The best budgeting apps of 2023
As society has moved away from cash, electronic transactions have naturally boomed. So much so that the average number of electronic transactions made by Australians has jumped from 300 to 650 each year over the past decade, according to the Reserve Bank.
Keeping track of these transactions can be tricky, especially for people who bank across multiple institutions. But for Australians looking to stick to a budget, it can be crucial.
To cater to people's digital budgeting needs, an array of budget and money management apps has sprung up in recent years, including Buddy, Frollo, Goodbudget, PocketSmith, WeMoney and You Need A Budget (YNAB), to name a few.
Peter Marshall, a banking expert at comparison website Mozo, has researched money management apps as part of an annual awards program and has witnessed the budgeting app market grow both in size and sophistication in recent years.
"Looking back when we first started assessing apps, there were only eight or so," he says. "There's quite a few more now, though. Most recently we found 20, of which some are free, while some have a regular fee attached to them."
How budgeting apps can help
At their core, most budgeting apps are designed to enable users to create budgets and input transactions, but beyond those fundamental features Marshall says there can be some other particularly helpful tools to look out for.
"A really big one is categorisation of transactions, and a lot of the good apps do that fairly automatically now," he says. "Some of them even go as far as giving you the ability to create new categories, so if you find that the categorisation that they've got set up doesn't really meet your needs, you can adjust that."
Beyond giving users the ability to customise their transactions, Marshall says the more advanced apps are able to proactively share insights with users.
"Some apps will send you notifications if there's been a large purchase on one of your accounts, or if you've met a budget target, or perhaps if you've missed paying a bill. So, they can really make it easier for people to be on top of their money without having to think about it so much."
One option, with features such as budgeting, goal setting and spending prompts, is the eponymous app from Sydney-based fintech Frollo. It lets users link their accounts from Australian banks and financial institutions so they can get a better perspective on their overall spending.
Piet van den Boer, Frollo's head of marketing, says it can also help users save money with tools like its bill-tracking function.
"Sometimes people have subscriptions they've forgotten about because they have so many transactions, so in our bill overview we can show them their upcoming bills, and a lot of people see that and realise they have some subscriptions they're still paying for that they go and cancel," he says.
Auto pilot or manual
One benefit that most apps have over the more traditional pen-and-paper budgeting method is the option for users to sync their card or bank transactions to automatically feed into the app.
That's not to say there aren't options - PocketSmith and YNAB being two - for people who like the idea of manually inputting their financial data themselves, though.
But on the automatic front, there are typically two ways that apps bring in data from their users' financial accounts: screen scraping or open banking, both of which are useful to know about.
Screen scraping involves users sharing their credentials such as an ID and password with a third party (for example, a budgeting app) in order for the app to access that financial data. Open banking, on the other hand, allows Australians to share their data with third parties that have been accredited by the Australian Competition and Consumer Commission.
Frollo has phased out screen scraping in favour of open banking which, van den Boer explains, ultimately means users have more control over their data.
"To get the right information into the Frollo app you need to connect your accounts, so to do that we use open banking, a government-regulated regime that basically allows a consumer to give consent to a third party to receive data from their bank," he explains.
"Instead of sharing your account credentials and having the third party log in for you - which is what screen scraping is - you tell your bank 'I want you to send this data to Frollo, and this is what they can do with it, but when I tell you to stop sharing it, you need to stop'."
Given the prominent data breaches that have occurred in the past year, many people will be cautious about sharing their data, especially their financial details. So how do budgeting apps use data, and just how safe are they?
Ultimately, that will vary from app to app, and it's a consideration that users will need to make before signing up.
"I think nowadays almost everything you do as a consumer involves sharing some data - sometimes whether you like it or not," says van den Boer. "You often don't even know what companies are going to do with it. What I think is great about open banking is that as a participant we have to tell people beforehand what we want to do with that data.
"The other benefit is that open banking is secure. The connection, basically, between the bank and Frollo is bank-grade security. So, we have to comply with most of the security regulations that banks have, and that's all part of us being an accredited data recipient as part of the consumer data right."
Case study: A clearer picture
When Resha Patel started using the budgeting program You Need A Budget (YNAB) in 2013, her aim was simple: to get a better sense of where her family was spending money.
Built around the zero-based budgeting system in which every dollar is given a purpose, YNAB can give people a full picture of their incomings and outgoings by enabling them to create their own budgets and customisable expense categories. According to its website, the average budgeter saves $600 in their first two months.
Patel says it proved to be a real eye-opener, especially when it came to how much she and her husband were spending on groceries and eating out. However, the process of entering transactions became a chore.
"I remember my husband and I used to sit down every Sunday night with an hour or two allocated to inputting our transactions," she says. "But I found that there were too many transactions in the week that it became a bit overwhelming, to be honest."
Fast-forward to 2020 and Patel decided to give budgeting, and YNAB, another try. But with a new approach.
"Since then, I've been going inside YNAB every single day to put my transactions in - so all of our credit cards, savings, the home loan, everything. And that's every day."
Ultimately, Patel says YNAB has given her a clearer picture of the family's finances, which has been worth the $US100 [$155] annual subscription fee.
"I think it's helped us to understand - especially living in this environment with cost-of-living pressures - where our money is going and what we might need to dial back on," she says.
"But it's also given us the ability to move things around so that we can just live life."
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