Best Budgeting Apps in the UK

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Contents:

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We've compiled a list of some of the best budgeting and money management apps in the UK. These are manual and open banking budgeting apps that help you track your spending, categorise your expenses, organise your money and identify wasteful subscriptions.

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All the open banking budgeting apps listed here are available on Android and iOS and regulated by the UK's financial watchdog, the Financial Conduct Authority (FCA).

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Compare some of the best budgeting apps in the UK:

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A budget is a financial plan for your income and expenses over a particular period of time.

Consider the following example - suppose your net monthly income (after tax and national insurance contributions) is £2,000. You need to ensure that at the end of each month, you have spent less than £2,000 as spending more could lead to severe financial and mental health problems.

A budget helps you make a spending plan for that £2,000. A plan that ensures you never run out of money before your next payday. If you do it right, you might even have some money left over for long-term saving and investing.

There are many ways to create a budget. For example, if you have your own method of estimating your income and expenses, making a plan to keep your costs below your income, paying your debt when due and saving a little for the future, you already have a budget.

At Koody, we recommend using the 50-30-20 budget rule. It's a brilliant budgeting technique that suggests spending 50% of your income on your needs, 30% on wants and 20% on savings and extra debt.

Let's continue with the £2,000 net monthly income example we used above. Using the 50-30-20 budget rule, you allocate £1,000 to your needs, £600 to your wants and £400 to your savings and extra debt. 

To make it easy for you to understand, we have included a simple budget calculator below. Use the budget calculator to quickly estimate how much of your monthly income to allocate to needs, wants and savings.

Budget Calculator 

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The 50-30-20 budget rule helps you categorise your spending and make long term plans for savings and investing, but it does not work in every circumstance. There are situations where you need to be a bit flexible with the rule, and it makes perfect sense to adjust the ratios to suit your needs.

For instance, if you are struggling with debt and can barely afford to meet your monthly repayment obligations, allocating 30% of your income to wants and 20% to savings and extra debt might not work for you. 

Consider your own financial situation before deciding on what budget rule to use. 

A budgeting app that tracks, categorises, and analyses your spending could help you better understand how much to allocate to wants, needs and savings.

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Most of these budgeting apps are entirely free to download and use. Additionally, many banks now offer a spending tracking and categorisation feature on current accounts free of charge.

The three main budget categories are needs, wants and savings.

Needs (50%)

These are things you cannot do without - your absolute necessities, such as:

1. Groceries
2. Essential clothing
3. Mortgage payments
4. Rent
5. Car payments
6. Utilities - energy, water, broadband, phone bill and TV licence
7. Transportation
8. Healthcare and Insurance
9. Childcare
10. Minimum loan payments. Anything above the minimum should go into the savings and extra debt category.

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Using the 50-30-20 budget rule, allocate 50% of your income to your needs.

Wants (30%)

These are the extra things you spend money on that make life more enjoyable, such as:

1. Dinner and drinks out
2. New handbag
3. Organising a party
4. Travel
5. Gym membership
6. Tickets to sporting events
7. Latest gadget
8. Shopping

Using the 50-30-20 budget rule, allocate 30% of your income to your wants. 

Since our wants make life more enjoyable, it's important to spend money on them. But be careful not to spend too much. Allocating 30% of your net income to your wants is just about reasonable. And, depending on your personal circumstance, 30% might even be too much. 

Savings and debt (20%)

This category is all about planning for the future. There are two critical future events to plan for:

1. Emergencies 
2. Long-term goals, e.g., retirement, wedding or house deposit

If there's anything we've learnt from the Coronavirus pandemic, it is that emergencies happen, and it pays to be prepared. 

At Koody, we strongly recommend building an emergency fund to cater to unforeseen financial shocks like a job loss, major health issue or massive car repair.

Your emergency fund should be equal to at least three month's living expenses. This would serve as a buffer preventing you from making poor financial decisions in a time of crisis. You can start by allocating 10% of your net income to your emergency fund. Read more about building an emergency fund here.

The second category under Savings and Debt is long-term goals. We all have long-term goals. For some, it could be living comfortably in retirement. For others, it could be buying a home or getting married. Whatever your goals, without adequate planning, you might struggle to achieve them.

Allocate the remaining 10% of your net income to saving towards your long-term goals and overpaying your debts (if you think it's necessary to do so). 

Read our Investing for Beginners guide to learn more about investing and financial planning for your future.

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Here are our top tips to help you stop going over your budget:

