The struggle is real!
Personal finance has become one of the biggest concerns for families all over the world. According to the OECD, the household savings rate has declined in all major economies in the past decade or so. Whether it's the millennials or the Gen-Z community (who are just entering the workforce), a healthy savings habit and a debt-free existence have become a major life goal.
Yet, this is a lot easier said than done. Here's why:
Social Media-Driven Lifestyles
Lifestyles, today, are making it increasingly difficult for people to stay away from debt and save money. The film "Keeping up with the Joneses" takes on a whole new meaning when you're constantly seeing the exotic locations your friends are traveling to, the latest restaurant they're eating at, or the expensive designer bag they just purchased.
Instant gratification has become the norm, and many young people find it hard to opt-out of this sort of competitive and impulsive spending. The result is simple: far too much debt and little to no savings.
Too Much Information, Not Enough Solutions
There is no dearth of information to guide people on how to save more, spend less, and retire at a reasonable age. Unfortunately, a lot of this information becomes noise, distracting consumers, and making it impossible for them to focus on one financial goal. In this time-strapped world, people are unable to buckle down and focus on their finances and find the right solutions in the sea of information.
Traditional Apps Don't Work as Well
Traditional budgeting apps are of little to no help. This is because they're more concerned with documenting and monitoring of financial decisions. They aren't able to give consumers crucial advice at the right juncture. All the decision-making is still left solely at the discretion of the user, which makes the use of these apps very limited.
This is precisely where cutting-edge technology comes in. Fintech companies across the world are now using Big Data and Machine Learning algorithms to build apps that can guide consumers through their struggles with personal finance, helping them come out on the other side. Here's how:
AI-powered apps provide customized solutions to users' personal finance struggles. For users that struggle with debt, these platforms issue a line of credit, which means that users can enable the app to make credit card payments for them, and then charge a lower interest rate. Some platforms (like Reap) even provide an interest-free window of 30-50 days, enabling users to manage their cash flow better.
They also partner with other businesses, from e-commerce giants to utility companies, to enable their users to access deals and discounts, thereby encouraging savings.
Moreover, because these apps have insights around the users' income, credit history, spending habits, buying patterns, etc., they're able to warn them about potentially high rates of interest and give them advice on how they can reach their savings goals. In the case of Reap, users receive optimal payment dates for specific expenses as well as payment monitors on how much a user is spending on a particular expense, which does a lot of the heavy lifting for those who aren’t able to build their own custom dashboards.
One Comprehensive Platform
Another great thing about AI-powered personal finance apps is that they provide customers with a single platform through which they can conduct all their financial transactions. This is a great starting point because it means that users don't have to manage multiple apps and platforms anymore and can look towards just one tool for all their personal finance needs.
This plays a big role in cutting out all the noise and clutter and allowing users to buckle down and focus on fixing their finances.
The Perfect Middle Ground
One of the only options people struggling with personal finance is to go to a financial adviser.
On the one hand, financial advisory services can be quite expensive, and people who are already struggling don't want to cough up even more money. At the same time, a lot of people feel a sense of shame about their financial situation and aren't always comfortable sharing it with another person, even if that person is a financial adviser.
AI-powered financial apps are the perfect way out. These apps use tools like NLP(Natural Language Processing) and advanced data visualization techniques to give users access to personalized advice and guidance. They provide the convenience and anonymity of an app but with an unprecedented level of personalization and customized advice.
As these apps become more and more sophisticated, they will also focus on imparting the human touch in all their interactions with the users.
If you want to learn how to take advantage of powerful data visualization tools for yourself, start off with Xccelerate’s Tableau course in Hong Kong.
Personal finance is a real struggle for people across the world. In the United States, for instance, people die with up to $61,000 in debt on an average. And the situation is similar, if not worse, in other advanced economies. It's not just about the debt either; it's also about the psychological toll it takes and how it limits people's lives. AI and Big Data-powered tools are a great way for people to finally take control of their finances and find their way to financial freedom, one good decision at a time. If you are just getting started, don’t worry: there are courses in Data Science and AI that can help you stay on top of tech trends and make the best use of data for your personal finances.