Should you let an app tell you what to spend?

If you decide to try out personal financial management software such as Level Money, then here's what might happen

By Bloomberg News

Jul 31, 2015 @ 11:34 am EST

I just spent six weeks with an app that watched over my spending like a hawk with an MBA. I figured I needed it. I'm a personal finance reporter without a budget. Am I overspending this week? I don't know. How much do I blow on alcohol? No idea. Should I be saving more? Good question.

Silicon Valley keeps building software to help people like me keep their spending under control. Banks are getting in on it, too. They're panicked that they're losing touch with a generation of millennial customers who hardly ever visit them. I'm a couple of years beyond millennial, but I put Level Money on my phone anyway.

Level Money, which claims 800,000 downloads and was acquired this year by Capital One Financial Corp., is free and doesn't require users to open a bank account or use a special debit card. Signing up and linking it to my existing bank and card accounts was easy. It went ahead and analyzed my bank statement, picking out my paycheck as well as recurring expenses — rent, utilities, Netflix — with only an occasional nudge from me. It made a good first impression. Then it suggested:

Set aside money for your monthly savings!

OK. I adjusted a little gauge to set my daily and monthly levels of saving and spending. Already I was faintly disappointed in the relationship. How much money should I save each month? This was the very question I was hoping Level Money would answer for me.

So I guessed, and LM immediately started watching my spending and sending me feedback every few days. It was like getting texts from a creepy new boyfriend who's just a little too interested in everything you do. “Color us impressed!” it said one day. "Boomshakalaka!" it said another. Like a cyborg who still hasn't got all the human idioms down, it exclaimed:

Thundering typhoons! We're happy to share you've spent less than 50% of your weekly Spendable!

Really? I had just charged $240 for theaters tickets and $560 booking a long-weekend getaway.

"It's a good day," LM beamed at me another time. "Your bank just saw a large incoming payment!" Yes, it did! Because I had deposited a $231 check!

I decided to move some of my savings to a mutual fund. Level Money read that as spending and freaked out:

You're overspent this month!

I started spending behind its back. I almost always use cash in bars — I hate the hassle of handing over my credit card to a bartender and getting it back at the end of the night, and it's easier to tip with cash. But LM had no way of knowing how much I was blowing on beer.

I also wondered how much I was spending on Ubers and taxis, clothes, books and weekday lunches out. LM wasn't much help here, either, even though I usually use my credit card. It lets you manually categorize each transaction. That's way more work than I want to do.

The problem is largely technical. Payment systems will put transactions in a general category, such as food, entertainment or transportation, but the data are notoriously unreliable.

Personal finance site will show your spending by category, but users need to log on to correct the software's assumptions. This month, for example, my account tagged a $100 purchase as a “restaurant” transaction. It was actually made at a bike rental shop, and I don't recall a short-order cook lurking behind the beach cruisers.

Using Level Money for the simplest of tasks, checking my balance, I got a question instead:

Enjoying Level Money?

Frankly, no. After more than a month of letting Level Money live on my phone, I found I'd changed none of my habits. I had no real insight into my spending. LM did monitor my spending levels, but I was already watching my checking account and credit card balances go up and down on my bank's regular app.

There are probably people who would find Level Money more useful. In an age when it's so easy to spend with a click, some surely need extra help keeping track of it all.

“We deliver a sense of clarity,” says Level Money's chief executive officer, Jake Fuentes.

Alex Sion, president of online bank Moven, says better apps can help consumers “be mindful and in control.”

I wanted more than mindfulness — I wanted extra cash left over at the end of the month. Maybe I was buying into a fantasy, that saving can be easy. We want to magically melt away $10 here and $5 there and use those savings to become millionaires. But cutting out a morning latte won't appreciably affect retirement. Saving requires carefully weighing your priorities, day after day. Theater tickets or an IRA contribution? A new sweater or more for a down payment? It's boring and difficult, and there's no shortcut.

Even harder are the big issues that prevent us from saving. Many people either earn too little or spend too much on big, recurring expenses such as their rent or mortgage. Should you lease or buy a car? Go back to school or hope for a raise? Move to a cheaper apartment or move to a cheaper city?

For now, these questions are too complex for coders to answer.

You're heading into the weekend with $141.76 left of your weekly Spendable! Enjoy the weekend!

Level Money? We need to talk.

Ben Steverman is a reporter and editor at Bloomberg.

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