Using Mobile Apps to Curb Client Overspending

There’s a school of thought among financial cognoscenti that Americans spend too much, save too little, and don’t seem overly concerned about changing that equation.

Nearly half of Americans say their expenses are equal to or greater than their income, according to a new study from the Center for Financial Services Innovation.

And for those ages 18 to 25, the percentage is 54 percent.

"Half of America has no financial cushion," said Jennifer Tescher, president and CEO of CFSI, which released the study. "They are living really close to the edge."

Seemingly in response, Wall Street is seeing a significant rise of consumer-oriented mobile apps that help consumers better manage their money, the CFSI reports.

“This growth in mobile technology could benefit the 57 (percent) of U.S. consumers who are struggling financially,” CFSI stated.

There is a “marked opportunity for providers to create profitable products that improve people’s financial situations,” the organization said.

“Banks, fintech companies, and other providers can position themselves today as leaders in helping consumers solve their financial challenges,” Tescher explained. “Providers that do this well will be rewarded by their customers, and they will play a crucial role in shaping the industry’s future and the country. It starts with measuring what matters.”

'Helps Track Money Spent'

That’s all fine and well for financial services products developers, but investment advisors, too, can play a central role in helping clients make better personal financial choices.

More and more, they’re testing – and embracing – new digital-based money management products and steering them toward their customers to help them clean up their finances.

Savvy advisors know (or should know) that 43 percent of U.S. adults have used a “digital wallet” such as Venmo, Google Wallet or Apple Passbook, to send or receive money this year.

“One reason for the success of these payment apps is it helps track money spent, and money owed,” said Jennifer McDermott, a finder.com consumer advocate based in New York City.

Users of these apps can also choose to keep their funds in the app rather than their bank account. Keeping exactly what you intend to spend on entertainment or other frivolous activities in an app “can help curb overspending in this area,” she said.

The breath and scope of spending management apps is impressive.

Take DrnkPay, a mobile app that connects users credit and debit cards to a breathalyzer, preventing them from making a potentially regretful purchase under the influence.

“Drunk shopping impacts 43 (percent) of Americans who drink weekly,” McDermott said. “Our finder.com data also reveals inebriated Americans spend on average $206 on each tipsy shopping spree.”

A new Chrome extension called Icebox is targeted to the 88.6 percent of Americans who admit to succumbing to impulsive buying binges.

The plugin works by replacing the ‘Buy Now’ button on the Top 20 ecommerce sites and pop-up reminders on more than 400 additional stores, McDermott said. It prevents immediate purchases by putting items ‘on ice’ between three and 30 days.

Reining in 'Spend-Happy' Clients

Advisors have their own digital money management favorites when working with their “spend-happy” clients.

“We use a mobile/web-based financial planning software from RightCapital to help our clients track their spending and help them create a budget,” said Christopher J. Berry, founder of The CJ Berry Group, a wealth management firm in Brighton, Mich. “Our mindset is ‘If you don't measure it, you don't care about it.’”

“None of our clients” like the idea of creating a budget, he said. “But by using automated/online tools, we're able to create budgets on the fly that are also available on mobile.”

Overall, mobile apps can be a “great way” for advisors to help clients control their spending, said Matt Reiner, CEO and co-founder of personal finance app Wela.

Wela helps users create a “daily spend limit,” which is essentially like Weight Watchers for your budget, Reiner said.

The user enters account data, spending habits and goals. Then the app provides a baseline for how much money the user can spend each day -- after bills/rent/and other financial obligations -- and still be able to meet his or her financial goals.

Personal finance apps can also send you notifications when you're reaching the top of your budget for a specific line item, helping to curb any upcoming purchases that could send you over the top, Reiner said.

With so many U.S. adults struggling to keep their household budgets in line, digital-based spending management apps and software can come in handy for both advisors and for clients.

“They allow you to get financial advice at your fingertips, right as you're making purchasing decisions,” Reiner said. “Having constant access to your budget reduces the likelihood that you'll overspend.”

Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms. Brian may be contacted at [email protected].

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