Smartphones have wrought remarkable changes to our way of life in just a few short years. Need a ride somewhere? There’s an app for that. Too tired to cook dinner? There’s an app to supply takeaways direct to your door. Need cash in a hurry? Undoubtedly there’s a pay day lender lurking somewhere with an app for this also.
Mobile apps span the full spectrum of needs. However, a UK study confirms that convenience apps can have a negative impact on our finances.
What are “convenience apps”?
First, let’s clarify exactly what is meant by convenience apps. They’re the phone apps that let you order takeaway food without the need to leave home, or those that get your laundry done and returned to your home. Convenience apps also include those that let you avoid ten minutes at the bus stop and head straight to your destination via private car.
And in my books, convenience apps also include the ‘buy today, take home today, pay later’ apps that have left traditional lay-by looking a little…well, less instant.
Overspending is easy
According to one UK survey, 76% of respondents said convenience apps make it easy to spend more than they wanted. Seven out of ten made no allowance in their budget for spending via convenience apps, and around one in five have no idea how much they spend each month on convenience apps.
These responses are all red flags for the impact convenience apps can have on our financial wellbeing. And I suspect the same survey results would apply here in Australia.
The findings aren’t really all that surprising. I’ve encountered plenty of other research that shows the more we become detached from cash transactions, the more we tend to spend. And, the harder it is to keep track of what we’re spending.
The solution? Stay in touch with spending
The solution is not always to abandon convenience apps altogether. The key is to go back to basics, and keep a monthly budget. That said, the days when we could track all our spending by looking at receipts and invoices could be over. Your bank account, credit card statement and even PayPal account may offer more realistic insights.
On the plus side, plenty of apps can also help you manage your spending. Just be sure to include spending made via your digital wallet.
However, there’s nothing like the mentorship of a financial adviser to guide you through a personal budget – and help you stay on track. In my experience, just having someone to answer to can be the thing that makes us think twice about off the cuff spending.
If your regular spending is starting to blow out, take early action by speaking with your adviser. He or she may suggest that you consider sticking with cash – for a while at least. It can be good advice as it provides a clear picture of where your money is really going.
– by Paul Clitheroe AM
Paul Clitheroe AM, co-founder and Executive Director of ipac securities limited, Chairman of the Australian Government Financial Literacy Board and Chief Commentator for Money magazine.
Online source: Produced by AMP Life Limited and published on 16 March 2018. Original article.