Pros and Cons to DIY Money Management

You don’t need fancy software to successfully manage your personal finances. People have been tracking expenses and income for generations with nothing more complicated than pen and paper, and you can do the same today — but do you want to?

Manually tracking your personal finances is difficult, but it can also be rewarding. If you are trying to decide whether you want to invest in a digital financial tool or whether the old-fashioned way will work, consider the following pros and cons:

Pro: Keeps You Abreast of Your Spending and Saving

When you are responsible for entering your income and expenses manually into your spreadsheets — whether they are in Excel or in a ledger on your shelf — you are more likely to be aware of your spending habits. Unlike some tools which automatically log every move your money makes, you are forced to pay attention to each and every incoming and outgoing dollar. As a result, you know much more about the state of your accounts, and you are more likely to recognize dangerous trends and rectify them before they get out of hand.

Con: Consumes Excessive Time and Energy

It cannot be understated how much time manually managing your money will take. Whether you keep your receipts and input all data in one chunk every month or whether you update your spreadsheets every time you make or spend money, it will take hours to keep your information up-to-date — which isn’t to mention the headache of organizing your receipts and account statements as you go. In contrast, money management software connects directly to your bank accounts, so you can see the state of your finances change in real time without expending any effort. If you are already pressed for time and low on energy, you might opt for a more convenient financial tracking solution.

Pro: Alerts You to Suspicious Activity

Because you put eyes on every outgoing expense on all your accounts, you are much more likely to notice when some number is wrong. Identity theft is real; in 2019, about 33 percent of adults in the U.S. were victims of identity theft, which means someone else fraudulently used their identity to sign documents or buy things. Because it is almost impossible to know for sure when your identity has been compromised, the best way to verify the security of your identity is to check your credit reports and watch your accounts for suspicious activity. The sooner you can catch a fraudulent expense, the more likely you are to get it reversed and keep your money safe.

Con: Causes Financial Burnout

Yet, when you are paying such close attention to your money — devoting hours of time and abundant energy to tracking and verifying every dollar — you are much more likely to burn out on your financial pursuits. Burnout is a mental health disorder in which a sufferer feels mentally exhausted and emotionally drained. Often, those experiencing burnout feel defeated and detached, lose motivation, develop a negative outlook and take actions contrary to their established goals. If you succumb to financial burnout, you might start spending your money wantonly, setting you back in achieving your financial goals. If you are at risk of feeling this way, you might not want to go the manual route.

Pro: Connects You to Your Financial Journey

Then again, some people don’t ever feel burnt out by the responsibility of logging their finances by hand; in fact, some feel empowered by it. Being so closely connected to your income and expenses can help you learn more not only about your financial situation but also about the financial world as a whole. Knowledge is power, and financial literacy is especially helpful in providing greater opportunities to build wealth and improve your lifestyle and wellbeing. If you tend to learn more when you have your hands on a project, you might feel inspired by DIY money management.

Con: Deprives You of Useful Advice and Tips

Money management software isn’t just an automatic tracker for income and expenses. Most financial applications also help to educate users with built-in courses on certain financial topics or tutorials for different financial tools. For example, some software walks you through the pros and cons of different budgeting styles, which can be helpful if you don’t know where to start in building a budget. As you get more advanced in your financial capabilities, financial tools can scale with you, providing resources for complex financial tasks like investing. If you like to have a coach guiding you through a new subject, it might be wise not to go it alone.

A pen and paper — or a blank digital spreadsheet — are the bare bones requirements of personal financial management, but that doesn’t mean you might not benefit from a few more bells and whistles. You can always give manual money management a try, and if it isn’t for you, there are plenty of tools ready and waiting to help.

*This is a collaborative post.