. It will help us say no to second-rate things and learn delayed gratification to achieve more worthy goals. In the end, practicing proper management will improve our overall well-being and allow us to support our families and friends during challenging times.
Personal finance management can be tricky, especially for those with multiple income channels. Using tech tools can allow you do it automatically to ensure accuracy and consistency. These will let you stick to your plan as much as possible. These are some tools to use for personal finance management
| Tech Tool | Basic Info | Why It’s A Great Tool |
| YNAB | You Need a Budget, or simply YNAB is a privately owned company developing an online budgeting program. Its function is based on a cash stuffing or envelope system, a popular method to visualize and maintain a flexible budget. This method requires an individual to divide income into household expenses and savings categories into separate envelopes. YNAB users can access it on a browser or a mobile app. Users can get it for $14.99 per month or $99 per year. | YNAB has real-time sync, providing automatic real-time budget updates across devices. Users can even check these in graphs and charts, which is easier to understand. So, users will be conscious of their current net worth, spending, budget, and financial goal development. It also makes it easier for users to assess their budgets since it employs AI for its smart categorization feature. It further has a unique calculating feature for loan repayments and refinancing with its loan planner tool. Users can utilize it for mortgage, personal, and student loan refinancing calculators. YNAB lets users calculate the interest and time saved for every dollar put toward borrowings. |
| Cleo | Cleo started in 2016, employing an AI assistant to fix personal finance. It offers free finance products and advice to customers. | Cleo has an AI-powered assistant accessible 24/7. Users can chat with it whenever they have financial questions or seek insights. It has an AI budget planner that adapts to each user’s situation. This feature works with its spending tracker to categorize income and expenses. Along with that, Cleo provides overdraft and bill payment alerts so users can stay on top of their money-related goals. More interestingly, it can be a fun app with unique ways of engaging users. Its “Roast” mode gives humorous yet constructive feedback on spending habits so users can make better financial decisions. Meanwhile, its “Hype” mode motivates users with its light-hearted encouragement. |
| PocketGuard | PocketGuard allows users to automatically take control of money, increase savings, and optimize spending with informed decisions to achieve their financial goals. Its basic version is accessible for free. But users can upgrade it to PocketGrade Plus for $7.99 per month. | One of the best features PocketGuard offers is Fraud Detection. Once you connect it to your bank account, it can ensure data security. It ultimately provides a Debt Dayoff Plan, which allows users to establish a strategy to pay off their debts using several methods, such as avalanche and snowball. Like the other apps listed here, it provides spending insights, bill payment trackers and reminders, and budgeting plans. |
| Rocket Money | Truebill was acquired by Rocket Companies (RKT) for $1.28B in 2021 to become Rocket Money. Its goal revolved around creating a decentralized platform for consumers to manage their finances. It earns $3 to $12 per month through membership subscriptions. Currently, it has 3.4M members, which can get a unique understanding of management using its valuable services. | Manage Subscriptions is the key feature of Rocket Money. It automatically determines and tracks monthly subscriptions and bills. It has a concierge service function to cancel subscriptions automatically on users’ behalf. Bill negotiation is another cool feature that negotiates bills for users to help them get the best deals possible. Lastly, it has a Smart Savings feature that automatically saves money once it learns the users’ spending habits. The automatic saving happens at the right time to avoid overdraft fees. |
| WallyGPT | WallyGPT is a platform employing AI to help people track and manage their finances for free. It is available in 70 countries, allowing it to connect with 15,000 banks worldwide. | Due to its wide coverage, WallyGPT can provide a centralized platform for all users to manage and connect their financial accounts, track transactions, and securely access loans, bank accounts, and investment accounts. It is also fully automated, so users can check their upcoming bills and make accurate budget projections. |
Personal finance is an integral factor in enhancing the overall well-being of each individual. It can be tricky, but with determination, awareness, and self-discipline, managing it is highly doable. Even better, you can employ tech tools to allow you to avoid the hassle of manually creating and checking your budget. These can be cost-efficient as they save you more time and money with their precise insights to let you make prudent decisions.
