For many of us, personal finance just means performing arithmetic. The traditional attitude to tackling our money encourages us to treat income, spending, savings, and debt as targets to be set during abstract calculation. Once we’ve set our targets and made sure they’re viable, we then make changes to our lifestyle so as to follow the budget we’ve set for ourselves.
Personal finance apps like Money Dashboard or Yolt succeed amazingly in helping us to quantify our spending and track our spending habits through numbers. These track values that are easy to quantify, like totals of income and spending, and organize them to help people set budget goals and notify them when they overspend. These apps help people set gamified targets for themselves - such as paying off debt by a particular date, or accruing a specific savings total ahead of a deadline. If human beings were entirely rational, such a quantity-focused approach to personal finance would be perfect. But human beings are not entirely rational.
Emotions have a major role to play in how we save and spend: they are often the ultimate reason we’re motivated to pursue our financial goals in the first place, while also often being responsible for why we fall short in meeting our financial targets. With four in ten adults now missing multiple credit payments, the issue of managing personal finances is growing more and more pressing and it’s clear the current arithmetic-heavy approach isn’t fit for our needs. We need a more nuanced approach to personal finance, which should involve taking into account our emotional states and how they correspond with our financial habits - how we feel about certain purchases, what our emotions are when we spend on certain things, and how we can feel motivated to follow through our spending habits
Thankfully, new technologies that are hitting the market promise a future where personal finance apps can follow this nuanced approach. Through understanding the relationship between our emotions and our spending, these apps can help people set and maintain realistic financial plans while also improving their quality of life.
There are many innovations that will help the next generation of personal finance apps break into the mainstream. Through using AI, we can both discern people’s emotional responses through using now-ubiquitous sensors combined with AI, while also being able to use increasingly sophisticated techs like chatbots to process a user’s sentiments around their financial choices.
We’re seeing an increasing use of technologies that can be used to register our physiological and emotional states. The last decade has seen the widespread deployment of many new technologies, such as heart monitors and facial recognition tech, which can be used to recognize the unconscious and subtle signals we give of our underlying emotional states.
To understand how this can be leveraged by personal finance apps, let’s consider an example. Imagine you’re pressured into making a purchase by your friends, which you instantly regret. You’ll likely feel a range of conflicting emotions - such as shame, anxiety, doubt, and remorse - that you might have trouble making sense of at the time.
When it comes to reviewing your spending later on, you might find it hard to understand why you made that purchase and why you feel the way you do about it. However, making use of the heart rate monitor in your watch and of automated shots of your face from your phone’s selfie camera from around the time, we can then leverage AI to infer what your emotional state was around the time of your purchase.
With this information, a sophisticated personal finance app can then associate that spending decision with negative emotions, helping to nudge a person to avoid choosing a similar course of action in the future - bolstering the person’s financial decision-making, along with giving them confidence in their decisions.
Further down the road, mind-machine interfaces such as Neuralink promise to offer even more sophisticated and nuanced looks at our current emotional states. If we choose to give our devices sensory access to the brain itself, we may reach a point where personal finance apps can make detailed inferences of our motivations for spending decisions. This promises not just to help us meet our targets, but set targets with a better sense as to our motivations and to better align them with our interests. In the meantime, and to supplement this, there are other ways to help people make sense of their motives and sentiments around their finances.
Text-based therapy has been popularized through apps such as Talkspace, and there’s good reason to think we can leverage the structure of these platforms when creating new apps to make sense of our personal finances. Through integrating financial chatbots with the model provided by text-based therapy, people can be offered the opportunity to share their thoughts, feelings, and reactions in writing to their spending in a private and accessible way.
Financial text-based therapy does more than just offer people a chance to talk through their emotions around their finances, but it also allows for an opportunity to collect data around their transactions. Through extracting parsed text, hashtags, emojis, and particular phrases via natural language processing - artificial intelligence applied to the domain of human language - an app can conduct sentiment analysis of our thoughts and feelings about and around transactions. Looking at the things users explicitly say, along with how they say them, an app can help inform a user about their emotional states and how it corresponds to spending.
There’s a lot of ways that next-generational personal finance apps are going to generate data and present conclusions. However, there’s one important part of the equation that needs to be considered - how should it be presented to users to help guide their decisions?
Presenting the qualitative parts of spending
Next-generation personal finance apps will have a tremendous amount of data to present - both quantitative and qualitative - to their users. This means that they’ll have to tread a fine line between providing informative insights to their users versus overwhelming them with too much data. Creating intuitive ways to visualize data will be key to making these apps work at personalizing and delivering their financial and psychological insights.
If done right, the next generation of personal finance apps can help millions of people make better sense of their spending and tailor their financial plans to match everybody’s unique needs. More profoundly, however, they should change how people look at their finances in the first place. By helping people build their awareness of how their emotions correspond with spending, this next generation of apps will help people better understand and become more aware of their spending and saving behavior - and with themselves. Ultimately, this can help people to better align their actions with their values, their true natures, and their long-term goals.
Roxanne Ravago, Senior Product Designer, argodesign