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1. Set SMART goals: Set SMART (Specific, Measurable, Achievable, Realistic, and Timely) goals and plan for each month of the year. There's no point in planning to save 70% of your income next month if you've never saved up 20% before. A rule of thumb is to start small and increase your savings goals each month. For example, if you save 10% this month, you can try 11% next month, 12% the following month and so on.
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2. ‍Open a separate savings account for each budget category: There are three main budget categories - needs, wants and savings. Opening a separate savings account or pot for each category will help you better track your spending. For example, you can open an ISA (tax-free savings account) for your savings and a standard savings or current account for your needs and wants. Banks like Monzo, Starling and Barclays allow you to create virtual savings pots within your existing account, so you don't have to go through the hassle of opening multiple accounts. This method of budgeting is called the envelope budgeting method.
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3. ‍Set up a standing order for each payday: If you have different savings accounts for each budget category, use your bank app to set up a standing order to move money from your current account to your savings account every payday. This way, you are allocating money to all three budget categories immediately after you receive your salary. If you have an investment account, you should consider setting up a direct debit to automate transfers to your investment account too.
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4. ‍Automate the entire budgeting process: Spreadsheets are lovely and might provide some value. Yet, many people fail to stick to their budgets because they can be time-consuming and strenuous to create and manage. If spreadsheets work for you, that's fine. If they don't, use smart manual budgeting apps (if you don't want to connect your bank account) or open banking budgeting apps that connect to your bank account, so you never have to worry about manipulating a spreadsheet. Before you connect an app or service to your bank account, double-check that it is regulated by the FCA. All the open banking budgeting apps listed on Koody are regulated by the FCA.
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5. ‍Pay off expensive debts: It can be challenging to stick to your budget if you are heavily indebted. Consider paying off expensive debts as quickly as possible, so you can focus on building a realistic budget and financial plan.
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6. ‍Build an emergency fund: An emergency fund is money you set aside to cover unexpected financial shocks like a job loss, unexpected medical bills or major home and car repairs. An emergency fund is not for planned purchases like buying a new house, car, gadget or university tuition. At Koody, we recommend saving up an emergency fund equal to 3 - 6 months' worth of living expenses.
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7. ‍Take the 1p savings challenge: The 1p savings challenge is a great way to cultivate a good saving habit. All you need to do is save one penny on day 1, 2p on day 2, 3p on day 3, and so on. After 365 days, you could end up saving over £650. Challenger banks like Monzo offer the 1p challenge as a feature within their mobile banking apps. Check if your bank does too. 
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8. ‍Keep track of your progress: If you use an automated service like a budgeting or money management app, it'll be easy to see if you are meeting your spending targets. Keeping track of your progress helps you stay in control of your budget.

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Modern budgeting apps like Money Dashboard and Plum claim to use the same encryption technology as all major banks to protect your personal information. They don't store your banking credentials and can only access your data in read-only mode. This means that your account can't be breached, and the money in it can't be touched. These apps are also regulated by the FCA.

Most modern budgeting apps like Budget by Koody, Plum and Money Dashboard keep track of your spending to give you a clearer picture of your spending habits. Banks like Monzo and Starling also help you keep track of your spending.

Here are our recommendations for the best ways to stop living paycheque to paycheque:

1. Create a budget
2. Reduce your spending
3. Improve your skills
4. Build an emergency fund
5. Sell old items you no longer need
6. Get a side hustle
7. Stay away from payday loans

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Here a few reasons why budgets fail:

1. You set unrealistic goals
2. Your budgeting tool is difficult to use and time-consuming
3. You don't plan for ad hoc spending or emergencies
4. You forget you have a budget
5. Your expenses are higher than your income
6. You are over-indebted

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Here are some of the best free budgeting apps in the UK:

1. Moneyhub - Spending analysis; Expenses categorisation; Goals
2. Budget by Koody - Analytics; Forecasted cash flows; Savings goals
3. Snoop - Spending categorisation and summaries; Discount code finder
4. Revolut - Analytics; Spending predictions; Expenses categorisation
5. Plum - Spending analysis; Expenses categorisation; Auto-saving

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Here are our top ten ways to save money as a beginner:

1. Write down your financial goals
2. Keep note of your expenses
3. Regularly check your bank transactions
4. Create budget categories for all expenses, including savings
5. Pay off as much debt as you can
6. Set saving goals
7. Stick to your savings goals
8. Automate your savings with standing orders or an auto-savings app
9. Find ways to cut back on your spending
10. Use the right money management tools

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Budget by Koody is an excellent tool for keeping track of your money and organising your finances. You can keep track of your spending, categorise expenses, get spending insights, set and manage savings goals, access learning resources, and so much more, all without the need to connect your bank account. Other budgeting apps featured on Koody also help you track and manage your spending.

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To choose a budgeting app, you should consider the following:
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1. Are you happy connecting your bank account to the budgeting app? If so, you want to go with an open banking budgeting app like those listed above. If not, Budget by Koody is the best choice for people living in the UK who prefer not to connect their bank accounts.
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2. Does the budgeting app help you track your spending in a user-friendly way? You should check if the app allows you to track all your expenses, including cash transactions, investments, real estate, pensions and crypto holdings in a simple and user-friendly way.
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3. Does the budgeting app categorise your expenses? Categorising your expenses helps you understand where most of your money goes. Do you spend more on household bills than you would like? Or are you spending more on shopping than family? Categorising your expenses reveals this information and helps you make more informed decisions for the future.
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4. Does the budgeting app help you save money? If saving and investing are particularly important to you, you may want to use an app that helps set and manage saving goals. Budget by Koody, for example, connects your savings goals to your expenses, such that each time you log a new saving activity, the money is deducted from your main balance. This helps you temporarily forget about the money, so you are not tempted to spend it.
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5. Does the budgeting app use the 50-30-20 budget rule or similar? The 50-30-20 budget rule is a budgeting technique that suggests spending 50% of your income on your needs, 30% on wants and 20% on savings and extra debt. A budgeting app that does not serve as a guide to helping you understand your finances so that you can make smarter decisions in the future is probably not serving you well.

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Open banking is a new technology that allows third parties (such as budgeting apps, payment processors, banks, lenders, credit rating agencies, and other financial institutions) to view your bank and other financial transactions in real-time or make payments on your behalf with your permission.

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In simpler terms, with open banking, you can share information from your bank, pension, investment, crypto or loan accounts with third parties.

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When you give this kind of access to third parties such as budgeting apps or credit rating agencies, it allows them to view all your bank transactions, make payments on your behalf or aggregate all your transactions across different financial providers to give you a complete picture of how you spend your money or a sense of your creditworthiness. The Financial Conduct Authority (FCA) monitors and regulates open banking activities.

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The easiest free budget app in the UK that does not require you to link your bank account is Budget by Koody.

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