Personal Behavior and Finance: Can Apps Really Change Your Bad Money Habits?
As you may have already noticed, our world’s technological advancement has presented us with certain advantages. For one, there seems to be an app for everything. On top of the social media platforms, there are other apps that promote “fixing” the bad habits of people.
Browsing through the app store can be overwhelming. Nonetheless, people continue to search for the perfect app that will make them feel productive. With only 24 hours every day, some of us do not have enough time to go through all of our tasks. As a result, these productivity apps made us feel somewhat like we are superhuman workers.
In addition to productivity apps, there are also financial apps that promise you better money habits. Every week, there seems to be a new financial app that would help an individual overcome certain bad habits when it comes to handling their finances. Some of these apps include Planwise, Beeminder, and Stickk among others.
However, it is only right that we delve into the psychology of using such apps. How does one’s bad financial habits stop? What are the factors that affect it? Can apps really change your bad money habits?
Another financial app that seems to be popular among professionals is Digit. This app costs about 2.99 USD every month. If you think about it, you must pay for something that will help you save money. It sounds illogical, don’t you think?
While Digit offers a free trial version, you can tell that the app can somewhat change your financial behavior. Nonetheless, it features certain habits that will help you save. On the other hand, it cannot change your attitude towards money in the long run. Of course, there are apps that you can use for free; however, this is not the case. People should allow themselves to be wary of the things they spend on.
In addition, if you really feel the need to use a financial app to help you up to a certain point in your financial journey, you may. The rule to follow would be to not spend above 50.00 USD every month on something you continuously use in order to truly get its real value.
What are the facts when it comes to the psychology behind using apps?
James Osbourne and Ben Carlson were sharing how a human being can learn to implement specific systems that will bring about a change in their financial decisions. Studies and researches have been conducted to support this claim further.
In one experiment, a group of individuals was divided into two. They asked the first half if they have the capacity to save 20% of their income. Half of this first group said yes. Furthermore, they asked the second group if they could live on 80% of their income, almost 80% of this group said yes.
Another study was conducted to determine the attitude of the workers who were paid every five days. What the researchers did was to split a month’s salary into six envelopes, each with the same amount. The results of the study were amazing; the savings rate of the workers increased. The subjects claimed that they saw the 6th envelope as extra money; therefore, they were more likely to save it.
The truth about saving as an adult through the use of these financial apps
People would share now and then about their doubts on micro investing. What’s intriguing is that the targeted demographic of these financial apps are those who are basically new to micro investing. If you think about it, people are more willing to pay for these apps as compared to just putting the said money into their retirement or 401(k) account.
You’re not really getting much if you skip out on what the tax benefits retirement account can offer — or by investing additional fees on these financial platforms. The bigger issue here is that if you do not have any money to begin with. To be financially savvy, you have to consider all of these aspects.
Indeed, microloans as well as payday are dangerous territories under the category of money business. Another thing one should be wary about is that if you have something — in this case, an app on your phone — wherein you can easily tap on for money every month, several times a month, then you will start to rely on it.
Here’s another truth that most people fail to recognize when it comes to monthly subscriptions like these apps — switching from one application to another, one platform to another, does not allow you to save money; it simply transfers accountability.
Loan apps like LendUp may appear less risky as compared to its competitors; however, much of the difference is just. Back in 2016, this app was ordered by the CFPB or the Consumer Financial Protection Bureau to pay a total of 3.6 million USD for the purpose of penalties and refunds to more than 50,000 customers.
The findings of the CFPB was that LendUp was not giving its customers the chance to access loans that are relatively cheaper or something that can build credit, as LendUp claimed it would. In fact, they hid the actual cost of credit among other things.
By the end of the day, any kind of app cannot change human behavior
It is always a smart attitude to suspect the ability of any financial product that you are offered. Be wary of products that promise a change in your life or your financial habits. When it comes to money talk, always question how the process works. If you are not confident with the technicalities of what the app does, then it is highly suggested not to get involved with it.
As Two Cents Life Hacker says “these financial and productivity apps are not silver bullets.” One of the main pitches behind these apps is that they make saving an easy process. They promise that the use of their product can make you feel like you have not missed your money while going through a process. But anything that can improve the financial life of an individual should be noticeable.
Changing your bad money habits take more than just a single or a few other financial apps. Productivity apps are no different. If you want to change something in your life, do not rely on technology for it. Hard work and diligence is what you need. It’s no easy feat to save money and get rid of any debt; this is a fact. If an app promises you this — an easy way of saving money — chances are that they are lying.
How do you beat your bad money habit without the use of apps?
Instead of focusing your attention toward finding the perfect app that will guide you through your financial journey, try looking for ways to break your spending habits — naturally. You can try seeking the advice of behavioral finance experts. These professionals are responsible for finding the relationship between the psychology of a human being and the things that affect their financial decisions in everyday life.
It is difficult to change the behavior of someone when it comes to their financial life. If an actual person cannot convince you to save more money, how can you be sure that an app can do it? Our brains are typically structured along a number of multi-system lines. Most of what we do is already automatic. We have to try and access the part of our brain that deals with our conscious self. There is a need to become totally aware of the consequences of our daily financial decisions.
How can personal behavior affect your financial decisions in life?
It may not be a surprise for most of us that there are indeed a number of ways that personal behavior can sabotage your financial efforts. One of the common biases is that we tend to overweight the present time and the future over the distant future.
In addition, an excessively optimistic individual can downplay the fact that with bad financial decisions, bad things can happen. Studies have shown that the population of our planet today are more directed toward excessive optimism. As a result, the majority of the population are not clearly thinking of the risk of any financial crashes in the stock market, or that they are not convinced that they should get life insurance.
The confirmation bias is the tendency of an individual to shut off their hearing aid to someone who is trying to tell them something that they do not want to hear. For example; if you have carried a high balance on your credit card for so many years now, and all of a sudden, somebody told you that this isn’t good practice, there is a high chance that you will not change anything.
Lastly, the loss aversion is an individual’s tendency to experience a certain loss more acutely than a gain that is of the same magnitude. It could mean that this individual does celebrate when something good happens; however, if something terrible happens, it really sticks with them.
The average person would experience loss at least three to four times as compared to a gain of the same magnitude. As a result, anyone who has had this kind of loss aversion behavior tends to develop a certain attitude toward their financial decisions. They close themselves up to the idea of investing or become more shy about taking any kind of financial risk.
In the end, apps cannot change how you act toward handling your finances. If you want to get out of a debt, you should practice discipline within yourself. There is simply no single app that will help you get out of your financial rut.