Innovative Ways Technology Is Transforming Your Personal Finances

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The days of managing your personal finances by going to CompUSA, purchasing Quicken, and spending countless hours meticulously inputting your financial information are over. In the past several years, advances in mobile and web-based technologies have fueled a whole slew of simple, innovative solutions that have vastly improved financial management. From services like Mint.com that provide an integrated platform to help people manage all aspects of their personal finances to online investing companies like Jemstep that have brought accessible, high-quality wealth management advice, individuals have a greater ability than ever before to make sound financial decisions. Below are three important technological trends that can help get your head around your finances and put you on track to effectively manage and achieve your financial goals:

The “Mobile Wallet”

The idea that you can conduct all your financial transactions without carrying cash or a credit card is now a real possibility. While companies like PayPal disrupted the ways consumers could pay for things online, a new breed of mobile payment products have helped make transferring money as simple as sending a text message. Nearly all banks now offer simple and secure applications that streamline your ability to pay for bills, deposit checks and conduct a variety of other financial transactions.


Other mobile payment products, such as Venmo, have made it significantly easier for people to transfer money to friends and family. Venmo is a free, Web-based payment network that allows users to establish two-way relationships with other users they trust, allowing each party to pay or charge the other as they see fit. Transactions can occur through text message and money in a Venmo account can be easily transferred to and from bank accounts. Examples of real-life practical applications of this service include instantaneous rent payments to a landlord or a roommate, or the ability to immediately pay back a friend who has just bought you lunch. While I wouldn’t recommend leaving your wallet at home every time you leave the house, there are now a variety of new ways to pay for things and transfer money that is simple, secure, and convenient.

Simplified Financial Planning

Keeping track of your finances has traditionally been a tedious and time-consuming process that required interaction with a clunky, wholly unintuitive piece of software. With the emergence of Web-based platforms like Mint.com, the world of personal finance is becoming user-friendly and better integrated. These platforms have not only revolutionized personal finance by providing easy-to-use solutions, but many of them also employ cutting-edge behavioral economics into their design to help users better understand the effects of every financial decision. One aspect of this science involves the practice of bucketing goals and expenses. Research shows that if you specifically allocate money toward a specific goal or purpose, you are more likely to consistently save money to reach that goal.

Other products like Planwise allow users to forecast their financial future by graphically plotting the impact of current and future financial decisions. By inputting information regarding your income, spending, debt and any other plans that will impact your finances (such as the purchase of car or a home), Planwise will create a personalized financial map for you. Overall, there are a lot of free and simple solutions available that allow you to easily track and get ahead of your financial planning. 

Low-Cost Investment Advice

Perhaps the most significant way that technology is changing personal finance is in the realm of investment management. Many companies are aiming to bring high-quality, personalized investment advice that has traditionally been only available to wealthy investors. Personal Capital, Jemstep and Betterment are all examples of companies that have taken this approach, allowing users to monitor all their investments and personal finances from a single online platform. Jemstep is an online investment advisor that seeks to improve retirement outcomes by telling people within minutes exactly what to buy and sell across various their retirement accounts. Ultimately, the goal of these services is to reduce the complexity and intimidation factor that is often associated with the traditional financial advisors, and by providing these services at a lower price point.

Before overhauling your entire system for managing your personal finances, it is important to keep in mind your own preferences. Much of effective financial decision-making involves being comfortable with your method of reaching a decision, and doing it in an efficient and low-cost way. While technology is certainly helping an increasing number of people achieve these goals, it is important for you to be comfortable with a product or service before you integrate it into your financial planning.

 

Joseph Egoian is an investment writer at NerdWallet, a site dedicated to helping consumers learn how to manage their money, whether it’s to help them find the best credit card for their needs, or find the right online brokerage account.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Retirement , Investing Ideas , Technology

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