Money Matters

Online financial apps can make electronic spending 'real' — and help graduate students cut back.

Britta Anderson works as a financial programs manager for a community service agency and teaches classes in money management — yet the 29-year-old psychology graduate student still needs help reining in her spending.

That's why Anderson uses the online finance app LearnVest, which sends her email alerts when she's spent more than she planned. "That puts a cap on my spending for a while," says Anderson, a master's student at the Adler School of Professional Psychology in Chicago, where she's studying industrial and organizational psychology.

Online finance apps are a growing field, with more than a thousand to choose from between the iOS and Android platforms. These mobile apps can help you keep on top of spending by monitoring your checking and credit accounts; many let you set up budgets and then notify you if you've blown past your targets.

Such online tools are especially important if — like most people — you increasingly use electronic money, such as credit and debit cards, instead of cash or checks, says Mary Gresham, PhD, an Atlanta financial psychologist. "Money in electronic form is much more difficult for the brain to track than money in physical form," she says.

But online money management tools can help your digital money seem real, says Brad Klontz, PsyD, a financial psychologist in Hawaii.

"The apps that track spending in real time and send you alerts help increase that conscious awareness" of your spending, Klontz says. "They help engage the prefrontal cortex to help you think through, 'Is this something I can afford? Am I just buying something to fill an emotional need?'"

This is key for mental health professionals, who Klontz has found are more "money avoidant" than other professionals, such as those in finance. In a 2012 study in the Journal of Financial Planning that surveyed 422 people (64 of whom were mental health professionals), he found that those in mental health fields scored significantly higher than financial advisors on financial denial behaviors, such as avoiding looking at bank statements or thinking about money. As a result, mental health professionals are at increased risk of overspending, compulsive buying, financial dependence on others and having trouble sticking to a budget, he says.

"There's a general sense [among mental health professionals] that money should not be important," Klontz says. "Yet, ironically, we then graduate from school with $100,000 in debt … and we're ill-prepared, frankly."

How to choose and use an app

When deciding on an app, keep in mind not only features such as spending notifications and goal-setting capabilities, but also an app's security. After all, you are providing crucial account information and data.

"You want to make sure it's gotten good reviews, that there is sound security and that it comes from a reputable name," advises Klontz, who uses Intuit's Mint.com app for his personal finances. "Make sure it's not something fresh on the market."

For example, find expert reviews in publications that focus on finance, computer software and/or consumer topics such as Bankrate.com and PCMag.com in addition to consumer reviews on app store sites.

Once you've settled on an app, remember to use it for more than checking your balance, says Gresham.

She advises looking monthly at your app's tracking reports to see how you spent your money and in what categories "and then ask yourself if that's the best use of your money."

Online finance apps to consider

Here's a sampling of some of the many money management tools online:

  • Mint.com (Available on the Web and in iOS and Android platforms)

    This free app, owned by Intuit Inc., has 13 million users. Mint tracks your activity in multiple accounts simultaneously, automatically updates and categorizes transactions in your accounts, and syncs data between mobile devices and computers.

    Michael Miesner, a 30-year-old doctoral student in clinical and primary-care psychology at East Tennessee State University, began using Mint about two years ago to help sort out his and his new wife's merged finances. He says the app does "a fairly decent job of looking at your spending, suggesting a budget based on your past spending and alerting you when you go over that budget."

    One downside of Mint is its boring graphics, says Anderson, the grad student in Chicago, who tried the app before turning to LearnVest. "For me, I need things — and I think my generation is this way — to be bright and fun; Mint didn't quite have it," she says.

  • LearnVest (Available on the Web and iOS only)

    Four-year-old LearnVest touts itself as being designed by and for women. Along with account tracking and budget planning, the free version of LearnVest features a library of personal finance articles. Users can also connect one-on-one with financial advisors for a $19 monthly fee, plus set-up fees ranging from $89 to $399, depending on how much contact you want with the advisor.

    Anderson likes LearnVest for its artsy appeal, financial articles and accessibility via her iPad. "I can read interesting financial news and check my balances and transactions, all while I'm waiting in line somewhere or between meetings at work," she says.

  • You Need a Budget (YNAB) (Available on iOS and Android)

    Some of Gresham's clients find this app to be very user-friendly, she says. The mobile app is free but works in conjunction with a Web-based program that costs $60 to download. The app requires you to enter and categorize transactions yourself, which can force you to participate more fully in the budgeting process and recognize how much you are spending.

  • Buxfer (Available on the Web)

    This free Web-based app is aimed at 20-somethings and gives the option of signing up via Facebook, Yahoo or Google. It tracks transactions and sends notifications but does not store your account numbers or passwords. You can use it to track shared expenses, such as household costs split among roommates. No mobile app is available, but there are customized Web interfaces for mobile devices.

  • Mvelopes (Available on the Web, iOS and Android)
    This app is based on the "envelope" theory of budgeting, where you set aside money in expense categories. It features a debt payoff planning tool, which is good for student loans, and online bill payment. It's free, as long as you have no more than four "envelopes." Otherwise, an upgrade is available for $8 to $13 per month.

Of course, just because you use an online budgeting app doesn't mean you will automatically be able to cut spending and keep your finances in better order. Moira Somers, PhD, a financial psychologist in Winnipeg, Canada, points out that most online budgeting apps "only tell you where things have gone — they don't really set things up for you to be thoughtful about where you want your money to go."

It's also important to be proactive about your finances, as limited as they may be, to avoid future difficulties.

Nonetheless, she adds, "having a regular way of tracking where things have gone is a very good first step."

Lorna Collier is a writer in Chicago.