Budgeting by hand offers control

When Abby Bailey tried the popular budgeting app Mint, she wasn’t sold.

To Bailey, the app didn’t feel user-friendly — her bank and credit card accounts, for instance, couldn’t sync, she said. She wanted more personalized spending categories. And she felt like the platform, which its owner, Intuit, recently announced is shutting down, provided more of a retrospective look at her monthly spending, as opposed to a tool for holding herself accountable.

The 25-year-old opted, instead, for what might be considered an old-fashioned strategy to some of her Gen Z peers: She made a budget herself.

“It makes me more aware,” said Bailey, an occupational therapist who lives in Philadelphia’s Center City and uses a digital spreadsheet she always keeps open on her laptop.

Bailey has encouraged others her age to try manual budgeting, too. As a side hustle, she started selling her budgeting templates on Etsy for $5 each, a one-time purchase less expensive than the $35 to $99 some consumers pay each year for apps.

While apps can upload transactions automatically from linked accounts and do the math on how much has been spent in different categories, “if you’re writing it down yourself, you’re like, ‘Oh, maybe I should spend less,’ ” Bailey said.

Taking control of your finances

Some of Mint’s 3.6 million active users are mourning its impending shutdown (the company encourages users move their data to Credit Karma). But financial advisers and researchers report that they have found that people are more likely to stay in the habit of budgeting if they do at least some of the work themselves. While as many as 90 percent of people aged 24 to 54 say they have connected their bank account to an app, only 20 percent said they have been active on those apps in the past three months, the Wall Street Journal reported last month, citing a 2020 survey from market researchers Aite-Novarica.

“I don’t think apps are bad,” said Wayne W. Williams, an associate professor of accounting at Temple University and a certified financial planner. In fact, these apps are “very useful and convenient, but you lose the control and the ability to do long-term” planning and goal-setting.

Williams still uses the “tried and true, pen-and-paper worksheet approach” for his own finances. His students, meanwhile, report using apps, but more so for tracking their spending, not for budgeting. Regardless, Williams said, it is important to get in the habit of at least reflecting on their current and past spending, as well as their financial goals.

With so many elements of consumers’ finances automated and online, “people don’t dedicate the time to spend looking at their money,” he said. “People don’t stop and do it at least on a monthly basis.”

Finding what works

In Montgomery County, Pa., Carly Burd and boyfriend, Tyler Hembd recently did a manual financial audit and started budgeting by hand as they save up to buy a home.

For Burd, 26, the practice has been a welcome change from past experiences with apps such as Mint and You Need a Budget, which she felt were “self-punishing” and unforgiving.

“I found it to be black and white,” she said. “It didn’t give me grace.”

Staying to a strict gas budget, for instance, was difficult, she said, given how wildly prices can fluctuate over the course of several weeks. With inflation, she added, the same could be true for grocery bills. And if you went as much as a few dollars over in a certain category one month, you’d see a visual cue that you had failed.

In fact, it contributed to extreme financial anxiety, something with which she — and many other U.S. adults — continue to cope.

“Budgeting is really ugly,” she said. “People would rather look the other way.”

As she takes a more active role in her finances, she said, she is already feeling her relationship with money change.

Experts such as Williams say there is no one-size-fits-all approach. Some in the Philadelphia region credit the consistent use of apps with helping them reach their financial goals.

Hallie Black, a 31-year-old who works in consulting, said she doesn’t think she would have been able to buy her home in Philadelphia’s Roxborough neighborhood earlier this year if it was not for years of using the You Need a Budget app.

When she first started using the app almost five years ago, she was skeptical, especially since it cost $99 a year. But she quickly got hooked, particularly because the app does allow users to take more of a hands-on approach than some other personal finance apps.

“It is so worth it,” Black said. “What is different about it is you only budget with the money you have. … I like that because you can kind of control where your money is going,” similar to a “digital envelopes” system.

One of the reasons Black said she thinks she has stuck with the app so long: It offers users the ability to look back, see their historical spending, and gauge how far they’ve come.

Others are still trying to find the tools that work best for them.

“I take it week by week,” said Iasia Carabello, a 23-year-old career nanny who lives in Philadelphia’s Brewerytown. For now, she said she budgets manually, focusing on making rent and student loan payments. Carabello has been hesitant to use apps, she said, because of data privacy concerns.

“Definitely the time is going to come where I’m going to have to buckle down on finances. At this time, I’m taking it slowly,” she said. “A lot of things that involve finance aren’t taught to you in school. … It’s hard to learn more.”

Need budgeting help?

Here are some tips from Wayne W. Williams, associate professor of accounting at Temple University and a certified financial planner:

• Don’t go on autopilot: Check your accounts regularly, enough to know how much you have in the bank and about how much you’re earning and spending each month.
• Set aside time to assess your finances offline: “The complexity of an individual’s expenses and income” should be proportional to the amount of time. Do so offline. “The apps are convenient, but they aren’t necessarily instructive.”
• Identify areas where you overspend: This may be the byproduct of habits you developed during pandemic quarantines when you had more disposable income.
• Audit your subscriptions: Many lose track of subscriptions on auto-debit. Cancel subscriptions you’re not using.
• Beware of big data: Be cautious of credit card offers and other suggestions by apps with your financial data. “It’ll probably reinforce bad behavior as opposed to create better behavior.”
• Set goals: The same way you set goals for physical and mental health, establish short- and long-term goals for your financial health. Outline a plan for meeting them.
• Prioritize paying down debt: Particularly on credit cards and loans with high interest rates.
• Don’t be afraid to get professional help: There are even free services, such as counseling through the nonprofit Clarifi.