App | Free Trial | Price | Bank Sync | Security |
---|---|---|---|---|
You Need a Budget (YNAB) Best Overall | 34 days | $109 per year | Yes | Bank-level security and encryption |
Simplifi by Quicken Best for Cash Flow | 30 days | $2.99 per month (billed annually) | Yes | Bank-level security and encryption |
PocketGuard Best for Overspenders | Free version available, no free trial of paid version | Free / $74.99 annually / $12.99 per month | Yes | Bank-level security and encryption |
Empower Best for Building Wealth | N/A | Free | Yes | Bank-level security and encryption |
Zeta Best for Couples | N/A | Free / $6.99 per month (billed annually) / $9.99 per month | Yes | Bank-level security and encryption |
As inflation rises and the pandemic-era aid winds down, more people are having a rough time managing their money. According to a survey from Payroll.org, 78% of Americans are living paycheck-to-paycheck due to rising inflation. And with the rise in interest rates, borrowing money isn’t as easy as it used to be, making budgeting an increasingly popular alternative. Â
Guide to Choosing the Best Budgeting App
What Is a Budgeting App?
Budgeting apps are personal finance tools that allow you to create a budget. Many apps require you to sync your bank accounts so you can track your monthly income and categorize expenses. All of your data is automatically imported into the app, which calculates how much money you have left over each month. This can give you an idea of where you can cut your spending and how much money you can set aside savings.
Budgeting may seem like a daunting task. But, it is necessary and doesn’t happen on its own if you want to save money. To make it work, you have to put in the effort and do it consistently. Using a budgeting app can help you track your spending and keep your finances in check. You can assign a maximum dollar value to your monthly expenses, allowing you to save hundreds of dollars each month.
How to Choose a Budgeting App
Consider the following tips as you research budgeting apps to choose the right one for you:
- Your goals: Determine why you want to use a budgeting app, whether that’s to set savings, create an emergency fund, or help you fund a large purchase for the future.
- Availability: Determine how you want to use the app and whether it is compatible with your device. It’s always a good idea to see if the apps you’re researching have desktop capability if you ever need to use them on a computer.
- Free trial: Does the app offer a free trial? Free trials allow you to test the features without committing to or paying for an app.
- Features: Your financial goals and situation will dictate which features you should seek. Don’t commit or pay for an app with too many bells and whistles if you want to make simple changes to your financial life.
- Automation: Ask yourself a few key questions. Do you want the app to work for you automatically or are you willing to manually track your finances? Can the app sync with your bank account and other financial accounts? Keep in mind that you may have to do some manual tracking with certain automated budgeting apps—especially if you use cash for certain transactions.
- Cost: How much are you willing to pay for the app? It doesn’t make sense to sign up for a complicated app when you can’t afford it, especially if it comes with features you won’t use. There are also a lot of free budgeting apps that can help keep you on track.
- Security: This is important, especially if you intend to link your bank accounts and credit cards to the app. You want to make sure that your financial information is safe and secure from hackers.
The best way to ensure that you have the right app for you is to read reviews and/or get recommendations. You can also speak to a financial professional to see if they can help guide you in the right direction.
Why Having a Budget is Important
Budgeting allows you to stay on track and meet your financial goals—even if you have money to spare each month. You can use a budget to track your income and expenses each month. This can help you cut back on wasteful spending, save money for the future, and reach some of your financial goals, whether that’s to save up for a car, vacation, or a new home.
When you’re budgeting, make sure you track every dollar that comes and goes out of your hands and your bank account. This includes any money you earn and your fixed and regular monthly bills (rent/mortgage, utilities, credit cards, loans, etc.) as well as any irregular expenses like travel and dining out.
How to Create a Budget
Follow these steps to create your budget:
- List your goals. Why are you creating your budget and what would you like to do with your savings? You may be saving up for a big purchase, a vacation, for retirement, or to set aside a rainy day fund. Whatever your goals are, make sure they are realistic.
