January is notoriously that time of year when we’re all feeling the pinch. Our jeans are tighter, our pockets are lighter and we’re desperately trying to stick to our New Year’s resolutions. If you’ve overspent over the holiday, now is a great time to take back control of your finances – taking advantage of the latest innovations in Open Banking and downloading some great fintech apps on your smartphone.
Making sure you stay in the black is perhaps the most fundamental part of money management. Famously, Elizabeth Warren popularised the 50/30/20 money plan – where she suggested that 50% of your spending should be on needs and 30% on wants and 20% to savings.
However, in practice, calculating all your expenses to work out where you spend most of your income is not always easy, especially if you have multiple different bank accounts with a range of providers. What’s more, even once you have this information, determining where you can cut back can be an even bigger challenge.
Luckily, nowadays, there are many apps that can aggregate all this data – helping you avoid going into your overdraft, reducing debts and advising you on any subscriptions you can cancel. In addition, apps like ‘Cleo’ and ‘Emma’ now also use the power of artificial intelligence to offer chatbot services so you can ask a virtual assistant direct questions like ‘can I afford a takeaway tonight?’ In response, you’ll receive insights into how your spending is going this month.
Once the apps have a clearer view on where you spend most of your money, they will suggest a rough budget for your big expenses (food, transport etc.) and if you go over this amount you will receive a notification. Most importantly, these apps can tell you an affordable amount to put aside for saving at the end of each month. This is also sent as a notification, which if you click ‘accept’, will automatically put this money away.
Open Banking is also revolutionizing the way you can save money. With these fintech apps, like ‘Chip’ for example, you set out steps to set aside savings based on rounding up your transactions or a percentage of your spending. For example, if you spend £1.40, the app will round up the amount to the nearest pound (£2) and put the extra 60p into your savings. Or, you may have a rule set up whereby each time you eat our 10% of what you spend goes into your savings.
Interestingly, some apps, such as ‘Oval’, have taken this idea even further and will allow you to also save based on your habits. For instance, you can link the app to Facebook account, so that you set aside a fixed amount of savings every time you post on your Facebook wall. And, you can even link your wearable device and save in accordance with your exercise – such as £5 for every 5k you run.
If you’re looking to invest your money in 2020 but aren’t quite sure where to start, then a fintech app can be a great starting point. Apps, such as ‘MoneyBox’ and ‘Plum’ work by linking with your bank account and rounding up purchases you make on your card to the nearest pound. You can also set a minimum amount to invest per week on top of your roundups.
Once you set up your account, you will be asked to choose what kind of portfolio you would like, depending on the level of risk you are prepared to take. The tracker funds are split into ‘cautious’, ‘balanced’ and ‘adventurous’ options, allocating different weightings for where your money is invested.
One important thing to note is that fintech investment apps are often not free. Sometimes you will be required to pay a small monthly subscription fee, for example. However, as this would also be the case with a personal wealth advisor, this may not have much impact on your decision to start investing with the app.
When using any fintech apps it is important to make sure they are certified by the relevant conduct authority and that you will receive compensation if the app should go bust. This will ensure that the app is properly encrypted to protect your data and much harder for cybercriminals to hack into.
If you found this post useful, check out some of our other similar posts: