Managing your personal finances can feel overwhelming. Between paying bills, trying to save, and paying off credit cards and other debt — it can be easy to wonder if you’re doing everything right.
There are many tools available that can help you and make personal finance feel more doable. One of the newer options that people have turned to is artificial intelligence (AI). AI tools and chatbots can help you spot patterns, get organized and build a plan.
While AI can be genuinely helpful, it’s important to acknowledge the risks. AI tools can “hallucinate” which means they may give you false and incorrect information and present it as fact. That’s why it’s best to use AI as a helper, not a financial decision maker.
How you can use AI to help with your personal finances.
1. Learn the basics of personal financial management.
Many people were never taught personal finance. Even now, only 30 states require that a stand-alone course be taught in school, and up until a couple years ago that number was only 11. Most people have simply had to figure it out on their own, all while keeping up with bills and trying to keep life moving.
This is an area where AI can help. It can help explain concepts like annual percentage rate (APR), cash flow, budgeting and more. It can help explain how only making minimum payments can keep you in debt longer and how credit scores work. It can put these concepts into plain language that’s easier to understand.
Just remember to double-check anything specific, like rules, fees and other details. AI can be a tutor, but not a financial advisor.
2. Get help with your budget.
AI can help you create a personalized budget. By sharing your income, bills, spending and savings goals, it can help you build a simple plan you can follow. Start by gathering all your monthly totals and prompting the AI to categorize them into things like essentials, flexible spending, savings and debt repayment. From there it can help you set weekly spending and savings targets, making it easier to keep track as you go along.
AI can also help you make your budget feel more manageable. You can use it to help you identify ways to cut back on spending, build a meal plan that will help reduce grocery costs, or create a strategy for handling unexpected expenses.
Keep in mind that you should never share sensitive personal or banking details with an AI chatbot. Avoid uploading bank statements or screenshots, Don’t share account numbers, routing numbers, login info, full credit or debit card numbers, or anything that could be used to access your accounts. Instead, type in the numbers you need, like spending totals by category or your monthly income.
If you’re looking for more automation, there are many AI-powered budgeting apps that can help you categorize spending, track subscriptions and remind you about upcoming bills. These apps can help save time, but they’re not always perfect. Always review the categories and pay attention to what access you’re granting.
3. Create a debt management plan.
If you’re working to pay off debt, AI may be able to help you create a plan to pay it off faster. Provide it with the balances, interest rates, minimum payments and any other information it may need. It can help you get organized and see everything in one place.
You can also compare different payoff strategies, like debt avalanche or debt snowball. From there, it can help you estimate expected pay off dates based on how much you can pay each month and set milestones to keep you on track.
When it comes to numbers and calculations, remember to double check the math. AI can and does hallucinate and it may not be accurate.
4. Set savings goals and create an action plan.
If you want to save money, AI tools can help you turn a goal into an actionable plan. If you share how much you want to save and how much you can reasonably set aside, it can tell you how long it will take and set up milestones or break the goal up into smaller targets.
If you want to automate your savings, you can instruct the AI to set up a schedule for recurring transfers to your savings accounts and to build in flexibility for months where expenses may be higher. It can also help you prioritize multiple goals, such as building an emergency fund or saving for a short-term expense.
Remember, AI is not a financial advisor. It can help you organize and plan your financial goals, but it shouldn’t get the final word on any decisions. If you’re looking for help with things like investing, retirement planning or social security, you can use AI to generate a starting plan and a list of questions to ask a trusted financial professional.
5. Get assistance with family and household planning.
AI can help with the big parts of financial planning too. If you have a big life change coming up, say moving in with a partner, taking care of an aging parent or changing your work schedule, AI can help list out the new costs you may need to think about, and how to plan for them.
AI can also help you compare options, whether it’s insurance plans, summer camps for your kids, commuting options and more. It will lay them out side by side so you can see the costs and the pros and cons of each.
Remember, AI doesn’t have the full picture of your financial life. It can offer guidance but it shouldn’t be taken as financial advice. When it comes to big decisions, think of it as an AI assistant that is helping you get organized so you can make an informed decision.
6. Find patterns in your spending habits.
Using AI to identify patterns in your spending habits can help you identify trends in your spending habits that otherwise would be easy to miss. If you give high-level totals in each category or a short list of purchases with descriptions, it can help you see what’s taking up the most room and your budget.
