What Is Personal Finance Management (PFM), How Is It Used?

What Is Personal Financial Management (PFM)?

While the moniker “personal financial management” is often used to refer to ways of managing your personal finances, it is also an actual term often known by its acronym, PFM, and refers to the type of software used for personal finance apps. PFM has been around since 1983 when Intuit co-founder Scott Cook grew tired of watching his wife struggle with all the paperwork involved in paying bills by hand.

He started to explore how to simplify, or automate, the process. On his way to hang a notice seeking a programmer at Stanford University, he fortuitously ran into Tom Proulx, who had done some programming and agreed to write a simple check-balancing program for Cook that became an early version of the personal finance software program Quicken.

And that’s how Intuit (INTU) was born. The company started by building out Quicken, but it was a crowded field. Cook and Proulx weren’t the only ones seeking a solution to the frustration of juggling all that bill-paying paperwork. When Quicken launched, there were already 46 other personal finance products out there, but many were clunky and not easy to use.

Quicken’s biggest selling point was its ease of use. Because it literally mimicked a paper check, the software became widely accessible to anyone who ever had to pay a bill by check. What finally pushed Quicken to the front of the pack was a combination of positive reviews of its Apple version, a direct marketing approach, and stellar customer service.

Understanding Personal Financial Management (PFM)

Creating a software product that mimicked a hard-copy product allowed Quicken to draw in customers, and tuning into other ways that customers were using the product allowed it to keep evolving. That was a critical key to its success.

For example, once the company found that a third of its customers were using the software for business expenses, Intuit pushed out what has become today’s Quickbooks—a version of Quicken that focuses on tracking those expenses. It also created a feature that allowed customers to download their brokerage statements and incorporate them into financial planning.

That set the stage for other PFM products to become part of a growing abundance of personal finance tools available today. They include ones focused on tracking credit scores (think Credit Karma), ones that allow individual investors to trade for their own account (think Robinhood), and ones focused on tracking spending and bill paying (think Prism). PFM is the software that powers these apps, as well as many mobile banking tools.

Special Considerations

Banking and finance apps may share PFM software, but they are not all built the same. It’s important to define what your needs are to ensure that you are using the right system. Some of these apps have free versions, although many have subscriptions to access more advanced features. Some are built for Windows, some are built for Macs, and some live in the cloud.

While mobile banking can help with bill paying, tracking deposits/withdrawals, and transferring funds between accounts, personal finance apps are often built with more comprehensive money management tools and a greater ability to personalize features. Many not only allow you to pay bills and track deposits/withdrawals but also include broader options that give you the flexibility to take more control of your financial management goals.

Personal finance apps have evolved to become much more user friendly and targeted to customers’ needs. Overall, these apps will allow you to be more organized with your finances. At the simplest level, they will help you track your budget/spending and ensure that you pay your bills on time. If you have broader needs, then there are most likely apps for them, too—or soon will be.

This list is by no means exhaustive, but it provides an overview of the top seven personal finance apps as ranked by Investopedia sister site The Balance.

• Best Overall: Quicken
  
• Best for Habit Building: YNAB
• Best for Zero-Based Budgeting: Mvelopes
• Best for Taxes: TurboTax
• Best for Investing: FutureAdvisor
• Best for Investment Advice: Empower (Formerly Personal Capital)
• Best for Spreadsheet Management: Tiller Money