Budget_App

Can Expensive Budgeting Apps Really Help Pull You Out of Debt?

Services like You Need a Budget are pricey — but some experts argue that it helps trick your brain into actually taking it seriously

When I first moved to Chicago, jobless and in debt, I opted to take advantage of my charitable friends by sleeping on their back porch rent-free. Living in a non-insulated, strictly-for-utility-purposes porch through a Chicago winter was tough, especially on a punctured air mattress. But one way or another, Craigslist odd job by Craigslist odd job, I vowed to budget my way to a space of my own.

Like many millennials, I signed up for Mint, a spiffy-looking budgeting app that promised to organize my spending into some semblance of financial stability. I hoped these spending charts and overage notifications would finally let me optimize my habits and gain control of my future. But, naturally, I ignored it all. Exceeded my budget for bars and restaurants? Lol, sorry!

 

 

For years, Mint continued to monitor my expenses, sending weekly reports via email and frequent push notifications when I’d drop two freelance articles’ worth of money in one day at Wrigley Field.

Mint is widely recommended. It might work for you, especially if you already save money every month and just need the satisfaction of watching your net worth climb, you bastard. But Mint did not work for me. It was too easy to ignore, perhaps because it was entirely hands-off. Maybe also because it was free. Would a paid budgeting app work better?

NerdWallet ranks the paid app You Need a Budget, often called YNAB, as the “best budgeting app for hands-on users,” while another finance blog, The Balance, writes, “You Need a Budget has a cult-like following of die-hard fans.” But the YNAB app costs nearly $84 a year. How do I know it’ll work?

I asked Phil Risher, a 31-year-old financial blogger who budgeted his way out of debt after one year on a $48,000 salary, for an objective take of the pricey budgeting-app market. Risher says he doesn’t like any apps or subscriptions that promise to help you get out of debt to begin with.

When Risher was paying off his debt, he used an Excel spreadsheet and his “trusty paper note pad for budgeting,” which he still uses to this day.

Why? “It forces me to be mindful about spending,” Risher explains. The problem with the apps, he says, is that they quickly lose their impact. You can simply ignore the notifications and continue spending wildly — it does all the work for you, then sorta guilt-trips you afterward. By the time you finally sit down to look over your monthly spending in Mint’s “Trends” section, it’s too late.

But with Risher’s Excel sheet (which he’s recreated here) and notebook, he’s forced to “physically cross off a line item when I spend.” Similar to the way writing things down helps commit things to memory, Risher says, his DIY spreadsheet hammers home exactly what he’s spending, what he’s spending on and where he’s at in his budget.

However, he says, “it does come down to personal accountability.” You get out of it what you put in. (Can you hear your baseball coach’s voice in your head yet?)

“The apps, free or paid, do provide an outline for budgeting and daily/weekly/monthly habits that, when done over a long period of time, can help you get out of debt,” Risher says. He wouldn’t personally spend money on an app to get out of debt because there are “just too many free or lower-cost options out there,” not to mention educational podcasts and reading material.

For Risher, it’s similar to getting into a sport by looking at the stats. You can get all the push notifications and read all the box scores, but unless you take the time to understand the rules and context around them, there’s a good chance your fandom won’t last. But if you proverbially “keep the book” at a baseball game yourself, your deeper understanding of the game will take root.

“There is just something extremely valuable in physically minusing money out of your budget that helps with self-control,” Risher says. He and his wife are saving up for a summer vacation, so if they both don’t stick to their budget, “we are basically saying that vacation doesn’t matter to us.”

Of course, not everyone is as disciplined as Risher. And who has time to read books, anyway? Danny Kofke, author of How to Survive on a Teacher’s Salary, agrees that it all comes down to a case-by-case basis of personal responsibility, but he doesn’t totally rule out a paid-budgeting app.

“You can do pretty much all a budgeting app does on your own, but most [people] will not, and this is why I think they can be helpful,” Kofke begins.

Think of it like a gym membership. Some people have the self-motivation to work out at home, but others need the financial burden of a gym membership to keep them in shape. Theoretically, without the little voice telling you, You’re losing money if you don’t go!, you’d probably stay home.

“Sometimes we tend to stick with something if we are paying for it,” Kofke says. “I’ve conducted some financial presentations for free and others for a cost, but for both I basically present the same info. The ones I get paid for always have more people in attendance, and I always sell more books. It’s psychological: When we pay for something, we expect to get something out of it. When we get it for free, this isn’t always the case.”

Kofke and his wife get paid once a month. So he subtracts his known expenses from their combined paychecks at the beginning of the month, and they work with what’s left over. This is an extremely simplistic version of what a budgeting app would offer, but it works for Kofke and his wife, so they stick to it.

“The trouble people have with budgeting isn’t about numbers, but about behavior,” Kofke says. To borrow another health analogy, Kofke compares it to people who use WW (formerly Weight Watchers). These members aren’t paying to track their calories; they’re trying to change their habits, period.

“Using a budgeting app will hopefully get you to change your behavior and create habits that you can continue to do without an app,” Kofke concludes. To that end, you could try the paid app, learn new strategies and changed behaviors, then quit it for the free version… or quit apps altogether and budget yourself with your new arsenal of financial knowledge.

After five years of ignoring Mint — and with a wedding on the horizon — I’d say that’s the only option I have left.