Can AI help with your finances?
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When it comes to finances, many challenges prevent progress, but Artificial Intelligence (AI) has the tools to help solve those problems. AI has the computing power to digest great amount of information and then uses that information to answer questions and trigger actions.
Budgeting and Cash Flow
Tracking your spending can be time-consuming and sometimes feel overwhelming, but cash flow is the foundation of financial planning. Several apps automatically track and categorize your spending habits.
Understanding where your money goes each month is a powerful tool whether you are trying to stick to a budget or approaching retirement, and need a good gauge on your future cash flow needs. AI can break down your spending habits and even provide suggestions on how to reach spending or savings goals.
Users can elect to receive notifications as spending approaches the budgeted amount. While some might cringe at that, others may need that extra set of eyes to help them stick to their plan.
The safest source for this type of AI assistance will be your own bank. Providing information to an outside AI application may compromise your financial information.
Automated Savings
Some people are disciplined savers, and others need a little more help. Common barriers to saving are deciding how much to save and executing that decision. AI can remove those barriers, so your savings happen whether you think about it or not!
There are a variety of AI-based apps that can help automate your savings in a few different ways. Some apps will round up your purchases so you are consistently saving small amounts. Other apps will track your account balances and move funds over to your savings account when your checking account balances reaches a predetermined limit. AI tools can also monitor your income and adjust your savings rates in real-time.
Again, if this type of assistance would be beneficial, check with your trusted financial institution first for such services.
Investment Management
Buy low and sell high, right? Maintain a diversified portfolio and rebalance when needed. Pretty straightforward. However, sticking to these concepts is a constant challenge for investors. AI-based robo-advisors take the emotion out of investing and prevent knee-jerk decisions. Believe it or not, robo-advisors have actually been around since 2008. There are now several platforms to choose from, but they all have a similar structure that helps to build and maintain investment portfolios based on the parameters set.
Do these platforms replace the value of a human providing personalized guidance that reflects your financial situation and your personal preferences and values? No. However, robo-advisors may be a helpful tool for those investing on their own.
Credit Score
Historically, credit scores have been a bit of a black box. Will closing that old credit card improve or reduce your score? What about establishing a home equity line of credit? AI is here to help again. For those looking to increase their credit score, AI eliminates the guessing game and provides specific actions one can take to help boost their score. In addition, AI is also used to help with credit monitoring.
Fraud
Identity theft is only becoming more prevalent in today’s world. Sometimes, data is compromised through company breaches; other times, a credit card is replicated and used to charge thousands of dollars miles and miles away.
Fortunately, there are tools out there that use AI to monitor transactions and alert users about unusual charges. Taking it a step further, the chatbot that contacts you to verify a charge is also running off of AI.
Today’s technology allows AI to use machine learning to track typical financial behavior and flag transactions that don’t align with normal patterns. This could be tracking login times, locations, or other metrics that don’t align with normal, established behaviors. AI can also use voice analysis and facial recognition to verify or block individuals from logging in or accessing account information.
Many credit card companies use these programs today to prevent fraud by alerting a cardholder when unusual activity is detected.
Tax Preparation and Planning
Reviewing deductions, tax credits, and filing taxes can be overwhelming. It’s easy to get stuck in a loop without knowing how to move forward. AI is a dominant player in tax preparation. For those who file on their own, chances are the tax software is asking probing questions and prefilling the appropriate forms to properly report income, expenses, and relevant taxable events.
Taking tax planning a step further, AI can also provide recommendations that will help improve one’s tax situation. That could involve suggesting retirement contributions or adjusting tax withholding elections.
What’s Next?
It’s hard to imagine how society will use AI five, ten, and even fifty years from now. Technology is progressing faster every day, and the capabilities that AI can provide will only grow.
A note of caution: Artificial Intelligence can find and use incorrect, as well as correct, information in its analysis and recommendations. It is important that you understand and are comfortable with the AI tool’s universe of information and how the AI tool will use your information before you engage.
Sarah Mahaffa, CFP, is a Wealth Advisor at Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit their website at www.BedelFinancial.com or email Sarah at smahaffa@bedelfinancial.com.