Friday, August 24, 2012

How to Use Personal Finance Apps to Turn Your Life Around



Personal finance apps and software are sort of like diets: They will undoubtedly work if you stick to them, but they are so difficult to maintain that, most times, they just don?t last.

At least, that?s the case for many. Mint, the biggest of the personal finance apps, claims 9 million users. The company (and sibling brand Quicken) were able to furnish a few of the fin serv equivalents of Jennifer Hudson, former out-of-control spenders who have embraced the frugal lifestyle.

Here are a few tips from other successful finance app users.

Get a Reality Check

Without exception, all the users who are now getting the most out of these financial service tools had a moment of clarity ? they saw how much they were spending and realized that they were living beyond their means.

For Lori Biancofiori, that moment came in May 2009. Biancofiori had recently gotten married, and the wedding cost more than she anticipated. Then her husband got laid off. ?I saw how much money we spent on dining out and groceries and cut our budget,? she says.

She and her husband had to make some tough decisions. They hunkered down and paid off $18,000 in credit card debt. They sold their condo in Chicago at a loss of $40,000; they realized the market wasn?t going to improve and they wanted to get out. Nowadays, the two live off one income and bank the rest.

SEE ALSO: 10 Things You Didn?t Know Mint Could Do

Michael Morrison got Quicken as a gift in 2006, after college. ?I thought it was a lame gift at first,? Morrison confesses. But once he fixated on the fact that he had a negative net income, he became motivated to cut back on spending.

Caryn Bryant, a human resources rep, says that seeing the numbers actually made her more generous. ?For the longest, I felt like, ?If I didn?t do this for my relative, then I would be financially OK,?? she says. ?I was always blaming others, but it was really my fault. Giving a relative $20 does not make one go into a financial tailspin, unable to pay bills on time (if at all) for months on end. It?s a series of poor financial decisions, and once you take ownership of the problem, you can fix it.?

Realize That Food Is an Achille?s Heel


For the average person, the source of one?s financial undoing is not a shiny new Ferrari so much as a sushi dinner. Our financial ninjas found that food was a siphon on their savings. However, a little discipline went a long way.

Upon reviewing her finances, Biancofiori found that she and her husband had been spending about $800 per month on groceries and $300 to $400 on restaurants per month. Now, they get by with $500 for groceries and $150 for restaurants ? still a fairly cushy situation, but one that saves about $500 a month.

Being single presents its own set of problems. But Mint user Daniel Sjoberg found that being up-front about his situation was the best way to counter temptation. ?I?d say, ?Let?s eat at home and we can drink and eat for cheaper,?? he says, adding that his friends were sympathetic when he laid out his financial goals.

?Because I made poor money decisions in the past, I can no longer afford (not that I could afford it in the past) to buy concert tickets, go on vacations, go shopping or just go out to dinner when I want,? says Bryant. ?In the sumemrtime, my friends always want to go out, and I know it?s in my best interest to not always go along. It?s hard telling them no, and it?s even harder to realize that I put myself in this position, but it is a constant reminder that if I don?t stay on track, that I will face the same situation next summer.?

Get Comfortable Making Yourself Uncomfortable

Like dieting, keeping a tight budget isn?t much fun. At times, you may hear that voice in your head, which asks why that $50 dining bill or that new iPhone is really going to make such a big difference. In such times, keeping the big picture in mind is difficult.

But apps like Mint and Quicken, with their reams of historical data, can help. Bryant recalls that, this year, she really wanted to pay her car off and pay down her credit cards:

In order for those two things to happen, I had to look at what my debt was and make a plan of attack that I was going to stick to. It involved extreme sacrifice, but I felt that I had no choice. To me, it was worth sacrificing for a few months in order to have an extra $700 a month when my goals were met. I stayed focused on that $700, and that?s what kept me focused; and that $700 will be used to start a savings account. I also keep a money journal. So if I spend an extra $50 for something, I need to make a note for exactly why I went over my budget.

Such rigor can be difficult. Bryant describes it as ?making myself comfortable with being uncomfortable.? Sometimes it may be easier for some than others. ?For me, the hardest part is that false sense of security that a full checking account balance can give you,? says Morrison.

A counterbalance to such temptations is the knowledge that you?re making progress. Just as a dieter can gain confidence and momentum from looking at the scale, born-again savers can look at their financial history and see how much they?ve improved.

That?s what has kept Morrison going through tough times. For those considering following his path, Morrison offered the following advice: ?Don?t get discouraged. Just stick with it. Once you see red turn to black, you?ll feel better.?

Images courtesy of iStockphoto, Adventtr and Flickr, boo-licious, respectively

Source: http://mashable.com/2012/08/23/personal-finance-apps/

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