Using AI-powered tools, you can create a budget in seconds and generate custom reports that show you exactly what you want to see. However, AI can’t effectively plan and track your spending, and privacy concerns can outweigh the benefits. In this article, we’ll look at some of the new ways people are using AI to manage their money, and I’ll share some pros and cons.
How AI is changing budgeting
Budgeting hasn’t seen a major upgrade since apps started automatically syncing your bank transactions. That is, until now, with AI changing the budgeting landscape.
AI-powered financial apps seem to be popping up everywhere, from AI chatbots inside traditional budgeting apps to using your favorite LLM to budget. ChatGPT has even introduced bank account syncing, which allows you to ask it questions about your account in a conversational way.
For example, you could connect your checking account, then ask, “How much am I spending per month on subscriptions?” and it will analyze your transactions and give you an answer. AI can also analyze your transactions and generate charts and graphs, allowing you to view your finances.
Pros of Using AI to Manage Your Money
It’s easy and fast
AI can now connect directly to your bank account, view all your transactions, and create a budget for you almost instantly. Some models can even output an Excel spreadsheet for you to use as an ongoing budget.
Even if you use a traditional budgeting app, you could quickly use an AI tool to categorize the past few months’ transactions and get a running start on a workable budget. Or, you could upload years’ worth of bank statements and get an average spending in dozens of categories.
Before AI, these were tedious, time-consuming tasks. Now you can finish them in seconds.
It can forecast
AI can analyze your past spending habits and generate forecasts, helping you spot patterns you missed and focus on facts rather than emotions.
For example, you might promise yourself that you’ll spend less on Amazon (my personal nemesis) going forward, and have that affect your forecasting. But AI won’t discount those purchases; it will work with your actual numbers.
AI tools can also run forecasts with proposed changes. For example, it can show you what your budget would look like if you increase your 401(k) contributions or buy a new car.
Customized reporting
AI can make charts and graphs from your actual numbers, tailored to what you want to see, and you can ask for them in conversational language. For example, it could create a bar graph showing you all of your food costs for the past year. Or you could take it a step further and ask it to show you your total spending this year compared to last year.
The best part is that you can build these charts without any special skills. You can just tell the AI exactly what you want to see and then change it at will.
Cons of Using AI to Manage Your Money
Privacy concerns
There are risks to uploading your personal data into AI chatbots. It’s difficult to know exactly what companies such as OpenAI or Anthropic are doing with your information. Even if you change your settings to make it more private, you are still giving very sensitive information to large corporations.
If you choose to do this, remove any identifying information, such as your name and account numbers, before you upload. Also, if you can, opt out of having your chats used for training purposes.
Custom budgeting features aren’t free
Today, there doesn’t appear to be a free option to use an AI tool to build you a budget from your actual transactions. If you want a custom AI-powered budget, you’ll either need to be on a paid plan with an LLM or pay for an app that uses AI to create the budget.
You can upload your transactions manually for free, but there are no free tools that will pull them automatically. And remember, if a tool is free, then you are the product. If you are using a free budgeting tool, look into what the company is doing with your personal financial information.
Doesn’t help you make decisions in the moment
AI is great at analyzing what has already happened. But it’s our current decision making that affects our finances the most. AI can look for patterns and give you averages of past spending, but that doesn’t help you decide if you can dine out or if you should just cook at home tonight.
Financial management apps like Lunch Money are much more effective at helping you plan and then track your spending. Knowing what happened in the past is a great starting point, but it isn’t actually budgeting.
Can provide bad advice
AI will happily hand out advice on your finances, but financial decisions are about more than just the numbers. A decision might make general financial sense but be totally wrong for your life.
For example, should you take a vacation? Purely from a financial standpoint, vacations don’t make sense. But, of course, they are wonderful additions to many people’s lives. If we only make financial decisions based on the numbers, we’d all be sitting in the dark, eating rice and beans.
Plus, always keep in mind that AI can just make up an answer at any time. LLMs work by giving you an example of what an answer to your question would look like, not necessarily the actual answer.
The bottom line
AI tools are making it easier to manage your money, and they can be highly effective when you incorporate them with a dedicated budgeting platform, like Lunch Money. But AI has its limitations. It’s not effective at helping you plan and track your spending, it can make errors and provide bad advice, and there are always privacy concerns.
Lunch Money, on the other hand, is a powerful financial management platform packed with features that help you stay in control of your budget. You can plan and track your spending to ensure you are making progress towards your goals.
Pairing true budgeting apps, like Lunch Money, with the data processing power of AI may be the best of both worlds. Let AI give you insights while staying firmly in control of your own finances.
Lunch Money pulls in your transactions and can automatically categorize them as they come in.
And unlike many LLMs, Lunch Money protects your privacy. We only collect the data required to provide you with budgeting services and will never sell your info. Lunch Money isn’t a giant corporation with no soul. It’s a bootstrapped, single-owner business that cares deeply for each and every customer.
