Best Apps for Debt Management and Budgeting

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Best Apps for Debt Management and Budgeting
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When it comes to money management, many of us learn how to do it the hard way. We learn painful and expensive lessons related to credit cards, student debts, car loans, mortgages, and more. However, money management doesn’t have to be a thorn in your side. It’s also not a necessary evil. Successful money management means putting your money to work for you, instead of wondering where it disappears to every month.

There are some excellent technologies that can make the process easy, even – dare I say it – fun! They can keep you from becoming delinquent or defaulting on your loans and getting into hot water with your creditors. They can also keep you from making mistakes that will lower your credit score. Here are a handful of apps and programs that make money, well, manageable:

Mvelopes

Mvelopes, as the name implies, is a virtual budgeting system based on the “envelopes” system of budgeting. For those not aware of the concept, “envelopes” budgeting requires making categories for your spending each month and setting aside a certain amount of your income for each category. Categories, and envelopes, may include; food, clothes, transportation (including bus fair, gas, or car repairs), health care, rent, utilities, entertainment, debt repayments, and savings, among other family-specific categories.

With the envelopes system, you examine your financial situation and decide what you realistically can afford to spend each month. Then you ration your income, in cash, into the certain categories.

Once you spend all the cash in a certain category you’re finished. You should try to now take more out of savings, borrow from other envelopes, or resort to credit cards to pay any of the expenses. This forces you to really take a look at where your money is going each month and budget accordingly. It can also help you get out of debt faster by curbing unnecessary expenses, and cut back where you can, allowing you to apply those extra funds to higher priority expenses.

Mint

Mint is another phone application that helps you make a monthly budget and keep track of your expenses every month. It can be configured to link directly to your accounts. The syncing feature of Mint is something to be wary of: banks warn that giving your private account information to third party applications can compromise your financial data. However, you may decide that the potential benefits of virtual budgeting and syncing your accounts are worth the known risks.

You Need A Budget (YNAB)

You Need A Budget (YNAB) is another phone application that works on a virtual envelope system. This one if different, however, in that it requires you to hand-enter you bills, expenses, and receipts each week. For those that are worried about protecting their financial data, be sure that there is no linking or syncing to your other online accounts.

Hand entering your financial information puts you in the driver’s seat, and forces you to develop better habits – something the developers of YNAB flaunt as the main point of their application. Similar to the other budgeting apps it also lets you view reports based on your unique spending habits and grouped expenses.

Debt Snowball

When it comes to debts there are a few different ways to address them. Some will tell you to pay off the highest interest debts first, no matter how large, while continuing to pay the minimums on the other debts. However, while this is sound financial advice and will save you the most cash in the long run, it’s not nearly as gratifying as the balance-based debt snowball method, and harder to stick to. Paying of larger high-interest debts first can feel like walking through quicksand as you look at the remaining balance shrinking a few dollars at a time each month.

A much more satisfying method is the balance-based debt snowball method. The way it works is simple. As each debt is paid off, from smallest to largest, you roll over what you were paying towards the next debts on the list. Some of the best apps that support this method are Ready for Zero and Undebt.it.

To get started, gather all of the information about your debts and make a list of the debts from smallest debt (ex. the $50 that you owe your friend), to largest (the $12,000 you owe in student debt). Next, note down the minimum payments you need to spend towards each loan to stay current. For simplicity’s sake I can’t get into how the added interest changes each month but there are other online payment calculators that can show you your total interest savings by using an accelerated debt snowball method. You may want to check them out before you download different apps.

Your list may look something like this:

  1. $50 – Personal loan – $25 min. monthly payment
  2. $150 – Personal loan – $25 min. monthly payment
  3. $500 – Credit card – $50 min. monthly payment
  4. $1.200 – Car loan – $100 min. monthly payment
  5. $12,000 – Student loan – $200 min. monthly payment
1st Month – Make all your minimum monthly payments. This month you’ll be halfway towards paying that debt first debt to your friend, while still paying the minimums on the other debts .
2nd Month – Wrap of the debt to your friend and cross it off the list: an extremely gratifying experience.
3rd Month – Take the $25 that you were paying your friend the first two months, add it to the $25 you were already paying your second friend, and realize you’ve already almost knocked out the second debt.
4th Month – Pay off your second friend and do a little dance for knocking two debts out of the park in only four months while still staying current on the others!
5th Month – Roll over the $50 you were paying to both your friends onto paying off the third debt – that credit card. Now you’re paying a total of $100/month towards the card so you wipe it out in only another three months!
7th Month – By the time you’ve paid off your credit card debt in the 7th month you’ve already paid your car loan down $700 bucks!
8th Month – Roll over the $100 you were paying on all the other debts, for a total of $200 bucks towards your car payment each month, and you wipe the credit card out in only another three months. You continue on like this until all your debts are paid off leaving the largest debts for the end when you have the most money available to pay them back.
11th Month – You pay off your car loan and pay an extra $100 towards you student debt. For a total of $300 towards your student debt.
12th Month – You pay a total of $400 on your student debt (having knocked it down $2,700 so far that year) and continue on paying the full $400/month that way until the debt is paid off – roughly another two years give or take. This knocks your student debt out a full TWO YEARS faster than only paying the minimum monthly payment, and also saves you hundreds in extra interest payments.

 

Using the debt snowball method you motivate yourself every month to keep at it because you see positive gains, no matter how small, as you work your way through the list. This can help you get all your debts paid off faster and also save you a bunch of money in interest payments.

Remember, most people find that budgeting applications and debt payment apps are best used in combination. Consider using two or more apps to help you manage your finances and stay on top of your monthly budget.

When it comes to money management you do need to be consistently reevaluating both your income and expenses – making changes as needed. It’s your money and your life after all and deserves your time and attention. The training and skills that budgeting apps provide can help you succeed in other areas of your life as well – by forcing you to become more disciplined, far-sighted, and goal oriented. If you stay focused and driven you are sure to succeed and will be able to pay down your debts – no matter how large they seem – in no time at all!

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