How ChatGPT can help with personal finance management

How ChatGPT can help with personal finance management
Photo by Jonathan Kemper / Unsplash

I am not sure about you, but it seems to me that the plethora of AI platforms recently had a big bang moment, to the point that we went from "Ok assistant X play some music" to "Do my job as today I don't feel like going to the office".

ChatGPT rules them all

Although AI tools are not a new thing and have been around  for some time, it is only recently that they have become more mainstream. ChatGPT is definitely the biggest name out there and a lot of the AI solutions available today, have built customizations upon it, to target specific use cases. In case you haven't been following the frenzy surrounding ChatGPT, it is an artificial intelligence platform that has been gaining popularity in recent years.

ChatGPT can do a whole bunch of language-related stuff. It can answer your questions, generate text, translate languages, summarize information, and so much more. It's basically a super smart chatbot that can have conversations with you and give you really helpful responses. Plus, it can be trained on specific topics like medicine, finance, or law, so it can give you expert advice in those areas too. Even big Corporations have started to  use ChatGPT in order to improve their customer service and provide personalized advice.

ChatGPT example

How is ChatGPT trained?

ChatGPT is trained using a process called unsupervised learning. This means that it doesn't require human-labeled data or explicit instructions on what to learn. Instead, it's fed massive amounts of text data from a variety of sources, such as books, articles, and websites. Through this exposure, ChatGPT learns to recognize patterns and relationships between words, phrases, and concepts. It uses this knowledge to generate new text, answer questions, and perform other language-related tasks. Additionally, ChatGPT can be fine-tuned on specific datasets or tasks to improve its performance. The more data it's trained on, and the more diverse that data is, the better it becomes at language-related tasks.

Understanding personal finance management

Personal finance management refers to the process of managing one's financial resources to achieve financial goals. This includes budgeting, saving, investing, and managing debt. Effective personal finance management can help people achieve financial stability and security, as well as reach long-term financial goals such as retirement savings.

One of the most important aspects of personal finance management is budgeting. A budget is a plan that outlines how much money you have coming in and going out each month. By creating a budget, you can track your expenses and identify areas where you may be overspending. This can help you make changes to your spending habits and save money over time.

The benefits of using ChatGPT for personal finance management

ChatGPT is a powerful tool for managing personal finances. It provides users with an easy-to-use platform to track their income and expenses, create budgets, and gain insight into their financial situation. With ChatGPT’s intuitive interface, budgeting becomes effortless, allowing users to take control of their finances quickly and easily. Additionally, the chatbot feature allows users to get personalized advice on how best to manage their money in order to achieve long-term financial goals such as retirement savings or paying off debt. By using ChatGPT for personal finance management, individuals can make smarter decisions about where they should allocate their resources in order to reach maximum financial success.

How to use ChatGPT for personal finance management

Using ChatGPT for personal finance management is easy. Users can access the chatbot through a website or mobile app and ask questions about personal finance management. ChatGPT uses natural language processing to understand the user's questions and provide personalized advice and tips based on their financial situation and goals.

To get the most out of ChatGPT, it's important to provide accurate information about your financial situation. This includes information about your income, expenses, debts, and savings. The more information you provide, the more personalized advice and tips ChatGPT can provide.

One question you might be  wondering is “Can ChatGPT pick stocks?". The official answer is that while ChatGPT can be trained on financial data and may have knowledge about stocks and investments, it is not an expert in the field of finance or investing.

The unofficial answer though is that ChatGPT can sometimes do better than fund managers. As reported by the Finder, one of those classic experiments man vs machine was run Between March 6 and April 28 2023, where a dummy portfolio selected by ChatGPT composed by 38 stocks gained 4.9% while 10 leading investment funds clocked an average loss of 0.8%.

Source: Finder

Over the same eight-week period, the S&P 500 index, which tracks the 500 most representative companies in the United States, rose 3%. Europe’s equivalent, the Stoxx Europe 600 index, ticked up 0.5% in that time.

Finder’s analysts took the 10 most popular UK funds on trading platform Interactive Investor as a benchmark for assessing the performance of the ChatGPT-generated fund. Funds managed by HSBC (HSBC) and Fidelity were among those selected.

If you have read other articles from my blog you should know by now that I am not a super fan of mutual funds, however I believe we should be careful in putting all our money where a chatbot says. This is for at least two reasons:

  • The test was only a few weeks long. This is not long enough to really see the results on a more sustained time frame
  • Chatbots rely on historical data and that is never a certain indicator of future performance

Common personal finance management questions answered by ChatGPT

When it comes to personal finance though , ChatGPT can help to answer common questions such as:

  • How much should I save each month?
  • What are some effective budgeting strategies?
  • How can I create a budget that works for me?
  • What are some good ways to save money on a tight budget?
  • How can I reduce my debt and improve my credit score?
  • What are some tips for managing my finances as a freelancer or self-employed individual?
  • How can I protect my financial assets and ensure that they are properly insured?
  • What are some common mistakes to avoid when managing my finances?
  • How can I negotiate better deals on loans, credit cards, or other financial products?
  • What are some effective strategies for managing my taxes and minimizing my tax burden?

To get the most out of ChatGPT for personal finance management, it's important to be specific with your questions. The more specific your question, the more personalized advice and tips ChatGPT can provide.

A snippet from the answer

In conclusion, ChatGPT is not a silver bullet but by getting answers to these questions, you can make more informed decisions about your finances and improve your financial well-being over time.