You may see that spending starts off high in the early part of the month, or that it spikes on weekends. Or you may see that you’re overspending in one area, even if the individual transactions aren’t that much. With these insights, you can more easily find ways to strategically reduce spending.
The goal isn’t to judge your spending, but instead to create a plan that helps make sure your spending is aligned with your goals. Remember, don’t share bank statements or other personal information. Just keep it high-level and double check the math if something seems off.
What are the risks of using AI for personal finance?
AI can make money management a little easier, but it also comes with risks. Here’s what to watch out for when using ai-powered tools:
Incorrect information. AI can hallucinate and provide incorrect information presented as “facts.” This could be a number of things such as miscalculated numbers or incorrect information about rules, fees or credit score factors. Always be sure to double check the details.
Missing context. AI doesn’t have all the context it needs about your financial picture. There are too many factors that go into managing your money, especially with things like variable income or emergency expenses. So, it may not always provide responses that fit your financial situation.
Overconfidence. Even when you provide an AI with details and the responses sound tailored to you, AI isn’t a financial advisor and it can’t give financial advice. It should always be treated as a supporting tool. If you’re looking for personalized advice, reach out to a certified financial planner or other financial professional. You may be able to find opportunities to connect with them through your community.
Privacy and security. Sharing sensitive information like bank account numbers, card numbers, or statement screenshots on the internet can increase your risk for identity theft or fraud.
Outdated information. AI systems may rely on information that is outdated or generalized. When comparing offers from banks, credit card providers or lenders, be sure to confirm all the details with the financial institution.
What are the best practices for using AI for personal financial planning?
Using AI for personal finance works best when you use it as an assistant and not to make final decisions. Here are some best practices:
Use AI for planning, not answers. You can ask AI to help you get organized, compare options or brainstorm ideas. Anything that directly affects your money should be double-checked and verified.
Start with real numbers. The more context you can give an AI about your financial picture the better the responses will be. Pull totals from bank and credit card statements, don’t use estimations.
Ask the AI to show its assumptions. You can ask the AI to show a list of what it’s assuming when formulating its responses. This could be things like when you get paid, when bills are due, or APRs. This way you can make corrections if you need to.
Use multiple sources for big decisions. AI can help you get started, but you should also be confirming details with your lender or bank, and it can be helpful to talk to a financial professional. Especially for things like retirement planning, taxes or investing.
What are some good personal finance prompts for AI?
To write a good prompt for an AI chatbot, you should start by telling it what you want, then provide the context it needs and then ask it to give you a step-by-step output to review. It can also be a good idea to instruct it to ask questions instead of guessing. Here are a few prompts that may be helpful.
I’m building a monthly budget. I’ll provide my income and monthly totals for bills and spending by category. Ask any questions you need first, then recommend a realistic budget and break it into weekly spending targets.
I want to save $___ . Here’s what I can save each month $___. Create a step-by-step plan, and include a backup version for a tight month. Include how long it will take me to reach my goal and give suggestions on how I can reach it faster.
Here are my debts with balances, interest rates, and minimum payments. I can pay $___ per month total. Create a payoff plan and estimate a timeline. List your assumptions and don’t guess missing numbers.
My work hours are getting reduced. Help me figure out what that means for my monthly budget. Ask clarifying questions first, then list the expenses I should review, suggest where I can adjust spending if needed, and create an updated budget plan that prioritizes essentials.
What are some good AI-powered personal finance tools?
There are many AI-powered apps and tools available. The one that works for you will depend on what kind of financial help you’re looking for.
Chatbots. Tools like ChatGPT can help you do things like plan your budget, create a savings or debt repayment plan, or basic information for financial education purposes. Be sure to verify any facts and always protect your privacy.
AI-budgeting assistants. Some budgeting apps, like You Need A Budget, use AI and machine learning to help categorize spending and identify trends. You should always review how the app categorizes transactions to ensure it’s correct.
Subscription tracking and bill management apps. Many budgeting apps also help you track subscriptions and manage your bills. They can identify recurring charges and help make sure you know what you’ve signed up for. In many cases they can help you cancel. Some apps may also be able to help you lower your bills, though this may be a premium feature.
DISCLAIMER: This content is for informational purposes only and should not be considered financial, investment, tax or legal advice.
