Savings Tools to Keep Us Disciplined

Savings Tools to Keep Us Disciplined

We have all been told that disciplined saving is the key to financial success. While it sounds simple in concept, the reality is a little more complex. How much should you save? Should your savings plan be based on monthly income, annual income, or something else? How can you make a savings plan if you're not sure what your income or expenses are? Failing to understand or answer these important questions can leave you without adequate savings to weather emergencies, not to mention potentially compromising your ability to retire comfortably. As the old saying goes, "failing to plan is planning to fail." 

There are some wonderful apps available to the average saver to help track and budget daily life. Forbes author Rob Berger shines a light on 7 prominent tools to ‘Better Manage Your Money.’ In particular, he reviews two apps highlighted below:

1. YNAB - You Need a Budget  - Marketed as the tool to save you money, YNAB starts with 4 simple rules: 1) be intentional about what your money should do before you spend it, 2) understand your true expenses, 3) accept that you may need to update your budget, and 4) don’t spend money you don’t have. Measurable goals within the program help keep you on track. According to Mr. Berger, a user of the app himself, “First, it uses a familiar spreadsheet layout that's very easy to use and understand. Creating a monthly budget takes just a few minutes. Second, YNAB is designed to encourage you to live on last month's income. Rather than creating budgets based on future income, you budget based on income you've already earned. In so doing, you give every dollar a job1”. 

2. Mint - Mint is one of the original (and free) FinTech apps, aggregating users' accounts in one place in order to help budget and track income/expenses. Mint's website and app were created by Intuit, maker of Quicken and Quickbooks software. Anyone familiar with these applications can easily familiarize themselves with Mint, a "lite" version of Quicken. Berger states, “Once bank accounts, credit card statements, and even investment accounts are linked, Mint provides a wealth of information on spending, budgets, and even trends. After linking just one of my bank accounts, Mint was able to show me my spending by category in just minutes.1

These are just two offerings in a growing field of budgeting and financial services applications. Some are better than others, but the most important thing is finding one that works for you. The benefit of aggregating accounts in one place is that it's easier to understand what comes in (income) and what goes out (expenses) on a total household scale. Furthermore, these tools can help you identify and eliminate unnecessary expenses. Once you have a handle on where you may be able to find some extra dollars, you can begin the task of building a savings plan. Typically the emergency fund should be top priority. Other common important goals include funding retirement accounts, paying down debt, and college savings. Without initially knowing what you have left each month, it is impossible to determine how best to use those dollars.

Financial planners can help you with this process. Do your homework and search for a reputable planner in your area.

Resources

1. https://www.forbes.com/sites/robertberger/2015/11/19/7-budgeting-tools-t...

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