Worried about money now lockdown is easing? A financial expert explains how you can manage your finances, create a fool-proof budget and pick the perfect banking app for you.
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After a long, hard lockdown the world is finally opening up again. But, along with the excitement of our social lives getting going again and pubs and restaurants reopening, many people are feeling anxious about the toll going-out will take on their finances.
A new survey by London-based banking platform, Curve, found 40% of British people anticipate they’ll spend more following the easing of lockdown on 17 May than they did when lockdown measures were last reduced on 12 April. It also found 36% of British people are anxious about finances and spending, even believing it’s having an impact on their wellbeing.
If you’ve stared in disbelief at your bank balance after a night out at the pub in the last few weeks, you don’t have to feel guilty. “Many people will have emerged from lockdown and feel like they should see friends and treat themselves, which they should,” says Hannah Cole, a financial adviser at advice service OpenMoney. “But, if anyone does feel like they’ve overspent, it is possible to get back on track and start keeping on top of your spending again.”
Here Hannah shares her advice on how you can get back in control of your spending if you’ve been living extravagantly lately, from making a realistic budget to choosing which online banking apps can work best for you.
Speak to a Financial Conduct Authority registered financial adviser before taking financial advice, and think carefully before making any decision.
Hannah’s five essential tips for managing your money
Make a realistic budget
When you start making any kind of budget, it’s important to make sure it’s realistic and you’ll actually be able to stick to it in the long-term. To do this, Hannah suggests “looking at your current spending and looking back at your monthly expenditure so the budget you set is achievable”.
There are three practical ways to create a realistic budget:
1. Visualise your money
“It’s always good to look at your money visually to see exactly where it’s going,” says Hannah. This includes looking closely at all your direct debits – subscriptions that might have been helpful during lockdown may not be needed any more – and gathering together all your bills, receipts and statements from the last three months.
“Everyone has different preferences for visually writing out their budget,” says Hannah. “Some people prefer writing out their spending in notebooks, others might use a spreadsheet, or there’s a growing pool of online tools that can help you put a budget in place.”
2. Catergorise your spending
Breaking down your budget into categories is a good way to keep it realistic. “Look into exactly how much you spent in the past in different areas,” says Hannah. These might include food shopping, entertainment, travel and eating and drinking out. The categories will be personal to you.
When you start making your budget, you’ll know exactly how much you’re likely to spend in certain areas in the future.
3. Factor splurging into your budget
“Always take into account how much you would be willing to splurge,” says Hannah. If you know you’re liable to make a lot of one-off purchases, factor this into you budget so you can make up for it elsewhere.
If you’ve been spending more money than usual as lockdown eases, Hannah says it’s best to revisit your budget and make some adjustments. “If you’ve been splurging for the last few months, try and be stricter in other areas when looking back at your budget,” she says. “After living in the moment try to think about living for the future too.”
Monitor your spending (even if it feels scary)
It’s easy to fall into the habit of not looking at your bank account regularly, sometimes it can even be daunting revisting how much you’ve spent. But, monitoring your expenditure and being vigilant about where your money is going is key to taking control of your finances.
“Monitoring your money by logging into your banking app or budgeting app every day is really important,” says Hannah. “If you spent over £40 on a meal, think about how much of that could have gone towards a food shop for the week.”
Hannah suggests taking advantage of banking apps like Starling and Monzo. You can create accounts with these apps alongside other more traditional bank accounts. They also give you real-time notifications as you spend. “Getting an alert as soon as money has left your account is a really good way of tracking your spending and putting it into perspective throughout the day,” says Hannah.
Monzo and Starling also let you set spending caps. “You can set up alerts that send you a notification when you’ve gone over budget that day,” says Hannah. “It’s a good solution for keeping tabs on your spending even when you’re out and about.”
Develop new habits
Handling your money in new ways and making it part of your financial routine is a good way to avoid getting stressed about your spending. “One of my habits is shifting a portion of my money straight into a savings account as soon as I get paid,” says Hannah. “As soon as your balance is reduced that can reduce your overall spending and means you’re saving at the same time.”
Squirreling away a small portion of money into an “emergency pot” is another good financial habit to take up. “A good goal is to have at least three months’ salary saved up in your emergency fund to cover any unexpected payments,” says Hannah.
Set yourself goals
Creating a financial goal you can work towards is not only a great way to start saving for the things you want, it can also change your mind-set about money.
“The people I’ve met that are the worst at saving are the people who live for today and don’t tend to look towards their future,” says Hannah. “Setting yourself a short-term or long-term goal you can save towards – whether that’s a new boiler or a new car – gives you an incentive to put your money towards something, rather than splurging it away.”
Again, apps can help you with this. Many banking apps let you set a financial goal, telling you much your monthly contributions should be and how long it will take you to achieve it.
Use technology to your advantage
“In recent years a lot more online money tools have become available that can really help you,” says Hannah. “Everyone should take advantage of it!”
Banking apps like Monzo and Starling, which you can open alongside your other accounts, are a great way to analyse your spending. The apps send you alerts when you’ve made a transaction, let you set up different saving pots and set saving goals. Each app has different advantages: Monzo gives you an overall spending review at the end of the year, while Starling has more options for withdrawing money outside the UK. Hannah suggests reading up carefully on each to decide which one will work best for you.
Online budgeting tools can also help you. Unlike banking apps these let you link external accounts so you can see the entirety of your finances. “These let you link everything up including your current account, credit cards, pension pot and investments. You can even add your student loan so everything’s in one place,” says Hannah.
There are lots of different budgeting tools available online, many of which offer free services. Hannah recommends: Emma, Yolt, OpenMoney and Snoop. “Each one has different features,” she explains. “So it’s best to download a few and see which ones suit you best.”
Hannah Cole, Financial adviser at OpenMoney
Hannah is a fully qualified financial adviser and support team lead at OpenMoney. Hannah’s team deliver one-to-one meetings with people wishing to use OpenMoney app’s money management tools.