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.
Sensing emotion
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.
Discussing sentiments
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.
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