What is Personal Finance Management (PFM) and how is it used?

What is Personal Financial Management (PFM)?

While the nickname “personal finance management” is often used to refer to ways to manage your personal finances, it is also an actual term, often known by the acronym PFM, which refers to the type of software used for personal finance management. Apps is used. PFM has been around since 1983, when Intuit co-founder Scott Cook got tired of watching his wife struggle with all the paperwork involved in manually paying bills.

He began researching how the process could be simplified or automated. On his way to post a job posting for a programmer at Stanford University, he ran into Tom Proulx, who had done a little programming and agreed to write for Cook a simple check-clearing program that became an early version of the personal finance software program Quicken .

And so Intuit (INTU) was born. The company started building Quicken, but the field was crowded. Cook and Proulx weren’t the only ones looking for a solution to the frustration of juggling all the paperwork when paying bills. When Quicken launched, there were already 46 other personal finance products, but many were cumbersome and not easy to use.

Quicken’s biggest selling point was its ease of use. Because the software literally mimicked a paper check, the software became accessible to anyone who ever needed to pay a bill by check. What ultimately propelled Quicken to the top was a combination of positive reviews of its Apple version, a direct marketing approach, and excellent customer service.

Understanding Personal Financial Management (PFM).

By developing a software product that mimicked a printed product, Quicken was able to attract customers, and aligning with other ways customers used the product allowed for continued development. That was a crucial key to success.

For example, when the company realized that a third of its customers were using the software for business expenses, Intuit launched what is now Quickbooks — a version of Quicken focused on tracking those expenses. A function was also created that allows customers to download their brokerage statements and include them in their financial planning.

This set the stage for other PFM products to become part of a growing plethora of personal finance tools available today. These include those that focus on tracking credit scores (think Credit Karma), those that allow individual investors to trade for their own account (think Robinhood), and those that focus on tracking expenses and focus bill payments (think Prism). PFM is the software that powers these apps as well as many mobile banking tools.

Special Considerations

Banking and finance apps may use the same PFM software, but not all are built the same. It is important to define your requirements to ensure you are using the right system. Some of these apps have free versions, but many have subscriptions to access more advanced features. Some are designed for Windows, some for Macs, and some live in the cloud.

While mobile banking can be helpful for paying bills, tracking deposits and withdrawals, and transferring funds between accounts, personal finance apps often come with more comprehensive money management tools and a greater ability to personalize features. In addition to allowing you to pay bills and track deposits and withdrawals, many offer more comprehensive options that give you the flexibility to better control your financial management goals.

Personal finance apps are much more user-friendly and tailored to the needs of customers. Overall, these apps allow you to better organize your finances. At the most basic level, they help you track your budget/spending and ensure you pay your bills on time. If you have more extensive needs, there are most likely apps for that too – or will soon be.

This list does not claim to be complete, but does provide an overview The seven best personal finance apps according to Investopedia sister site The Balance.