- Automating a Simple Personal Finance System with Monzo (2023)
- 1. Monzo Plus (Daily Spending)
- 2. Monzo Pot (Bills)
- 3. Monzo Flex (Credit)
- 4. Marcus (Short-Term Savings)
- 5. Vanguard S&S ISA (Long-Term Savings)
- How can I simplify this further?
- What to do with surplus disposable income?
- What if I don’t like index funds or equity investing?
- What about pensions?
- What if I don’t like Monzo?
- Should I overpay my student loan?
- Should I overpay my mortgage?
- Further Reading
- Recent Posts
Automating a Simple Personal Finance System with Monzo (2023)
By @Charlie Revett on @May 16, 2023
Two friends from work were interested in understanding how you can use Monzo for an automated personal finance setup. I think a practical example would be useful for others, so I am sharing it here.
As with any personal finance blog post, I’d like to start by saying:
- This is information; not financial advice or a recommendation
- Rates, products, and service providers change regularly so have a look yourself
- This aims to take the best practices from the world of personal finance and package them in a simple, automated setup; thus is not designed for best-in-class returns and is aimed at beginners
My goals with this system are:
- Set and forget; it should automate within reason
- Minimalist; you shouldn’t need a spreadsheet to track your different accounts
- Transparency; it should nudge you in the right direction when budgeting
The system should provide:
- A main account just for daily spending, with budgeting in mind
- A separate account for paying bills
- Access to credit for additional monthly cash flow
- Instant access savings for short-term saving goals and an emergency fund
- Long-term tax efficient savings via index fund investments
1. Monzo Plus (Daily Spending)
- Go full Monzo via a current account switch
- Upgrade to the Plus account as we’ll need Virtual Cards for automating paying bills, and the 1% AER/Gross up to £2,000 is a nice-to-have
- Your salary should be paid into this account, and you’ll use it for daily spending
- It should only have what is required for your monthly budget, extra disposable income should go to savings
2. Monzo Pot (Bills)
- Create a Pot called “Bills” and enable a Virtual Card for it
- Configure all direct debits and subscriptions (e.g. Netflix) to be paid from the pot
- Having these payments separated from your Monzo Plus daily spending account will make budgeting much clearer
- Create an automatic deposit on the 1st of the month from your Monzo Plus account, which covers the total amount for bills per month
3. Monzo Flex (Credit)
- Sign up to Flex, which allows you to purchase something and pay it back over 3 months interest free
- Use this for additional monthly cash flow if necessary, for example to buy a flight
- Having this within Monzo instead of a traditional credit card provider makes a huge impact on the transparency of your spending, it’s all too easy to spend over what you planned when transactions sit in a different app
- Frustratingly, Monzo doesn’t allow you to configure the default payment duration, therefore for each transaction you’ll want to set it to the “1 month” instalment plan
- This is to ensure that you start each month with £0 to pay back in your Flex account
4. Marcus (Short-Term Savings)
- Open a Marcus Online Savings Account (instant access) to house your emergency fund and any short-term savings (e.g. mortgage deposit)
- Create a standing order from your Monzo Plus account for the 1st of the month, which regularly contributes to your short-term saving goals
- An emergency fund refers to savings that are specifically set aside to handle unexpected expenses, ideally 1 to 3 months worth of salary
- The emergency fund should be ignored until required, it will need to be replenished manually from your Monzo Plus account on the rare occasion it is used
5. Vanguard S&S ISA (Long-Term Savings)
- Open a Vanguard Stocks & Shares ISA to house your long-term savings
- Create a standing order from your Monzo Plus account for the 1st of the month, which regularly contributes to your long-term saving goal by investing in an index fund
FTSE Global All Cap Index Fund Accumulation
How can I simplify this further?
- Remove the use of a Monzo Pot for bills; instead paying for them from your main Monzo account, which now no longer needs to be a Plus account
- Replace the Marcus savings account with one from Monzo to reduce the number of service providers from three to two
What to do with surplus disposable income?
- Either; open a Vanguard GIA and further invest in the same fund as your Vanguard S&S ISA within this new account
- Or; contribute to your workplace pension whilst claiming additional tax relief
What if I don’t like index funds or equity investing?
- Read in to the LifeStrategy funds that Vanguard offer, as they have a mix of bonds which will reduce the overall risk (and expected yield) of the investment
- Alternatively; you can avoid investing via a S&S ISA, and instead only make use of your Marcus account, or read in to Cash ISA accounts
What about pensions?
- Ensure you’re contributing enough to your workplace pension to receive the maximum employer match, and enrol in salary sacrifice if your employer offers it
- Open a Vanguard SIPP and transfer all old employer pensions over to this account
- You’ll pay fewer fees, have access to better funds, and it will be far easier to keep track of them all within a service provider you’re already using for your S&S ISA
What if I don’t like Monzo?
Should I overpay my student loan?
Should I overpay my mortgage?
- I’m personally against doing this, however I think it heavily depends on the psychological benefit it provides to you and current interest rates
- Read → UKPF: “How do mortgage overpayments compare to savings or investments?”
- ukpersonal.finance - much of this was learnt by amending the UKPF flowchart
- monevator.com - a wealth of knowledge going back many years
- 📚 “The Richest Man in Babylon” by George Clason
- 📚 “The Psychology of Money” by Morgan Housel
- 🐈 created by @viglomir on the Midjourney Discord