If your outgoings are making it impossible for you to set money aside each month, you’re not alone. Acclaimed financial expert and journalist Laura Whateley, shares her favourite budget apps and top tips for regaining control of your bank account
1. Use cash more and check your direct debits each month
I noticed on my favourite ever holiday to Japan, that the Japanese are still really wedded to cold hard cash. You still pay with notes and coins on the bus or for your sashimi supper in a restaurant. Maybe this is why they find it easier to be mindful with their money. Cashless, contactless, online shopping and auto-renewal makes it supereasy to pay, super-hard to monitor what’s going out of your account – why do you think companies love it so much? Amazon does not even require your CVC (card verification code) number, a usual hurdle that can stop me from making a particularly impulsive purchase simply because I cannot be bothered to track down my debit card.
In fact we find it psychologically more difficult to part with cash, so are less likely to overspend when we have to pay with notes than when we use contactless and do not even pay attention to the transaction price.
Given my own reliance on Apple Pay I shouldn’t be surprised by how many readers write to me at The Times in despair that they have accidentally been paying literally years afterwards for a mobile phone, or mobile-phone insurance, or magazine subscription auto-renewals that they had long stopped using. Companies make a fortune out of making it a massive hassle for you to leave their clutches: ‘To cancel your online-only subscription you have to write a letter to us in a fountain pen that can only be sent recorded delivery by a post office 30 minutes from your flat.’ There are apps to help with this, too. Bean or Emma will monitor your direct debits, and will alert you to any unused subscriptions.
2. Set up lots of pots and pay yourself first
• Cash in envelopes
The Japanese way is to take out your allocated budget of cash and put it in envelopes at the start of the month: one for food, one for nights out, and so on. Only let yourself spend what is in them, like when I used to be able to go out taking just £15 for a couple of orange Reef, club entrance and a taxi home. RIP 2003. This also has the potential to make you feel really happy when you come across some cash, like the disproportionate pleasure of a tenner in an old coat pocket.
• Multiple direct debits
My way now is to open multiple bank and easy access savings accounts, different ‘pots’ into which I deposit different sums via direct debit. My earnings go into one account, and then I put set amounts into others, a tax-bill savings account, a joint household spending current account with my other half, an easy-access saver for my own personal holiday and clothes-splurge saving, and I set the direct debits to come out weekly. It is then easier to see how much is left over and whether or not I can justify another new mascara, and also helps me save substantial sums with minimum effort. Weekly feels more manageable than monthly.
• Prepaid card
You could also get a prepaid card and, like a pay as-you-go phone, load it up with your budget for the week or month, and then use it to spend with, like you would a debit card, without the risk of overdoing it and slipping into the red. Beware fees on prepaid cards. A card like Pockit charges 99p for cash withdrawals, and a 99p fee each month that you spend less than £500, and you pay 99p up front to open it. The Optimum card costs £5 to open, but has no fees for spending on it. You are charged to use it for cash withdrawals at ATMs though.
3. Try Monzo, Starling or Revolut
The easiest way to save using the ‘pot’ method is via one of the new app banks.
Enter my love, Monzo , ‘as close to a cult as a bank can be’, according to The Economist, with its plain English terms and conditions littered with emojis and hot pink debit card, the millennial’s black American Express. I get very excited when I see a fellow Monzo customer wielding theirs. So much for the baby-boomer generation being way smarter at managing their money; 53 per cent of Monzo’s customers are between twenty and thirty, 28 per cent are aged thirty to forty.
It is one of several start-up ‘challenger’ banks. See also the equally great Starling and Revolut , so popular that when it launched it had a waiting list and ‘golden tickets’ you could send your friends to let them jump the queue. You apply on the app, with a photo of your passport, and a short selfie video where you state your name, and a couple of days later a debit card arrives in the post. It offers you real-time alerts every time you use your debit card, categorising your spending. For example, it recognises if you used it in Zizzi and adds your bill into the ‘eating out’ category. Rather than ploughing through the normal itemised current-account list of transactions, you can finally see just how much is going out each month to Tesco Express.
You can also set up ‘pots’ where you direct your salary into different compartments to stop yourself spending it all. I also like the coin jar feature where every purchase you make is rounded up to the nearest pound, with the difference sent into your nominated pot. So if you were to buy a coffee for £2.50 you pay £3, 50p of which is automatically saved.
Genius budgeting apps
This is a savings app that uses an algorithm to analyse your current account to work out how much you can save, then automatically moves these savings into a separate account every few days or weeks, usually about £10 to £25 five times a month – the maximum is £100 five times a month. You get more interest on your savings the more people you recommend to also use the app, up to a maximum of five per cent.
Works along the same lines, but your savings are invested through the peer-to-peer lender, Ratesetter. You use it through Facebook Messenger.
Does the same, but your money is invested in the stock market instead. You can also round up your spending on any debit or credit card to the nearest pound with the difference invested, so that you save without really noticing.
Backed by ING, the Dutch bank, Yolt enables you to view your credit card, banking and savings accounts all in one place, making it easier to manage your spending.
Offers something similar to Yolt, with colourful graphics and tags to categorise and view your outgoings.
Uses artificial intelligence to monitor your spending and will alert you to when bills are due, or you have overspent in a month.
Lets you split bills with friends or flatmates.
Useful to send money to friends via text message.
Allows you to use your phone to send up to £50 to other Paym users.
Lets you store all your loyalty cards, Nectar, Boots Advantage Card, etc. on your phone.