- Determine your monthly income. This includes all of the money you earn every month. Do not include things like tax refunds as things like this will inflate your monthly earning figure.
- Calculate your expenses:
- Fixed monthly expenses. This should be all fixed expenses, such as housing, car payments, and student debt. Include any other things you pay for that come at a fixed, predictable cost.
- Flexible monthly expenses. This list should include anything you spend money on each month that comes with a flexible cost. Groceries, entertainment, travel, and other similar items fall into this category.
- Don’t forget expenses that occur semi-regularly. Property taxes, insurance, and other expenses that you don’t pay monthly but must still be accounted for should go on this list.
- Choose your strategy. With the envelope strategy, you set aside cash each month for specific spending goals, such as groceries and entertainment. The 50/30/20 plan involves spending 50% of your income on necessities, 30% on wants, and 20% on savings.
- Rework your spending to fit your strategy. Make sure you make adjustments to your habits so you stick to your plan. Consider brown-bagging your lunch rather than buying it or giving up that morning brew from the neighborhood coffee shop to help keep you on track. You may also want to give up the credit card and start using cash.
- Automate your bill payments. Setting up automatic debits can make your life easier because it takes the guesswork out of making your payments and keeping track of them.
- Track how you’re doing. Keeping tabs on your progress and making minor changes can help you stay on track. For instance, if you’ve paid off a debt, you can put that money to use in a different category.
Budgeting Apps vs. Expense Tracking Apps
You may have heard about expense tracking apps and are probably wondering how they differ from budgeting apps like the ones we highlighted above.
Budgeting apps allow you to actively manage your money. This means you have a solid grasp of what your income and expenses are each month. This includes setting aside a certain amount of money for groceries and entertainment so you stay within your limits. If you’re using budgeting apps, you probably have clear goals about where and how you want to spend your money. Put simply, there are no surprises when it comes to your money because you know how and when it comes in and where it goes.
Expense tracking apps, on the other hand, allow you to paint a picture of how you spend your money each month. These apps record your bill payments and other expenses, such as your nights out, the clothes you buy, and the morning coffee you stop in for on your way to work each morning. At the end of the month, you get a clear picture of where your money went so you can determine if and where you can make adjustments to help you save money.
Check out our list of best expense tracking apps.
If you opt for the cash envelope budgeting method, make sure to keep track of your envelopes very carefully. If you lose an envelope, you can’t get your money back as easily as if you’d used a debit or credit card.Â
Pros and Cons of Budgeting Apps
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Ease of access: Mobile access can help at home and while you’re on-the-go
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Affordable or free: Many options come at a low cost or even free
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Fewer errors: Automated syncing and record-keeping eliminates human error
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Helpful, automated interfaces: Visuals and insights in real-time can help you with everyday decisions
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Can be difficult to learn: Complex apps can be difficult to navigate and pick up
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Cash can be hard to manage: Some apps require extra work if you’re using cash
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Must have an internet connection for syncing: You can lose access to your app if you don’t have a connection
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Potential for upsells: Some apps may try to sell you other products and services
Alternatives to Budgeting Apps
Keeping up with a budget is always a great idea but you don’t necessarily need an app to do it. Here are some other popular options in both the digital and analog realms that might work better for you:Â
- Budgeting software: If you’re not keen on using your phone, you can do most—if not more—of the same things on a desktop computer that a mobile app would let you do. You may be able to log in to a program online or download a program on your computer.
- Expense tracking apps: Budgeting can seem overwhelming and a good first step for many people is to simply track their spending. If that’s the case, a more streamlined app might be better for you.
- Spreadsheet budgeting: Many people choose to make a DIY budget using a paper spreadsheet or a program like Google Sheets or Microsoft Excel. This lets you customize it how you want, although it is more work to put together and maintain.Â
- Cash envelope budgeting: You’ll take out paper cash and put it into categorized envelopes such as food, clothing, and gas with this method. This lets you set a stricter budget cap for yourself if you’ve had problems spending too much in the past.
