When it comes to money, the benefits of technology are undeniable.
Technology has the power to cut out the mindless tasks that were previously central to personal finance. And those benefits come in the form of added time to pursue more important or more fulfilling matters, as well as increased control over financial decisions.
But technology can also change the way you view money. It can encourage your need for instant gratification, and if you depend too much on technology, you can end up making bad decisions, like overspending because apps or websites influenced you to make impulsive purchases.
And if your reliance on technology becomes too great, it can be difficult to disengage. That’s why it’s important to be mindful with your money.
Dr. Mike Brooks, a licensed psychologist and licensed specialist in school psychology, introduced the idea of Mindful Engagement with Technology (MET). Essentially, the idea is that we strictly use technology to achieve specific goals, then disengage with technology.
“[Phones] are a tool to be used for accomplishing tasks,” Brooks wrote earlier this year in an article for Psychology Today. “We have a purpose in mind, use our phone for that purpose, then we put the phone away. The premise is that, through a Mindful Engagement with Technology, we can be happier and more productive. In essence, we can get our needs met through MET.”
Technology can be a great financial tool. There are now dozens of apps and services that help you be mindful with your money. You can track your finances, prevent overspending and there’s even apps that help you pay down debt.
When used properly, technology can remove some of the emotion that lurks behind financial decisions — and that can help you stay mindful with your money.
The key is finding ways to ensure technology is a positive influence on your life, while remaining aware of your actions and mindful of your money.
OSOM isn’t always awesome.
“Out of sight, out of mind.” This concept comes with a few drawbacks.
The more you use electronic payments — debit cards, credit cards, even apps like Venmo that send payments — the more you’re removed from your money. That separation can make you less mindful of how much you’re actually spending, compared to using cash.
Take credit cards, for instance. Research shows that consumers are willing to spend as much as 83% more when paying with a credit card instead of cash, according to a report from ValuePenguin, and credit card usage is steadily increasing across the board.
Think about it: When you pay for something with a $20 bill, you’re much more aware of how much you’re spending because you see the cash with your own eyes. But when you hand over a credit card, the weight of your decision and how much you’re spending isn’t really there.
The money becomes less real, and how you measure the value of something like a restaurant meal become distorted.
Let’s say you’re heading out for dinner with friends and only have cash on you. In this case, you’re much more aware of how much you can afford to spend. The physical cash reminds you how much you have on hand. Without that reminder, you’re much more likely to spend beyond your budget.
On the other hand, paying with plastic is often convenient and comes with added benefits, like building credit, earning points and even getting cash back on credit card purchases.
A boost in your credit score can help you save money in the long run, and those credit card rewards are usually as good as cash.
So where do you draw the line? You’ll need to figure out what works best for you, but a good strategy incorporates both cash and credit, each used in certain spending situations.
Purchasing a flight to a wedding on the other side of the country? Put it on your credit card. You’re spending that money regardless — just beware of the potential impulse upgrades! Going out with your co-workers? Budget ahead of time and bring your desired amount of cash. You can even go as far as leaving your credit card at home, but it’s usually best to have money on hand in case of emergency.
Technology can be your ally …
One of the greatest benefits of technology is that it can help automate the tasks you don’t enjoy or avoid altogether. Automation can greatly reduce the effects of things like decision fatigue, and that keeps you sharp for the things that matter most.
For example, say you want to set aside money every month for an emergency or rainy day fund. Instead of logging into your bank account every month and deciding how much to save, you can set up an automatic payment from your checking account to your savings account.
Even easier, you can use a dedicated savings app that automates the entire process for you. That way, you make the decision once and know you’re setting money aside without any additional work.
“The whole ‘set-it-and-forget-it’ model is great when it comes to saving money,” said Bethy Hardeman, a personal finance expert at Tally. “You only have to make that smart decision once. Then, an automated service can continue making that smart decision for you, so you can focus on other things — while still being mindful of your money.”
Now, let’s say you’re in credit card debt. You can leverage automation so that you’re automatically making payments toward your balance every month. If auto-pay isn’t your thing, there are apps (of course) that ensure you won’t forget to pay your bills and fall further into debt.
And that one-time decision can pay off big time.
… but don’t be afraid to use your brain.
Something else to consider is the role apps and services play in helping you assess your overall financial situation.
There are many tools out there that help you create an accurate budget by tracking your spending and comparing it to your income. Some track your spending automatically by scanning your bank accounts and credit card usage and categorizing them. All you need to do is to log in and monitor your activity.
“The whole ‘set-it-and-forget-it’ model is great when it comes to saving money. You only have to make that smart decision once — while still being mindful of your money.” — Bethy Hardeman, personal finance expert at Tally.
Let’s say you’re looking for ways to cut back on your expenses because you’re trying to set aside money to buy a home. You sign up for a budgeting app to track your spending for a month or two. After a few months, you notice you tend to spend a lot on dog food at a specialty pet store.
After some research, you compare prices and find that the grocery store down the street offers the same brand at a much lower price. (This scenario doesn’t need to take you a long time, but technology won’t do it all.) Then, take the difference you saved and set up automatic payments to go toward your savings account.
Instead of using pen and paper to track — and possibly getting frustrated in the process — websites and apps work hard in the background. You’re just there to reap the benefits.
In fact, you can make decisions about spending and saving within minutes, preventing decision fatigue and feeling better about action steps you’ve taken to improve your financial situation.
Make technology work for you.
Technology can be a great tool to assess and reconfigure your financial situation. Imagine how it would feel to be able to pay off all your debt, save up for a house or that next vacation.
Pretty nice right?
When used the right way, technology can free up your time by handling the grunt work and refocusing your time and energy on other high-priority tasks.