There are a plethora of phone apps and tools available these days to help us keep our finances on track. A lot of these apps will help automate and manage your money and can get you set up for financial success. You don’t need to add every tool out there to your toolbox; you just need to find a few tools that will work well for you.
Even as a Certified Financial Planner (aka a personal finance nerd), I can’t just wing it with my finances. I leverage a few awesome tools to ensure that I’m always staying on top of my finances and reaching my goals.
Here are the 3 tools that I use on the regular. All of them have a specific purpose and play a role in keeping our family finances on track.
1) KOHO Pre-Paid Visa Card
My wife and I started using KOHO Visa cards over a year ago for one simple purpose: to ensure we were spending within our means. This was specifically for our expenses that have a ton of emotion attached to them. I’m talking about eating out, groceries, clothing, entertainment, hobbies, gifts, etc.
KOHO is a no-fee pre-paid Visa card that you can load from your bank account through an e-transfer. It is paired with a great app that is available on both iPhone and Android. The app displays what your available “spendable” amount is left on the card. It provides notifications when you make a purchase as well as a feed of all your expenses, which are broken down into categories. My favourite feature is the micro-savings goals: KOHO lets you save small amounts of money each day towards short term savings goals.
How do I use it? I have set up an automatic transfer to my card with a predetermined amount of money each Sunday: $175. This is the amount I have to spend each week on all of those emotionally charged expenses that I mentioned above. Budgeting for each of those categories individually can be very challenging, and if I opted for a monthly amount of $700 I would run the risk of burning through that $700 by the 3rd week of the month. With this weekly approach I’m more aware of what I spend my money on and how much I have available for the week.
By sticking to this weekly amount for all of our fun and emotional type of expenses we are ensuring that we spend below our means. All of our other non-discretionary (or unemotional) type of expenses run through a separate chequing account.
2) YNAB (You Need A Budget) - Budget/Cash Flow Management App
This is a great tool that allows you to sync all of your bank accounts and credit cards to track and budget your expenses. I typically don’t recommend budgeting your discretionary (emotional) expenses; rather, I suggest establishing a weekly amount available for all these types of expenses (see above). It’s available on desktop and through a mobile app. It’s very simple to use, yet has some robust features that can allow you to keep a “finger on the pulse”; ie. you’re aware of where all of your money is going.
When I talk to clients about cash flow planning and budgeting, the whole idea is to bring awareness to your finances and have a plan. If you’re just spending without a plan each month and saving whatever is left over (if there is money left over), you’re just living life by default and run the risk of falling short of reaching your goals. It’s important that each dollar has a job and is being accounted for.
YNAB is a great tool to help you create your game plan for each month. Personally, I only check in and monitor YNAB once a week for about 15 mins. I don’t let it consume me or take up hours of my time, but I do like to check in and see where we are at throughout the month and make any adjustments when they’re required.
YNAB is not free and the cost is currently $84 USD per year. If it can help you with staying organized and spend smarter, in my opinion, the price is worth it.
3) MYLO - Investing your spare change
MYLO rounds up your daily purchases and invests the difference for you into a diversified portfolio. For example: you pickup a Starbucks coffee and spend $3.50; it will round it up to $4.00 and save the 50 cents. It’s a phone application that syncs with your bank accounts and credit cards.
I’ve just recently started using this app and it is the first of its kind in Canada. What I love about this app is that it allows you to save a little extra cash each week in a relatively painless process that requires no extra thought. Everyone is different depending on the number of transactions you’re doing each month, but the average person may save an extra $10 to 15 dollars each week.
Like I said, this is great for saving a little extra each month. However, this shouldn’t replace your fixed monthly savings contribution that you’re making into your RRSP, TFSA or savings account. This application also shouldn’t give you the impression that by spending more (aka. having more monetary transactions) that you’re doing a good thing because you’re also saving.
The MYLO app is new and therefore it’s natural to have questions about security and if your money is safe. Be sure to check out their FAQ page on their website as it will answer a lot of your questions and address any concerns you might have. Their investment portfolios are primarily made up of low-cost ETFs through Vanguard. They don’t currently offer an option to save into registered RRSP and TFSA accounts, but apparently this is on the horizon and will be available in the future.