smart spending

How your phone can boost your budgeting

Mobile technology is making it easier than ever before to budget wisely. Startups are coming up with new ways to create them, track your income and expenses, chart progress, maximize savings and stay motivated.

"People are spending more and more time on their phones and doing a wider variety of things," says Kelli Grant, a personal finance commentator at CNBC.

"We are finding out that people are very interested in using their phone for personal finance. If you use them the right way, phones can help you make smart decisions," she says.

Here are three parts of the budgeting process your smartphone can help with.

1. Creating a budget

Denise Winston, a financial expert and author of "Money Start$ Here," says the first step of successful budgeting is to set a goal.

"The biggest challenge for people is that they don't have a clear, specific and deliberate plan for their budget," Winston says. "People get sucked into this vicious cycle of graduating, going to work, earning and spending. We never learn about budgeting."

Fortunately, apps like Budgt, Jumsoft Money and Mint can help you create a budget in just a few taps. These services ask a few quick questions about your finances and use algorithms to generate customized plans. They handle the nitty-gritty aspects of budgeting (how much you can reasonably save a month and how long it'll take to achieve your goals) so you don't have to.

Level Money and Qapital, which isn't yet open to the general public, are two future-oriented mobile finance startups that show how everyday spending affects your overall budget. Level Money gives you notifications like "you have $260 more spendable dollars this week," and updates the number after every purchase. Qapital displays how your everyday spending decisions affect your long-term goals. For example, it can tell you how cutting back on your daily latte will save you $40 a month toward larger goals like a dream vacation.

Americans ignore budgeting | Calendar icon © Undrey/Shutterstock.com, Guy with mobile phone © Kostenko Maxim/Shutterstock.com, Dollar sign icon © Undrey/Shutterstock.com, Piggy bank icon © T.Dallas/Shutterstock.com

2. Sticking to your budget

Creating a budget is an important step, but budgets work only if you stick to them.

Before the Internet, tracking expenses required manually logging every expenditure. Checking up on your bank account involved waiting for a paper statement, making a trip to the bank or at least a phone call. Now, most major banks have a mobile app for customers, providing constant access to financial information. A recent report from the Federal Reserve Board found 33 percent of all mobile phone users and 51 percent of smartphone users use mobile banking.

Mobile banking is important because it means you can constantly check your progress, which in turn can affect your behavior, says Lori Atwood, a former investment banker and startup chief financial officer who's served as a consultant for large financial institutions, small businesses and wealthy individuals.

"You can see if you're spending less than you earn each month, and that's the key to financial health," Atwood says. "Knowing your expenses allows you to know if you need to decrease some spending in a category until next month. You control spending a little here and there to stay on track. You don't have any surprises. It's about being deliberate and controlling your financial life so it doesn't control you."

Level Money app

Level Money

Smartphones simplify tracking expenses because our devices are with us all the time. Winston says she uses the standard to-do list on her phone. Services like Quicken, Mint and Level Money connect to your bank account and automatically track spending. Others such as Wally and Spendee prompt you to manually log expenses and monitor how spending fits into your overall budget.

3. Staying motivated

Savings goals can be big or small -- anything from a new pair of shoes to a $10,000 emergency fund. These goals are key for maintaining motivation, and to keep them fresh, we need compelling reminders.

In a 2013 Dartmouth study, researchers found that receiving a monthly reminder significantly increased participants' account balances and the likelihood of hitting their savings goals. But those reminders became even more effective when they focused on how saving helps and mentioned specific savings goals or incentives (like insurance coverage).

Mobile devices are probably the reminders par excellence of the modern world. They ring, beep, buzz, flash and fill up with push notifications every time you turn around.

"Smartphones can be the right tool to help you be disciplined about budgeting," says Chris Hensley, a financial adviser and president of the Houston Midtown Chapter of the Society for Financial Awareness, a nonprofit organization dedicated to financial education.

"Whenever I decide to get Starbucks and go over my budget, I get an alert to let me know. Does this prevent me from doing the negative behavior? Sometimes yes and sometimes no, but a nudge in the right direction will help reinforce the positive behavior of saving," Hensley says.

Winston even tells clients to keep pictures of their goals on their phones.

There are also a number of tools out there to do the reinforcing for you. SaveUp is a startup that ties a game-like rewards program to personal savings: You can earn prizes like cars or vacations when your behavior is on track.

Beyond budgeting

Mobile budgeting options range from the minimalist to comprehensive programs like You Need a Budget. Grant has tested many of the budgeting apps and says choosing one isn't so much a question of "good" or "bad" as it is which product is right for you.

"When setting a budget and using technology, the app that works best for you is the one that helps you stick to the budget," Grant says. "Everyone has their own style. For some people, manually entering things is a way to hit home."

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