“Bank of Dad” is a weekly column which seeks to answer questions about how to manage money when you have a family. Want to ask about college savings accounts, reverse mortgages, or how to save for a family vacation? Submit a question to Bankofdad@ . Want advice on what stocks are safe bets? Ask your broker. And then tell us. We’d love to know.
My wife and I are expecting our first child. Due to the sheer panic of it all and just to be more buttoned up in general, I’m getting our family finances more in order. One of the items I’m looking for is a new budgeting app. There are a lot of them out there. I’m thinking about getting You Need a Budget – someone told me it was life-changing. But are these worth it? Do they work? If so, which one do I use, and are there security concerns I should be aware of? — Terry J., Long Island
You’re a wise man, Terry. Kids are amazing. They’ll give your life a dimension it’s never had before. But there’s nothing that’s going to tear a hole in your wallet faster than a new baby. From now on, you’ll need to watch those pennies more closely, and budgeting apps can certainly help. The fact that there are so many apps on iTunes and Google Play is actually a double-edged sword. While there’s a product out there for every need, it’s also hard not to get paralyzed by the sheer amount of choice. In an effort to make the shopping experience easier, here’s a quick primer on some of the more popular ones on the market.
You Need a Budget
What you’ve heard is true. You Need a Budget is a nifty little tool for people trying to keep a lid on their expenses. It’s different than most other apps, and arguably more effective, because of its attention to detail. When you get paid, it’ll ask you to assign each dollar to a specific cost category, whether it’s your mortgage, groceries or utility bills.Suppose you want to head out to lunch with some buddies, but your “eating out” budget is running low. You’ll either have to borrow from another expense bucket or have the guys over at your place instead. It’s by getting into the nitty-gritty that YNAB makes an impact. Unlike some other apps, it’ll cost you. You’re billed $84 for a year of use, which amounts to $7 a month. Its makers claim the average user saves more than $6,000 a year. Even if that’s a rosy calculation, there’s no doubt a lot of users get a great return on their investment.
Cost: $84/year (after 34-day trial)
Mint was one of the first products of its kind, and it’s earned a reputation as a top resource for cutting down on unnecessary spending. It also happens to be one of the more feature-laden apps on the market. With Mint, you can pull information from your bank accounts, credit cards, bills and investments, giving you an instant snapshot of your financial life. Users can track the progress of their savings goals, which is great if you’re trying to save up for summer vacation or Christmas gifts ahead of time (never a bad idea). You’ll also receive alerts when you overspend in a certain category, making it harder to cheat on your money goals.
Like Mint, you can sync all your financial accounts, eliminating the need for a multitude of logins. As you make purchases, PocketGuard automatically categorizes them so you can see where your spending your cash (though you can make corrections manually if it makes an error).What really sets this one apart is the “In My Pocket” feature tells you how much you have left over after you’ve saved enough to cover your bills and other spending categories. So if you want to hit the mall, you know exactly how much you can spend without getting into trouble. You don’t get the precision that You Need a Budget can offer, but it doesn’t require as much of your energy, either. And a lot of users will appreciate its no-frills interface.
Cost: Free for basic version; $4 a month for PocketGuard Plus.
Tracking expenses is great, but some folks need a little extra hand-holding when it comes to making financial decisions. Albert is an interesting solution. It, too, syncs with your various financial accounts. But it also has a team that tips you off when there are opportunities to save money or when you’re overpaying for certain expenses. You can also text when you have a money-related question and get input from a real, live human. The Albert app itself is pretty a pretty streamlined affair compared to some of the competitors. But the peace of mind that someone’s a text message away can be reassuring. And it’s free!
While there hasn’t been a high-profile breach of any budgeting apps to date, it’s certainly not inevitable that the streak will continue forever. Any time you’re downloading an app that will pull information from your checking and investment accounts, you’ll want to make sure it has bank-level encryption in place to protect your data.
Some even use a two-stage authentication as an added layer of protection. When you log in from a new device, it’ll make you enter a one-time confirmation code or ask you security questions to double-check your identity. Most apps make it pretty easy to check out their security policies, which is certainly worth a couple minutes of your time.
Like many couples, my wife and I argue about finances a lot. But one thing that gets me is that my wife is always on my case about buying coffee in the morning. I don’t spend much on it ($3 to $5 a morning) but it’s nice to go to the shop and feel like a part of our neighborhood for a bit before I spend the next 10 to 12 hours at my desk. Yes, the cost adds up, but it’s not a large enough concern to really worry about — including that I get one coffee free after purchasing 10, I spend maybe $50–60 on coffee a month. There are much bigger things we need to worry about but the conversation always comes back to the coffee. I guess my question is: How do we move past these petty financial arguments and fight about money more productively? — Greg K., Minneapolis
It’s probably true that your morning caffeine fix isn’t the main hurdle preventing you guys from reaching your financial goals. Nor should people become joyless zombies in order to ensure a comfortable retirement years down the road – it’s about finding the right balance between your present happiness and future security.
On the other hand, seeking some sort of compromise is probably the only way to end to the continual bickering. And I guarantee, that’s more satisfying than any latte you’ll ever sip.
To be fair, cutting back a little will actually help your finances more than you might think. I’m going to challenge your math here a little. If you’re throwing down $4 a workday on a trip to the coffee shop – and a lot of folks spend more than that – you’re really spending more like $80 a month (even after factoring in your free tenth cup).
By trimming that down to, say, three visits a week, you’re saving around $32 a month. If you put that into a Roth IRA that gets a seven-percent annual return, your extra pocket change would be worth around $16,000 in 20 years. You’re not going to live off that in your golden years, but it couldn’t hurt.
More so, explain to your wife what a trip to the corner coffee shop means to you – that you get more out of it than a fancy drink. And then ask her if she’d be willing to meet you in the middle. I doubt she’ll say no. But be prepared to make a small sacrifice on your end, too. When it comes down to it, settling for a humble cup of coffee at home once in a while will be well worth it the peace of mind.