As developed governments across the globe are emphatically proving, spending more than you make for an extended period of time is a certain recipe for financial disaster. The same can be said for households, which in the U.S. are tightening their belts following the bursting of a historic housing bubble, subsequent high unemployment rate and disappointing investment returns.(To help you tighten your belt, read The Beauty Of Budgeting.)
TUTORIAL: Budgeting Basics
Despite the shifting mindset to spend less, sales of personal computing devices continue to take off. The roll out of sophisticated smartphone and tablet computers has led to the advent of a wide array of applications, or apps for short. Some of the most popular apps are those that play games, but a more useful idea would be ones that help individuals address basic budgeting issues. Below are five ideas that the ideal budgeting app would contain to help consumers balance saving and spending needs.
Interest Rate Alerts
For most consumers, debt payments constitute one of the largest expenses to deal with on a monthly basis. The primary debt payment stems from housing, which in many cases is due to a mortgage on one's home. Another common payment stems from a vehicle that may have been obtained through a lease or loan.
The payment levels for these and other forms of debt are highly dependent on the interest rate at the time a loan was made. An app that thoroughly tracks this rate with current market rates could prove greatly beneficial for users. Ideally, it would alert users when market rates fall and there may be a compelling opportunity to refinance. For example, the interest rate on a 30-year fixed mortgage has been falling toward 4%, which is close to the lowest rate in history and could allow consumers to save substantial monthly mortgage payments for decades to come. The ideal app would identify appealing rates and even local banks that could help consumers refinance at a low cost.
Monthly spending needs consist of basic necessities and more discretionary products or services. An app that helped consumers track spending usage each month could greatly enhance the ability to prioritize spending requirements and keep individuals from overspending. For instance, the app could notify a credit card company to refuse purchases at the electronics store or high end fashion boutique if a predetermined monthly allowance has been exceeded, or if the monthly budget only has room for two more stops to the grocery store, to buy gas, or to cover the co-pay for the doctor checkup. The same goes with banking alerts, such as when the checking account is running low on funds. (For more ideas about budgeting, read 5 Ways To Make Budgeting Fun.)
Staying on the spending front, an application that alerted consumers about discounts on goods and services could help stretch out monthly spending budgets. An application already exists to find the cheapest gas prices by local zip code, and this could be applied to food. Another budgeting app idea would search online for digital coupons and gather the most frequently purchased grocery items in a folder to be printed our scanned at the checkout aisle.
Primary consumer liabilities, including the financing to support one's home and car, were touched on above. Looking at the consumer balance sheet, these same items constitute one's primary assets. As such, properly maintaining them can help preserve their value and also minimize future spending needs. An application that emailed consumers when the HVAC unit needs a new air filter or that a car is up for an oil change qualify as preventative maintenance. Proper notifications from the app could lead to substantial cost savings in the long run.
Balancing spending requirements with one's monthly salary must first be addressed, but so must the future when retirement is reached and there is no longer the steady paycheck. In this regard, an application that actively monitors savings, investment returns and personal financial assets would also be ideal. At best, it could help balance current needs with a projected budget that is anticipated upon retirement.
The Bottom Line
The 1940 classic investment book, "Where Are the Customer Yachts," may have put it best when it offered the following rhyme: "He who buys what he can't pay for is not the man to shout 'Hooray' for." The current focus on austerity measures is unlikely to reverse course soon and means applications that help individuals (and maybe even governments) improve their personal balance sheets should become increasingly popular going forward. The ideal app would collectively address the above spending needs, though individual apps with customer uses could also work well. (For some apps that can help you save, check out Managing Your Money: There's An App For That.)