When Personal Finance Software Might Not Be a Good Thing

Managing Your Money with Personal Finance Software

*based on completely unscientific polling data

Software and technology have changed the way people function in many areas of life which includes personal finance.

People manage their money on the go using iPhone apps with products from Mint.com, Bank of America, Capital One 360 and many others.

Information is available near real-time when you want to look at your checking account balance, or just see how you’re doing against your planned budget for the month.

I’ve learned a lot about software over the past 12 years because it’s my primary career as a software project manager. In that time, I’ve learned a lot about how businesses use software to help them perform their work more efficiently.

However, I’ve also learned that it’s still about the business process and not necessarily the technology that makes the biggest difference.  Let me explain. You have to have a good business process in place for the technology to provide the most value to the organization.

Certainly, software can help create better process, but you must first invest in creating the right process with the right people and then leverage the technology to make it even better.

What does all of this have to do with personal finance?  If you don’t have good personal money management practices in place, signing up for some of the best money management software may be of some help, but you still have to do your job well as the personal money manager.

Software can provide you the tools to create a budget and track your spending, but the tool by itself won’t help you succeed in achieving your financial goals such as paying off debt, spending less than you earn each month and funding your retirement.

Let’s look at a few practices you must establish to get the most out of the technology side of personal money management.

Planning and Tracking

I’m of the opinion it’s important to be proactive in planning your money each month by establishing a spending plan (to whatever level of detail that works best for you).  You’re in control of your money if you’re giving every dollar a job at the beginning of the month.

If you’re only looking at your spending through the analysis features of your personal finance software at the end of the month, it’s too late to make any changes for the current month.  You’ve most likely overspent money and will have to make up for it the next month.

A lot of software automatically assigns categories and provides budget suggestions for you.  While such features can be handy and can save your time, be careful you’re not letting the product replace your important job of planning your spending and proactively managing it each month.


As I mentioned in the opening of this post, today’s technology provides the ability to manage your money on the go.  I know for my wife and me, having online technology is a great way for both of us to keep our eyes on our spending categories and insure we’re not spending more than we’ve planned.  But, it would be a mistake if we let the software come in between us discussing our spending.

We try to take the time each month to sit down and plan together (it only takes 15 – 20 minutes).  We then spend a little bit of time each week reviewing where we are with our plan (10 – 15 minutes) and discuss new spending needs not planned and how to manage them.  Conversation can never be replaced by personal finance software.

Managing Change

Let’s be honest and recognize spending is not perfect each month.  For example, some months we spend more for groceries than other months.  In some cases we might spend a little more on entertainment because there was a special event we wanted to take our children to see.

Then we have the holidays, birthdays and many more things that aren’t regular recurring expenses.  Be careful in planning your spending once and setting it up as a reoccurring budget in your personal finance software.

You can’t assume the same budget or plan can be carried over from month to month.  In other words, it’s dangerous to go on auto pilot. Doing so would be short-sighted as it’s important to review today’s needs and yesterday’s spending to manage wisely.

I love the benefits software provides and I’m a big fan of personal finance software all together.  But, it’s important for us to remember that technology can never replace our important responsibilities of managing money.

It’s still our job to plan, track, communicate and manage all the changing needs.  It’s the software’s job to help us be successful at these responsibilities.

What do you think about these ideas of establishing good personal money management practices and not depending on software to do this for you?

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