Understanding personal finance
First things first: what exactly do we mean when we say 'personal finance'?
Personal finance is a term that describes how you manage your money: how you earn it, borrow it, spend it, save it and invest it.
Personal finance can be thought of as a series of financial decisions. When the right choices are made, these decisions put you in a better financial position and enable a higher level of comfort, freedom and quality of life.
There are two main ways to increase your chances of making the right personal finance decisions: seek professional financial advice, or improve your financial literacy by educating yourself. Consulting with a financial planning professional is always a wise choice, but the recent rise of AI chatbots means self-education is now a more accessible option than it used to be.
AI and machine learning
On a very basic level, artificial intelligence and machine learning (a subset of AI) are technologies that ingest huge amounts of data, analyse it to identify patterns and trends, and then use the resulting insights to answer queries and draw conclusions that can sit well beyond the scope of the original data set.
This means that AI can process financial information and turn it into actionable guidance that is personalised to a user's unique circumstances. By telling an AI chatbot like ChatGPT a little bit about your financial situation, you can get the tool's help to review your spending patterns and habits, to identify better money management techniques, and even find investments or saving accounts that could help you reach your financial goals.
Another option is a personal finance management tool. Apps like Quicken Simplifi, NerdWallet and Rocket Money are purpose-built, AI-powered tools that analyse your spending and saving, and generate insights into how you can improve your habits. These tools are often built right into modern banking apps.
For anyone interested in ways to better manage finance, these technologies represent a huge step forward. But how exactly do they work, and what exactly can they do?
How can AI help with personal finance?
AI-powered chatbots and personal finance managers can improve your money management in a few different ways.
Automated expense tracking
AI-powered expense tracking apps can track your spending in real-time, and automatically categorise every transaction into easy-to-understand buckets like bills, food and beverage, entertainment, transport, health and retail. This can give you a clear and concise picture of your spending patterns, help you improve your financial literacy, and identify areas where you're spending too much.
Many bank and credit card apps now include expense tracking as a standard feature, often as part of an AI financial assistant or robo advisor. Alternatively, you can download a dedicated AI personal finance app that may offer a few more financial management features.
Debt management
Debt management is a critical part of personal finance management. By strategically borrowing money you can significantly improve your financial position: you can finance an investment, start a business, or give yourself the tools you need to succeed, like a car.
But these opportunities can only be realised if you manage that debt responsibly, and pay back those borrowed funds in good time.
Once again, AI is here to help. You can use AI chatbots and tools like Debt Payoff Planner, Undebt.it and unbury.me to optimise debt management strategies based on your specific situation. These apps can create personalised debt repayment plans that can tell you exactly what to pay and when to pay it.
Saving money
In personal financial management, how you save money is just as important as how you spend money. It's a challenge to save money, but with the help of some AI-powered financial management, you can start to save more effectively than ever before.
A big financial management tripping point for many Kiwis is the temptation to spend money if it is readily available. One way to make spare cash less readily available is to automatically save money using AI-driven algorithms. Many banks and third-party apps offer automated saving, rounding up every purchase you make and putting the extra money aside in a savings account.
There are a number of AI-powered apps and financial assistants that encourage good saving habits and provide financial advice on how much you can afford to save based on your earnings and spending habits.
Budgeting
The best approach to personal financial planning is to understand exactly how much you are able to spend before you spend it. Proper budgeting makes money management simple - all you have to do is work within your spending limits.
AI-powered financial assistants offer everyday people a revolutionary ability to manage finances by analysing earnings, spending habits and financial goals, then generating a budget that works for you. MoneyLover, Booster mybudgetpal and You Need A Budget are a few of the best.
Credit score improvement
The health of your credit score can have a huge impact on your long-term financial prospects. A bad score means that you may not be able to borrow money when you need it, or you may need to pay more for the pleasure of borrowing, whether to buy a car, invest in a property or start a business.
Apps like Yonda and Centrix let you quickly and easily check your credit score, and then offer up customised recommendations on how to improve it. You can even tell the AI your specific financial goals, and it will craft a plan to improve your credit score to whatever degree you need.
By taking a more proactive and AI-powered approach to managing your credit score, you give yourself the chance to borrow the money you need at a better interest rate.
The bottom line
The potential for AI is huge for anyone looking to improve their approach to personal finance. Between spending, saving, budgeting and borrowing, AI has the ability to enhance every aspect of money management.
Whether you automate the boring aspects of personal finance or get an AI-powered robo advisor to guide you towards your goals, technology can make financial management simpler, more efficient and more effective.
The tech is there. A lot of it is even free. It's up to you to capitalise on it.
Not quite ready for a conversation with an AI-powered robo advisor? Do not worry; our network of 25 branches across New Zealand means we have plenty of people ready to chat with you when you are ready!
And once you have your personal finance house in order, we're here to help you take the next step.
At Instant Finance we're the Makers of Possible: we offer quick, easy and custom-crafted personal loans that give you access to the money you need, right when you need it.
Apply now to secure the finance you need to make your dreams come true today.