Why Did I Change My Budgeting Approach?
Last year I decided to change how I was budgeting. As a personal finance blogger, I love budgeting and have a lovely spreadsheet for this purpose. However, I always felt like I was flying by night with this as I didn’t really put money aside or check I was sticking to my budget. I could get away with it because my income was increasing and I didn’t spend very much so would always end up OK. If I went back 10 years on the other hand, this would not have been the case. I remember having no money at the end of the month because I’d spent it all! Clearly, I needed to try something different. Step in Monzo Pots.
What Are Monzo Pots?
Monzo Pots really helps people like me look after their money. Rather than having amounts in a spreadsheet that I theoretically took notice of (spoiler: I didn’t), it encourages you to put money aside in a virtual Pot. This allows you to pay bills without any issue or accidentally spending the money. It’s very much like a digital version of putting cash in literal pots.
Pots are essentially categories of your choosing which you set up in the Monzo app where you can place money. You then use that money to make payments. You can tell it to take direct debit payment from a particular Pot.
You can change out more about Monzo Pots here.
When you receive your salary, you can tell Monzo to “Sort Salary” into the pots on the day it arrives at your account. You do have to do this manually but that’s OK. Once it is set up, you don’t have to reset it each month as it saves what you did last time and it’s a simply tap on the screen to do this. You can easily make adjustments to the amounts here too should you need to. I can also instruct Monzo to send some money to a savings account before I get my grubby hands on it.
If you are not sure about using Monzo as your main account then I can say don’t worry. It’s been great and since I ditched my old bank I haven’t looked back.
My Monzo Pots Setup
I have four pots called Bills, Car, Travel, and Service Charge. Essentially, I know how much these things cost per month or annually because of my spreadsheet, and I sort money to these pots accordingly.
- Bills contains money for utilities, mobile phone, broadband, tv licence, mortgage, council tax. Most are monthly direct debits.
- Car has money for fuel, car tax, insurance and some maintenance costs. These are annual so I split them by 12 and pay an amount accordingly.
- Travel is a flat amount which I want to spend on holidays and is based on what I spent last year divided by 12.
- Service charge is what my building charges me monthly. It probably should be included in Bills but because I hate paying it so much, I put it as a separate pot.
This means that my money is sorted according to my budget and is ready and waiting for these payments to come out. Sometimes money does build up in these pots, such as the car if I put less fuel in than normal, or if I don’t spend as much as budgeted. Having a few extra pounds lying around is no bad thing after all.
The Monzo app then sort of hides the pots away from your main balance and screen so the balance you see is what you have left after paying all your bills from the pots. This is also helpful and good for restraining spending. It removes the feeling that you’re loaded on the 1st of the month only for all the direct debits to clear you out.
Real-Life Results After 12 Months
At the start I found it a bit odd. This was because I didn’t like seeing my bank balance so low after being paid. This of course is purely in the mind as the money is still there. You just can’t see it. It took me a while to get used to this and in the early months, it felt like my pots were running dry as maybe I’d spend more that had built up in them. However, these issues were short lived and now I don’t seem to have that problem.
After 12 months of using Pots, I’m really finding it great. The main benefit is I can be confident of how much money is available for either saving or spending. The second benefit is I’ve ended up with a surplus which can be added to savings or spent. Between my savings account and pots, I have built up £24,000 of cash and this is very reassuring. I also don’t have to scramble around to pay for my annual car insurance or for flights to go on holiday. I simply use the money that is in these pots.
Final Thoughts on Monzo Pots
Monzo pots combined with Salary Sort is an ingenious way of managing your money which encourages you to take ownership of your budget in a practical way. It really helps with controlling spending. After 12 months I’m really finding it useful and would recommend.
Have you tried budgeting with Monzo? Let me know your setup in the comments — I’d love to hear how others use it.
