You’re going through the same thought cycles that I did at the beginning of this topic
I think I vaguely understood in the end but it sounds like a complex feature to build. As others mentioned there are different approaches to get the same result that the OP is after but it does seem very niche.
There is no bad idea though, so I wish it all the best.
If it is about “recovering” the savings spent in the one-off, you’d just do what you were doing before the one-off payment. To make that into a “budget” you’d have to be able to toggle movements to pots as an actual “spend” which I kinda get - its more the idea/concept of “spreading the cost” you’ve already spent it so there is no cost to spread.
If it helps others and works for them and is easy to implement go for it - that I guess is the wonderful world of personal finance!
But if you carry on as usual you’d end up with less savings than if you used the “spread the payment over future budgeting cycles” idea.
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For example
Bob puts £100 per month into savings at the beginning of each month. Any money left over at the end of each month is also added to savings. His current total savings is £2000.
Bob has a one-off payment of £1000 and he uses his savings to pay for it. Bob now has £1000 in his savings.
Scenario 1 (spread cost of payment)
Bob spreads the cost of the one-off payment over his budget for 10 months. This reduces Bob’s budget by £100 each month for 10 months.
After the 1st month, Bob saves his normal amount of £100 + an extra £100 due to his reduced budget. Bob now has £1200 in savings.
After the 10th month, Bob has £3000 in savings. This is the amount he would have had if he hadn’t made the one-off purchase 10 months ago. The £100 per month deduction from his budget is removed automatically.
Scenario 2 (carry on as normal)
Bob doesn’t spread the cost of the one-off purchase. He continues to save as normal.
After the 1st month, Bob saves his normal amount of £100. Bob now has £1100 in savings.
But where does it end? If you have a £1,000 one off payment one month and then another £1,000 one off in three months time - you’re going to get to the point where you have no budget left to spend on things you need to live.
I get the idea but it just doesn’t make sense to me - that is what savings are for - one-off payments that you can’t afford in a typical month. It doesn’t truly “spread the cost” because the cost has been incurred. It is then up to you on how you want to continue saving.
For me Scenario 1 doesn’t work - you’re not in arrears of saving because you spent those savings.
Scenario 2 is how saving works in my mind works - you build yourself back up with what you can afford - you don’t punish yourself for making the payment out of savings.
Well, this feature clearly wouldn’t be able to cope with that kind of spending. You’d either have to not spread the cost of one of the transactions or spread the cost over a longer time period.
You could, of course, make one (or both) of the payments using your savings and not account for it in future budgets, but this would damage your long term savings.
I think your view works for short term savings towards things like holidays or a planned new phone purchase and I would still use that method to save up for things like that.
However, if you want to meet a long term goal (eg: a house deposit, saving for retirement), I think exclusively using your method is restrictive as it can’t take unplanned, essential payments (eg: replacement phone or a broken car) into account as you can only pay for these by reducing your long term savings.
It’s not the spending that it can’t cope with, its the concept - eating into your budget for things you’ve already budgeted for is like being double charged (whether that one-off payment is recorded or not).
But it doesn’t - that’s what savings are for. If I save up £20,000 for a house deposit, that’s what I was saving for, that’s why I was putting £200-300 away a month. Why would I then, after having saved up for it, want it to be reflected in my monthly budget? My long term and short term savings are the same, once I have enough to pay for it, I buy it.
How so? If it is in my rainy day pot for example I can spend it? If I make a provision in my budget for £50 a month to go into my “rainy day fund” why do I then need to punish myself for taking the initiative to do that?
On the retirement fund point, I wouldn’t take money out of that pot - I’d leave that as a phone replacement isn’t retirement. The problems here seem to lie in having 1 “pot” with no determinable goals.
For a personal example. I am saving up to have my watch serviced. I know the cost and I know when I want it serviced. So I made a provision to put £30 every pay day into a locked pot until I have the money needed. When I have the money needed I will pay for the service and then decide what I want to do with that previous £30 a month I was sectioning off, I won’t think to myself “I need to get that money back as quickly as possible because I don’t need that money for that thing anymore”.
Is this not just money management then and not a need for a new feature like this? You shouldn’t have a single savings pot and goal, if you’re saving for a big thing like that. You want an emergency fund as a separate savings you can dip into for necessities. Otherwise if you’re saving for something like that and want to buy something large as a good thing surely you should be saving for that other thing separately and not dipping into your specific savings. I realise I’ve just said the word savings too much.
