How to manage finances with a banking app

To keep a budget, save money, manage money more rationally, you need to know the costs. Recording your spending is the number one step in almost any financial literacy course. And often already on it, many refuse to venture.

Such people can be understood. Recording all expenses is not the most exciting activity. It is necessary either to immediately enter the data into a notebook or a tablet, or to store all checks and periodically do calculations. There are, of course, special applications, which help automate this process somewhat, but they also need to be dealt with.

On the other hand, most banking applications, which are already installed by many, record expenses and categorize them. This means that you can use them to account for expenses, however, with a slightly truncated functionality (about why this is so, it will be below). We understand this issue.

What can be done with the banking app

Find out how much and what you spend

Usually, the application does not just give a list of expenses, but also displays it graphically, for example in the form of a chart.

On it you can clearly see exactly how your expenses are distributed. Sometimes this is already enough to notice an imbalance in spending. For example, it seems to a person that he is very ascetic with money. He squeezes himself in everything, except that sometimes he orders dishes with delivery - you can treat yourself. If at the same time he enters the application and sees that the segment of food from restaurants occupies a large part of the diagram, somewhere he is mistaken in his assumptions.

But also in the application you can see how much is specifically spent in a particular category. Based on these data, it is easy to understand where in fact your money is gone.

At the same time, banking applications are usually able to show expenses not only for a month, but also for a year, and for a selected period of time. This is useful, as monthly spending doesn't say much about buying discipline. But in the long run, everything will be more than eloquent: you can see not a one-time act of waste, but habits.

Find cost items that can be cut

Applications usually allow you to see what transactions were made in each category. Therefore, if a suspiciously large amount of money has been spent in one of them, you can see why it happened.

Sometimes there is nothing criminal about spending. For example, you bought for a year something that is stored for a long time at a discount. This promises savings in the future. But sometimes the list of expenses makes you think.

If you study how much money and what was spent in each category, you can understand where you spend too much. And pull yourself togetherif needed.

Comply with spending limits by category

Unlike notepads and tablets, the application shows you how much is spent in a particular category in real time. This means that you won’t be able to cheat and ignore some kind of spending, you can clearly see the total amount.

Sometimes, in order to save on optional purchases, it is useful to set limits for yourself in certain categories. For example, you can allow yourself to spend no more than 5 thousand per month on entertainment and no more than 3 thousand on a taxi. You will immediately see as soon as the costs approach a critical point. Perhaps this will influence your further decisions, and you will take the bus and spend a quiet free evening at home.

Plan a budget if you don't need to save a lot

Although it is super important to consider costs, this is only an auxiliary tool. It is needed to predict spending.

Plan your expenses useful in order to avoid the so-called cash gaps, when there is temporarily not enough money for obligatory expenses. Thanks to the analysis, you will understand how much you spend on food, utilities, medicines and clothes per month. Accordingly, you will be able to ensure that the stock always has the right amount.

Analyze your financial behavior

Here, it is rather not a diagram that is useful, but a general list of expenses. Because for this item, it is not the categories of expenses that are important to us, but the dates. It happens that a person lives for himself and spends money quite consistently. And then - wow! - and in one day he has a lot of purchases for a huge amount.

In this case, it is important to understand what caused such shopaholism. If it is, for example, "black Friday", all clear. The man spent a lot, but also saved well. But there are other reasons. Suppose he drank and felt like a millionaire. Or so he tried to cope with stress.

This analysis helps you track down what is causing you to overspend and address the source of the problem.

What are the disadvantages of a banking application for analyzing spending

The application does not reflect all costs

The easiest way is for those who use one card of one bank everywhere. Then all the information about spending will be in one place. If you pay with cash or cards of other banks, this data will remain “behind the scenes”.

In some banking applications, you can enter expenses in cashto include them in the overall statistics. But it will not reflect where the money went. So you can only see how much you spent in bills.

The application distributes expenses according to its own logic

The algorithms search for the expense category based on the MCC of the outlet that accepted the payment. MCC (Merchant Category Code) is a code that describes the main services or goods that characterize an organization: fast food, restaurants, supermarkets, cosmetics stores, and so on.

But the code may not match the category of expenses, where it would be logical to include them. For example, Magnit Cosmetic and iHerb are classified under the MCC in the Supermarkets category (the first is Grocery Stores, Supermarkets, the second is Various Grocery Stores, to be more precise). Although with manual sorting, these costs would be more correctly attributed to cosmetics or household chemicals.

In general, the cost structure is not as accurate as it should ideally be. This should be taken into account when analyzing them.

The application does not detail costs

The algorithm simply classifies the transaction as a spending item. But this is not enough for a deep analysis of costs.

For example, you spent 3 thousand rubles in a supermarket. But purchases can be different. With this money, you could buy food for the week: meat, milk, eggs, bread, vegetables. Or, say, a ready-made pizza, a bottle of alcohol and a tray of ice cream. It seems that all these products, the application did a great job.

But in terms of cost analysis, this is not enough. Especially if you're working to figure out where your money is going and cut back on spending. For those for whom saving is the number one task, it is still better to record expenses yourself and in more detail.