How AI Is Redefining Personal Finance: Smarter Investments, Safer Decisions

Introduction: 

When I got my first job, I was elated. My colleagues and I ran through a couple of our first pay cheques. We lacked knowledge of managing our personal finances. It was a concept we were oblivious to. 

However, I quickly observed how many of our senior colleagues nearing retirement were struggling with their personal finances. Most had children about to go to college, yet lacked any form of savings or funds to support them. Things were so bad for most that they would jump on an opportunity to work beyond retirement age.  

And so it hit me all at once, the importance of personal finance-something I later explored in depth through platforms like MrMoneyFrugal. The quality of the life we would live in old age is determined by how well our personal finance was managed in our youth. Health, relationships, and success in life are heavily dependent on our personal finances. 

I came to understand that the ability to track my monthly expenditure, put aside a percentage of my income for savings, and invest in an index fund, among other things, will determine the quality of my life.   

The question is, did the revelation of the importance of taking personal finance as a priority equal how quickly I began to take positive actions? Of course not. There are so many reasons why you and I do not take charge of our personal finances, 

Why Do People Miss The Important Things About Finance 

• Cumbersome Data: Managing personal finances often requires sorting through data that is often cumbersome. Collation of the data around personal finances can even sometimes be a much more weighty business than actually analyzing it.  

• Time-Consuming Activities: Imagine you have to create a budget for your spending every month, file and keep all receipts of purchases, and sort through the prospectuses of potential companies you want to put in some of your savings. The entire system is time-consuming, and as such, most people do not even bother.  

• Complicated Reports: The ability to read financial reports requires a level of education. It can be hard, especially for those who are poor at mathematics. We would rather just skip the whole process of personal finance rather than be burdened with learning how to do it. 

Despite these obvious barriers to managing personal finance, I did great, and so did many. There is a possibility you did, however, for the most part, many do not. All you need to judge the financial habits of people is how well they are doing. Indeed, there are external factors that influence wealth distribution and financial stability; still, some responsibility falls on individuals to sort out personally. 

Fortunately, the advent of AI has brought down many of the walls preventing the proper management of personal finance. Today, even those without prior experience can excel in high-level finance management with the right tools.       

How AI is changing Investing and Personal Finance 

When it comes to personal finance, budgeting and tracking of my income are two very important tasks I must do, like most people. As mentioned in the previous section, they can be cumbersome and complicated. I did them anyway.   

Now with AI, I can do both faster. With ChatGPT, all I need to do is simply feed it a prompt explaining exactly what I need done- real data of income, my expenditure list, and directions on how much to be set aside for savings and investment. And in less than 1 second, I would get back a well-rounded budget. 

For tracking my spending, I had a pick of several AI-powered platforms like Walnut Money Manager. Armed with this tool, a large chunk of my time is saved, and a complicated process is made simple. At the end of each month, I knew for certain how much I had overspent on street food.  

As for investment, AI helped solve three major problems: research, analysis, and prospecting. Earlier this year, I was looking into investing in a mutual fund. Ordinarily, I would have had to go through a 90-page fact sheet.  

I uploaded the document into ChatGPT’s Advanced Data Analysis, and in seconds, I got all the required information I needed to make an investment decision.  

Analysing investments before AI and now 

Analysis of investment is dependent on the type of investment. Irrespective, the process before AI required a whole lot. First, you have to know exactly what you are looking for. Get the right documents, analyse the information therein, and then make a decision.  

When it comes to investing in the stock market, the process looks something like: 

• Follow editorials to know what companies are going public 

• Visit the BSE or NSE to download the prospectus of the company 

• Combed through the data, which covers a whole range of topics, including the financial statements of the company 

• Study the industry the company exists within 

• Follow the issue price, Grey Market Price, and other information 

• Analyse data along the way, and then make a decision to buy or not 

The steps above are an over-simplification, as they are very taxing, which is why the ordinary investor relies on experts to do their analysis and simply shadow their action or buy their consultation.  

Thankfully, each of these steps requiring analysis can be done with ChatGPT, right on the bed before leaving for work. Trading platforms also have integrated AI to aid analysis and present information to users. Summarily, AI has made things much easier.  

Human Errors Vs AI Errors: Who Wins 

Across all financial platforms where AI is used heavily, there is always a fear of glitches, that sudden spike that makes the market lose a whole lot of money, or makes unholy gains. Incidents like these have happened before. However, it begs the question, which is worse, human or AI errors? 

I would be frank. Most human errors would not be made by AI, due to the incomprehensible amount of data AI analysis. Rare mishaps here and there are nothing compared to the level of accuracy AI operates on. Fortunately, AI tools are constantly upgraded with better models being released. Hence, the margin for error keeps closing up.    

However, before AI, human error abounded, and at a level of productivity and accuracy that is not up to that of AI. Therefore, in any conversation about error, human error is worse compared to AI errors.                                         

How will AI redefine Personal Finance in the time to come? 

The future of personal finance is only as bright as the future of AI. Most activities will become automated. From simple tasks like saving, budgeting, and spending to more complex activities like Investment, ease, accessibility, inclusion, and growth would be the order of the day. 

On the flip side, the risks of depending on AI still remain. Experts have warned of some sort of apocalyptic event that would be catalysed by AI. Everyone being plugged into a system that has been built to act sentient should be a source of worry. A single mishap, and the finances of entire nations can come crumbling down. 

Conclusion 

The excuse for shunning proper management of finance because of how complicated or daunting it is is gradually being taken out of the way. In this article, I made sure to mention perhaps the most popular and accessible AI tool, ChatGPT, which can be used by anyone. There are tens, if not more, of finance-specific AI tools you can subscribe to. AI is redefining personal finance. Embrace it.