- Pay yourself first budgeting: If you hate the idea of budgeting, this method allows you to sidestep it entirely by setting up automated transfers into your savings account, with the remainder left over to spend as you wish.Â
You may have heard of the 50/20/30 budget rule. This rule, which was popularized by Sen. Elizabeth Warren, suggests dividing your take-home pay three ways: 50% to your needs, 30% to your wants, and 20% to savings. Needs represent living expenses and other things you must spend on while wants are things that you don’t necessarily need.
Why You Should Trust Us
Budgeting is a challenge for many people. While many folks want to reel in spending, it can be tedious to manually track expenses with a spreadsheet, making giving up all too easy. Luckily, there are budgeting apps to automate the process. But, the market is flooded with free and subscription-based apps, and most people don’t have the time or energy to test each out. Fortunately, we did the heavy lifting for you.
We considered 15 of the best companies on the market, comparing each app’s budgeting functionality, pricing, free trials, and user reviews. We compared the features, educational tools, security, and how each app accesses your financial data. All our picks are free, offer a free version, or have a free trial, so you won’t have to waste money on a budgeting app that doesn’t suit your needs. Investopedia launched in 1999 and has been helping readers find the best budgeting apps since 2020.
Frequently Asked Questions
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That depends on several factors. Budgeting apps can be worth the effort only if you use them and do so consistently. This means being honest about your spending and tracking every expense you incur. See where you can make changes and adjustments.
Some apps may help you identify where you can cut back while they help you track and live within your new budget. But, before you get started with a budget app, it’s important to know your goals. Ask yourself whether you want to save money for a rainy day, the future (i.e. retirement), or for a big purchase.
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When selecting a budgeting app, look for features such as its ability to sync your bank accounts, track your spending, and organize your expenses into categories, allowing you to see trends over time. In addition, you might want an app that offers automated savings, suggestions to save money, bill alerts, access to credit scores, and investing features. Note: Make sure any apps with a savings component connected to them are FDIC-insured.
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The general rule of budgeting is that you spend 80% of your take-home pay and save the remaining 20%. You should spend 50% of your monthly after-tax income on necessities. This includes things like housing, utilities, food, insurance, auto payments, healthcare, and debts. Your wants, such as dining out, vacations and trips, entertainment, clothing and accessories, and electronics, should get 30% of your pay.
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A budget is a spending plan that is designed to account for every dollar earned and spent for a certain duration of time. In most cases, budgets are designed for monthly and/or yearly spending.
There are five key reasons why you would want to (and should) budget:
- Identify your spending habits and opportunities to save.
- Work toward and meet your long-term goals.
- Stop (or at least cut back on) your overspending.
- Saving for retirement.
- Plan and prepare for emergencies.
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Budgeting apps can help anyone manage their finances, curb their spending, and save money. They also allow you to organize your money matter in one place. These apps allow you to see what goes in and out of your bank account(s), pay your bills, pay off your debts, and save money.
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Budgeting apps can be a great way to help you save money and eliminate wasteful spending. But they are only as safe as the company behind them—especially if you link your bank account to the app. If the company gets hacked, your data may be stolen. Be sure to find an app that encrypts your data and uses other security features like two-factor authentication. Updating your app regularly can also keep your data safe whenever the company adds new security features.
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You’ll need to gather some basic information to create a budget. The first thing you’ll need is your monthly income, which you add from all the sources that contribute to this figure. Don’t include things like tax refunds or semi-annual payments. Then calculate your monthly expenses—at least one month’s worth to get an idea of how much you owe each month. You may want to choose a month where you have semi-regular payments like car insurance.
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Budgeting can help you keep your expenses down and save money for the future. There are some rules to help keep you on track.
- Plan. Putting a plan in place is the first step you can take to bring order to your finances.
- Take control. Having a plan only goes so far if you hunker down and stick to it. This requires you to be honest about where your money is going and commit to your plan.
- Reevaluate. Give yourself time to stay on your plan. After six to 12 months, revisit your budget to see what’s working and make any adjustments.
Guide to Budgeting Apps