Another year is starting, and what best way to start the year than with a few tips on budgeting?
Let’s start from the beginning and have a look at the definition of a budget.
A budget is a strategic plan that includes:
How best to use the money you have coming in, and;
How to effectively report on your money’s activity within a specific period
But, how to make a budget?
The key to creating a budget is to be realistic, set goals, and stick to a conscious strategy. First and foremost, you need to account for the money going in and out of your accounts. This means looking back and looking forward – and being honest about where you’re spending more than you should.
Next, figure out where you’re spending more than you want to – and adopt the money management framework that best suits you - maybe the 50/30/20 rule would be a great start.
Revolut can help you!
You can easily manage your budget with Revolut’s Budget Planner. Set a monthly budget for whatever you need, and you can track your progress in real-time with alerts and updates. With our handy Analytics tab, you get full visibility on where your money is going – and thanks to the automatic categorisation of payments, you can easily understand where you’re spending.
Linked cards would help to some extend, but who’s going to use five or more different cards for groceries, eating out, shopping cloths, the drugstore, trains and busses?
You can do some of this already with card limits. You can set up a spending limit for each card which resets every month. So set up any number of physical and/or virtual cards, label them with a category of choice and you’ve got a fixed budget.
I do agree that pockets should be improved to allow envelope budgeting. And linking a card to a pocket does make sense to some extend for recurring stuff like Netflix. But statistics isn’t for envelopes. Statistics are meant to be informative. To help you understand your spending. You can then set up envelopes based on this information. And linking cards doesn’t necessarily improve statistics, like the current card limits don’t really influence statistics.
Here’s what I would call next level: set up pockets as envelops. Fund those pockets automatically when the system detects that your salary (or any regular income) comes in. Then allow to link spending categories (like groceries) to specific pockets. Also allow to link recurring direct debits, recurring individual card payments, and one time payments and transfers to pockets (this is partially possible already).
Here’s how the system would work with one time payments and transfers: identify any transaction in your feed, tap on it, and select a pocket you want to fund this payment from. It works both ways. When someone pays you back after a restaurant visit, this incoming transfer funds your pocket.
To me, linking cards to subaccounts is a workaround for personal finances.
It’s a different story for business accounts, but I am not going into this here.
For personal finances, it’s a stopgap solution. It’s nice to have. But for envelope budgeting, it’s critical that all relevant transactions are allocated to one specific „envelope“ — which can be a category or a combination of categories. Where fintechs can be better than traditional methods is in helping to organise, and in doing most of the work automatically.
Linking cards to subaccounts is an option to organise card payments. But there’s more than card payments. And it’s unnecessarily complicated. Why do I have to pick a specific card when the app can allocate the transaction for me? Think of shared accounts. And people that also use business accounts. The number of cards becomes unmanageable.
It’s a fun feature for things like a vacation budget, or if you want to link a card to an account for e-commerce transaction that are considered to be high risk. Or even for „responsible“ gambling or pocket money for a hobby. That’s fine. But I believe it’s not the best option for proper budgeting based on categories. There are better options.
Here’s another complication when linking cards to pockets: pockets have a set currency. Revolut’s FX platform works based on individual accounts for different currencies. It gets messy when you want to combine those two features. A simple UX fix would be to ignore balances in other currencies than the currency of the pocket. But as someone who lives in two places and actively uses three currencies all year long, I wouldn’t want that.
Personally, I do budget using Vaults in Revolut, as well as using the Analytics and Budgeting functionality inbuilt to the app.
They’re not perfect, but they are pretty good I find.
Although the ‘Pockets’ function is there, I personally have found this to be a poor implementation for budgeting / funds segregation - particularly as only certain payment types can be assigned to a pocket (ie, the transaction must be a card payment and be configured by the merchant as a subscription).
When I raised this shortcoming to support, they advised I should contact the merchant directly and ask them to reconfigure their payment systems
Last time I tried Pockets, I also don’t think that Direct Debits could be assigned to a pocket, although that could have changed recently.
For large, infrequent payments in particular (such as annual insurance payments), I have a seperate vault set up with an automated transfer in each month - a form of electronic envelope budgeting, if you will - and this works well for me.
In this use case, I would like to see the option to link a virtual card to directly take payment from this vault, rather than have to manually withdraw and pay at the time.
A plus side to this, is you can have an individual virtual card tied to a single merchant, with a limit configured on what can be taken by that merchant.
Indeed, there is also the security aspect of segregating merchants to individual virtual cards, which is one of the advantages and sell points of using virtual cards in the first place.
I do agree that having separate virtual cards for different categories of usual day to day expense (such as Groceries, Clothing etc…) can get messy very quickly and is probably impractical for most use cases.
But I can see how linking spend categories to a specific Vault could work here.
Overall, the linking of virtual cards / categories to Vaults would work well for me.
That said, I’m not necessarily saying this is the right solution, and maybe there are better options there instead.
I’m certainly open minded to hearing better ideas than my own
It’s odd that Revolut decided to split functionality between Vaults and Pockets.
One of the use cases for Vaults is to keep money save from being spent. If you’re holding funds in many currencies, putting it away in a vault prevents any unintended transaction. That’s useful if you want co control which currency Revolut uses, for example.
The name Vault and where it lives within the app (wealth section) does give a hint that Revolt intends Vaults for safekeeping and saving (with interest).
The name Pocket on the other hand indicates that this is the pot where money for spending is kept. I agree that the implementation lacks. I think Revolut should rework Pockets instead of adding payment functionality to the Vault feature. You’d end up with the same functionality.
That’s true, and maybe scheduled withdrawals should be a feature enabled for Vaults anyway for other reasons.
But again, it comes back to how complex should something be, and would the average user be expected to go through so many steps to enable what should be a relatively simple task
I agree with this too. Out of other functionality that Revolut implements so well, unfortunately I don’t think Pockets is up there
It also depends on the merchant. Revolut can’t show the data before the merchant provides it. In principle, one time SEPA direct debits need to be provided 5 days in advance, but recurring direct debits only 2 days.
This is SEPA. It’s different in the UK. The general advance notice in the UK is 10 days, but there’s a bunch of exceptions, like when you’ve got a different agreement with a customer. Customers probably don’t know when they agree to this during setting up the direct debit. Recurring direct debits based on a direct debit mandate already in place then also don’t have this advance notice requirement anymore.
The 10 day notice for new or changed direct debits in the UK is to the customer, not the bank. Direct debits are currently processed through Bacs, so the advance notice you get in online banking is usually two working days (although they can be predated, which gives more notice). A few years ago there were talks about moving direct debits over to Faster Payments, but they seem to have changed their mind on that one.
My biggest grip with analytics is when I hide transactions from my transaction feed out of sight (because 10 pints on a Saturday night doesn’t need to be seen) it also removes those transactions from analytics.
This is then messes up my budgeting because it’s not accurate.
It only needs to hide from the feed and not everywhere else in the app. Unsure if it’s intended or needs fixing but I’d most certainly prefer it kept in analytics, just not visible in the feed as it can take up quite a chunk
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