If you’re reading Retire By 40 and other personal finance sites, then you’re probably looking for ways to improve your financial situation. The answer is really simple.

  1. Spend less
  2. Increase your income
  3. Invest for the long term

However, the execution is another story. All these 3 things are hard to do and that’s why we scour personal finance blogs for inspiration. Well, today is your lucky day. I just read a UCLA study that shows how easy it is to reduce your discretionary spending by 15%. Actually, they looked at people who had installed the Personal Capital mobile app, and that was the result. Is it really that easy?

spend 15% less just by installing an app

Mindful Spending

Smart phones are a wonderful modern device. They insinuate their way into our lives and once you start, you can’t quit. Yes, I have a love/hate relationship with my Moto X. I’m a little bit addicted to it. The phone is always with us and it’s beeping at us all the time. Anyway, let’s just talk about the nice things the Personal Capital app brings us and ignore the addition aspect for now. The UCLA study didn’t go into a lot of detail about why the subjects spend less so the following are mostly my theories.

  • Ease of access – The Personal Capital app makes it easy to check your bank account balance and the amount of available credit. This action promotes mindful spending because you can see if an item is affordable or not. According to the study, those who check their balance usually spend less than those who don’t. My theory is that just by checking your balance you’re actually delaying the action of purchasing something. You’re online so you might as well check the price at Amazon, right? After a few minutes of browsing online, the burning desire to purchase is usually doused a bit and I’d be able to put off purchasing for a day. Once I put off purchasing for a day, then I’ll only come back if I really really want the item. Heh heh, that’s how it works for me at least.
  • Constant reminder – I installed the Personal Capital app a few days ago and it’s useful for me. Normally, I go over our finance in detail once a month. That works well, but a month is a long time. It’s a bit of a pain to categorize various line items all at once at the end of the month. With the app, it’s easy because I still remember what I just purchased and I can categorize it right away. The constant reminder is also helpful to put a break on spending. I can check how many times we ate out so far this month and maybe skip going out if we already exceeded our once a week quota.
  • Cash flow – We can also see the monthly cash flow on the app. If your expense is overtaking your income, then it’s time to clamp down until the next paycheck. We usually don’t have that problem, but it’s still nice to see that we are on track for a cash flow positive month.

The UCLA researchers found that the spending reduction was in groceries and restaurants. These are the easy discretionary spending categories. You probably won’t get the 15% result if you’re already tracking your expense. We eat out once a week and that’s a good level for us. I don’t think the app will help us reduce 19% in that category. However, if you’re just starting out on the financial freedom journey, then you need all the help you can get. Most US households are terrible at controlling their expenses. The constant online feedback will be very helpful if your spending is out of control.

Here is how to get started with Personal Capital

  1. Sign up through the Personal Capital website.
  2. Link your accounts. You can link all your bank accounts, mortgage, investments, and credit cards in Personal Capital*.
  3. Link your home. Personal Capital recently rolled out the Zillow integration. You can link your home and your net worth will be updated automatically. Nice! Zillow tends to overvalue the home, though.
  4. Install the Personal Capital app – You can just search with Google Play.

*Personal Capital takes internet security very seriously and they employ multiple levels of security. Your account information should be safe. However, if you’re paranoid about your passwords, then Personal Capital probably isn’t for you.

I’m a huge fan of Personal Capital and I log in almost every day to get a quick look at my accounts. They have quite a few useful tools for investors. The mobile app is pretty nice and it helps me keep track of our spending. It makes my life easier and that’s a good thing.

Would you give the Personal Capital app a try? Do you have another app that you can recommend? I’m not an early adopter, so I don’t know all the nice apps out there.


Disclosure: We may get a commission if you sign up with Personal Capital.

Graphic credit: Economic Behavior in the Digital Age by Yaron Levi and Shlomo Benartzi



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