Could Someone Give me Advice on Budgeting Tools within Monzo for Managing Variable Income?

Help
1

Hello there, :wave:

I recently started freelancing full time; and with my income now fluctuating each month; I am finding it challenging to budget effectively. I have been using Monzo for a while and really like the tools it offers; but I am not sure I am taking full advantage of everything that could help me manage an inconsistent income.

I am mainly using the budgeting feature to set targets and keep track of my spending categories; but I would love some advice on specific Monzo tools or strategies you all use to stay on top of things when your income is not steady.

I have read a bit about the Pots feature; and I am wondering if creating multiple Pots for things like taxes; savings; and even a buffer for slower months would help me stay organized. Has anyone here found success with a similar setup? :thinking:

Also; I have gone through this post; https://community.monzo.com/t/looking-for-advice-guides-on-using-monzo-for-budgeting-ccsp/ which definitely helped me out a lot.

I am open to suggestions on budgeting frameworks that might pair well with Monzo; or specific tips on how to make the most of Monzos budgeting tools under these circumstances.

Thanks in advance for your help and assistance. :innocent:

2

Hi! Welcome.

First things first, I would set up a business account. You don’t have to have one, but it might help you with the segregation.

Then I would work out what your average pay/earnings/needs are for each month. Set up a bank transfer for that amount each month from your business account to your personal account.

If you have any direct debits etc, these can easily be paid from a pot. When your transfer comes over, you can either have more transfers to pots or use salary sorter.

If you have things like Netflix that charge your card each month, they can be paid from a pot but only with a virtual card and you’ll need a paid plan (Extra is £3 a month)

So (for round numbers) you’d have something like this…

Business - Income £1724
Transfer to personal - £1500

Transfer to DD pot - £300
Transfer to virtual card pot - £200

Set target to £1000 and away you go!

Your bills/payments are covered and you have your money set for the month. There is a surplus building in your business account so next month if your income was only £800, the transfer will still go through.

Another good thing to do is to go through your bank statements (this is a bit easier if you can use excel and download the CSV) and see what and where you’re spending each month. Is there an Amazon Prime sub that you don’t use, the gym you haven’t been to since May, are you spending £100 a month on sausage rolls. See where your money is going.

You can having pots for anything too. Maybe you’re saving for a house/car and want to add £100 a month. Or you know your insurance will be £360 next year so you want to save £30 a month to cover it so when the time comes, you’re covered.

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3

Hi Drake,

In addition to the good advice above from Revels, you might want to consider some of the following.

Monzo do forbid personal accounts for being used for business purposes in their T&C, but aside from that it’s just easier to keep business and personal separate by using a business account.

You don’t say if you’re working as a sole trader, a limited company, through an umbrella company etc. so I don’t know how much of this will apply to you but…

Do you need to set aside a portion from each invoice for corporation tax?

Do you have an accountant? If so, divide their annual fee by 12 and set aside enough each month to pay them at the end of each year. Note that a good accountant should save you money, despite their bill :slight_smile:

Do you have to pay insurance such as professional indemnity or public liability? Again it’s a good idea to save for this over the 12 months so you can cover this each year.

If you’re paying yourself, do you need to pay a professional payroll provider to give you payslips, a P60 at the end of the year, and calculate your NI liabilities (employer and employee).

Will you pass the threshold for VAT registration? If so, and you’re sorting the VAT yourself, you’ll have to submit VAT returns electronically which requires software which also comes at a price. You should also put the VAT element of any invoice payments from clients into a pot so you can pay the VAT when it’s due.

If you’re paying dividends as well as salary you’ll need tax documentation, and for these to be declared on your personal tax return.

Can you afford to make employer pension contributions? These reduce corporation tax.

Finally if you have excess profits at year end, you can pay a lump sum employer contribution into a pension to reduce your corporation tax.

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