Completely disagree with your view that it’s like being double charged. When you select the payment to be spread across multiple budgets, the parts of the payment included in future budgets obviously wouldn’t be included in the budget of the month you make the payment.
This feature essentially reduces your future spend to replace the amount you’ve temporarily taken from your savings, so you’re basically paying back the money you’ve borrowed, interest-free from your own long term savings.
How is this in anyway double charging yourself?
I guess depends on how you save.
Some people may set separate short term savings goals (eg: buy a new phone) and long term savings goals (eg: house deposit). This feature would be useful for these people.
Other people might treat their long term and short term savings goals as the same. Although, to me, this method doesn’t seem to have a good long term plan.
Your watch example is a different type of saving, which I do use and I believe works well. If I’m saving up to buy something, I would use that method.
I’m talking about expenditure you haven’t planned for.
If you have some necessary, but unplanned, expenditure (eg: phone breaks, car breaks down etc…) that you need to pay for, you’d have to use some of the money you had been saving for other things (eg: fixing your watch, saving up for retirement etc…) to pay for it.
However, you don’t want to lose all the progress you’ve made towards your other goals (especially if those goals are time sensitive). So you reduce your spending budget for a few months and put more money towards your savings goals until you’re back on track. This is what the feature does. (NB: obviously you would try to avoid using money from a time-sensitive goal with a deadline in the near future to pay for the unplanned expenditure.)
Some people, yourself included, have a separate “Rainy Day” fund which is specifically set aside for unplanned expenditure. However, what happens if the cost of the unplanned expenditure is more than the amount in your rainy day fund - you’d have to borrow the money from one of your other savings goals (eg: retirement fund) and then pay the amount borrowed back in at a later date. Also, some people like to have their Rainy Day fund at a certain level and so would still need to reduce their spending to bring it back up to a level which they are happy with.
This feature would allow people to bring their long term savings and/or Rainy Day fund back to previous levels after unplanned expenditure.
But it increases your spend? Your overall spending for each month is increasing leaving you with less? Thats why its like being double charged - you’ve already made the payment and yet still paying for it.
I just think allowing to “spread the cost” of something that you’re not really spreading the cost of, could in some situations actually be detrimental to someone finances.
I don’t debate the logic you provided - but in those instances, rather than dipping into savings, would a 0% credit card not make more sense? It just seems strange to increase the amount you are putting away (it also assumes that it is possible to put more away than is already being done).
If this happened to me (it has done recently actually) - I just focused on the savings pot that was most crucial first - which was getting the rainy day back up and running - I wouldn’t target all pots at once and increase the amount I save - mainly because I can’t because my budget is maxed as is with my current savings plan.
My point stands that if you pay £1,000 and want £1,000 back in a pot in 10 months and would on a month put £100 in a pot anyway - saying “just increase to £200” isn’t always an option, and if it is - does this really need to be “budgeted for”.
If you really wanted to “spread the cost” of something I would get a credit card, or something similar.
I really enjoyed this discussion and it kinda makes sense although I can’t really see the use case for it - if it helps someone else and Monzo can implement it - why not!
It doesn’t increase your spend, it increases the amount you save by effectively reducing your budget.
If someone’s budget is reduced, they should spend less per month (assuming you stick to your budget). This means they’ll have more money left over at the end of the month to go into savings (although they could put that money into savings at the beginning of the month instead - it makes no difference).
NB: I’m assuming this person sticks to their budget every month.
That’s true, you could use a 0% credit card (if you’re eligible for one).
However, you would still need to reduce your budget every month to pay the credit card off. So the process would be exactly the same as the one for the suggested feature, except you’d be paying off your 0% credit card each month instead of putting extra money in your savings.
It could even be argued that using a 0% credit card to buy stuff would be a use case for “spreading the cost of a purchase for a set duration”:
Buy something for £1000 using a 0% credit card.
Manually add £1000 to be spread across your budget for 10 months. This reduces your budget by £100 each month.
Every month, use the £100 saved from reduced day-to-day spending due to your reduced budget to pay off your 0% credit card.
Completely agree.
It makes loads of sense to use the extra saved each month from the reduced budget due to spreading the purchase (ie: the extra £100 saved each month in the example above) to focus on the savings pot that was the most crucial first.
Fair enough. If someone’s budget is fully maxed out, I could definitely see how this feature wouldn’t be useful to them.
However, if you are able to cut back spending in certain areas this feature would be useful.
For example, if your car breaks down and you need to pay to get it fixed ASAP, you could spread the cost of your purchase to reduce your Shopping and Eating Out budgets until you’ve built your savings back up.