Can I use AI to plan my finances?

Since OpenAI released the current version of ChatGPT to the public, people have been prompting it to generate all sorts of content – I asked ChatGPT to plan my Europe trip. 

But can you use AI for finance and budgeting?

Let’s put ChatGPT to the test and find out if its answers are factual, useful, and practical.

ChatGPT: Of course! I'll do my best to help you with any questions you have about money. What specifically would you like to know?

ChatGPT: Creating a budget involves setting financial goals, tracking income and expenses, and making adjustments as needed. 

Start by listing all sources of income and monthly expenses. Categorise expenses into needs (such as rent and utilities) and wants (such as entertainment and dining out). Determine a realistic amount to spend on each category and track your spending. 

Use tools like spreadsheets or budgeting apps to help you stay organised. Reevaluate your budget regularly and make adjustments as necessary to meet your financial goals.

ChatGPT: There are several strategies you can use to save for retirement in Australia. 

One common approach is to make contributions to your superannuation (super) account, which is a tax-effective way to save for retirement. You can make contributions through your employer or on your own, and there are caps on the amount you can contribute each year. 

Another strategy is to take advantage of government incentives, such as the co-contribution scheme and the low-income super tax offset. 

Finally, consider seeking professional advice from a financial planner to help you create a personalised retirement plan that aligns with your goals and financial situation.

ChatGPT: The answer to whether you should pay off debt or invest your money depends on several factors, including the type and amount of debt you have, the interest rate on the debt, and your overall financial goals.

In general, if you have high-interest debt, such as credit card debt, it's usually a good idea to focus on paying that off first as the interest charges can quickly accumulate and negate any investment gains.

On the other hand, if you have low-interest debt, such as a home loan, it may make more sense to invest your money, especially if the potential return on your investments is higher than the interest rate on your debt.

Ultimately, it's important to create a balanced financial plan that takes into account both debt repayment and investment goals. A financial advisor can help you create a plan that works for your unique situation.

ChatGPT: To invest in the Australian stock market, you can open a brokerage account with a licensed stockbroker or online trading platform. 

Once you've opened an account, you can transfer funds to it and start investing in shares listed on the Australian Securities Exchange (ASX). 

You can also consider investing in exchange-traded funds (ETFs) or managed funds that provide exposure to a diversified portfolio of Australian stocks. 

It's important to do your research, understand the risks involved, and consider seeking professional financial advice before making any investment decisions.

ChatGPT: There are several ways to minimise taxes in Australia, such as contributing to a superannuation account, claiming deductions for work-related expenses, and taking advantage of tax offsets and concessions. 

Consider seeking advice from a tax professional to help you identify tax planning strategies that suit your financial goals and circumstances. 

You can also stay up-to-date with tax laws and regulations to ensure you're taking advantage of any changes or new opportunities for tax minimisation. It's important to always comply with tax laws and regulations and avoid any illegal tax avoidance schemes.

ChatGPT: The amount of money you should have in an emergency fund depends on your personal circumstances and financial situation. As a general rule of thumb, it's recommended to have at least three to six months' worth of living expenses saved in an emergency fund.

However, if you have dependents or an unstable income, you may want to consider saving more. Additionally, if you have a high level of debt or job insecurity, you may also want to aim for a larger emergency fund.

It's important to regularly evaluate your financial situation and adjust your emergency fund accordingly. This can help you feel more secure and prepared for unexpected expenses or a loss of income.

Note: It’s not always possible for everyone to save 3 to 6 months’ worth of living expenses, so this answer gets a low score for practicality. That being said, it’s still worth aiming for if you can afford it.

ChatGPT: The Australian government offers several support programs to help first-time homebuyers. 

The First Home Loan Deposit Scheme (FHLDS) allows eligible buyers to purchase a home with a deposit as low as 5%, without paying lenders mortgage insurance (LMI). 

The First Home Super Saver Scheme (FHSSS) allows you to save for a home deposit in your superannuation account, taking advantage of the tax benefits. 

The HomeBuilder grant provides a $15,000 grant for eligible applicants who build a new home or substantially renovate an existing one.

Additionally, some states and territories offer their own first-home buyer incentives, such as stamp duty exemptions or reductions.

Note: Applications for the HomeBuilder grant actually closed in April 2021. ChatGPT has been trained on information that is a little out of date. So, it’s important to always double-check if what it says is still relevant.

Overall, using ChatGPT prompts for finance seems pretty capable of providing (very) general tips to help plan your money. It can even provide you with information relevant to Australia, despite being made in the US. 

The only cases where factuality was a problem were when it came down to having outdated information. So, it’s quite trustworthy. All of the tips from ChatGPT were useful and most were practical, simple steps you can take to plan your finances. 

I asked ChatGPT to write short answers because a lot of the original ones it generated were far too long for this article. However, they did go into a lot more depth.

There’s definitely a place for finance AI in your toolkit, but at this point in time, ChatGPT doesn’t appear to be a viable replacement for financial advisors or a Google search session – at least not the versions of artificial intelligence we commoners have access to.

If you’re looking to use artificial intelligence to plan a budget, you can request that ChatGPT helps work out the difference between your expenses and income, and how much you might be able to save. 

However, by the time you’ve typed in all the numbers, you’re already halfway to creating your budget and having an AI chatbot do the maths for you is sort of pointless. 

Should I be concerned about privacy when using AI for budgeting?

Unless you could upload your bank statements (despite the obvious privacy risk) for it to analyse, I’d say ChatGPT is better at giving you tips for budgeting, as opposed to creating one. 

But before you leap blindly into airing your personal information on the internet, make sure you read into the service’s privacy statement and the way it collects info about you.

Where AI can help is its ability to condense a wide range of information into digestible tidbits that serve as the starting point for your own research. 

For example, when I asked ChatGPT what government support was available to first-home buyers in Australia, it rattled off a few of the federal schemes and mentioned that there were state-based ones too. 

So, in effect, ChatGPT is more like a conversational search engine, useful for finding information quickly. 

Have a question about credit card repayments or insurance? ChatGPT can point you in the right direction. Want to know which credit card or insurance policy is better? ChatGPT won’t be able to tell you, but it will give you things to consider when doing your own research.