I’m writing this article because I often find in conversations that managing one’s finances is a topic many struggle with, especially among students and pupils who haven’t learned it at home. So, I’ve written an article that I can always share:
I’m a big fan of budgeting, which means I plan relatively precisely how much money I want to spend on what each month. To make sure I don’t run out of money before the end of the month, I set aside money for different purposes at the beginning of the month into (virtual) envelopes. For example, for:
- Household
- Subscriptions
- Mobility
- Savings
- Vacation
My experience is that if you don’t budget, you end up spending more money than you intend to. Especially when it comes to saving, I find it important to set aside the savings amount right at the beginning of the month, rather than saving whatever is left over at the end. Budgeting also makes decisions easier. For example, if I want to learn a new instrument like I did last year, I can determine how much I’m willing to spend on lessons, equipment, maintenance, etc., in order to stay within budget.
In the past, this was quite a complex process. You could use paper envelopes for different categories, plus a checking account, plus a savings account, etc. Or you could keep a household ledger. That requires a lot of discipline and can be time-consuming. Managing everything from one checking account still feels tricky to me.
How does it work exactly?
I share some details about my budgets here. Every month, I set aside money for the following areas:
- Mobility: €100. I don’t own a car, and I get around by walking, cycling, sometimes using Cambio, occasionally taking an e-scooter or Moia, and I also use the HVV (Hamburg Public Transport) or the train. I don’t want to spend more than €100 a month on all of this. Most of the time, I stay well under €100, but when I have to make a longer trip, like to Berlin, it’s good to have a reserve. When e-scooters first came out, I initially spent a bit too much on them; of course, it was new and fun, but then I realized I was spending too much on them.
- Health: €50. I have health insurance with a deductible, and I set aside money for that every month. In addition, I pay for anything the insurance doesn’t cover. If there’s any money left over at the end of the year, great, then it goes into my investment account.
- Subscriptions and Membership Fees: €70. This includes Apple Music, my membership with D64, etc. I find it important to keep subscriptions separate because even if each one costs only a few euros a month, it adds up over the year.
- Household Account: I won’t reveal the exact amount, but we try to stay within budget here. Ideally, you have a shared account with the other household members.
- Vacation Fund: I am currently saving for this with Growney.
- Pocket Money: €200. Yes, I pay myself pocket money 🙂 I use it, for example, to buy fish sandwiches. But I also try not to spend it all so that I can treat myself to something more occasionally. I also financed my flute this way.
- Savings: I won’t disclose the exact amount, but I diversify my savings across different platforms—Growney, EstateGuru, Scalable, my financial advisor, and a solid reserve (3-6 months of salary) in a high-interest savings account.
In addition, there are areas for which I prefer to have separate accounts:
- A small business account, through which I handle everything related to my side business (teaching assignments, book royalties, Google AdSense for income, web hosting, etc., for expenses). I like to keep this separate because the tax office will eventually want a piece of it, and it’s also easier for me to manage the taxes this way.
- A property account, where everything related to my real estate is handled, such as rent, loans, management fees, property tax, etc. Occasionally, something needs to be repaired, and it’s always good to keep this separate from other budgets to avoid confusion.
If I had everything in one account, it would be complicated to keep track of. Sure, it’s possible, but I prefer to pay for the ability to keep everything separate and have things run automatically. Yes, it doesn’t sound particularly minimalist with multiple accounts, but I try to keep the effort as low as possible so that I don’t have to spend too much time on it.
Current accounts with sub-accounts
As I mentioned, some neobanks now offer current accounts with sub-accounts. N26 was, in my opinion, quite ahead with their Spaces. It’s a really good idea, especially because it encourages people to start budgeting their money. But for everything to run automatically, these Spaces need to have their own IBANs. Initially, they didn’t have them, but now they do. Unfortunately, the money didn’t always arrive reliably in my sub-accounts. And the support wasn’t very helpful. I don’t see why I should pay to be treated poorly. Even though N26 was the only one of the candidates to offer me an overdraft right away, which can sometimes be quite helpful.
bunq was my favorite for a long time, partly because they offer features that were really helpful, such as virtual credit cards. This allowed me to assign a unique virtual credit card to each sub-account. It was a great feature because I didn’t have to move money around all the time; I could book things like MOIA directly from the Mobility account. Unfortunately, like with N26, I ran into the problem that money didn’t always reliably show up in the sub-accounts after the German IBANs were introduced. When Google sent me a message that a payment had been returned, and bunq then told me that I wasn’t cooperating because I wasn’t getting Google to release more information, that was the final straw for me. I had already been frustrated with bunq’s overcharging, then the really rude support – no, I don’t want to pay for that, no matter how good the account is. So, I left quickly.
Now I’ve ended up with Vivid and am testing their offer. Like bunq, Vivid also offers virtual credit cards, but you have to pay €1 for each. I think it’s worth it. Vivid also doesn’t offer a debit card, which is a shame because you still need one often, something that both bunq and N26 provide. The signup process wasn’t entirely smooth for me, with lots of problems. BUT: The support is incredibly friendly AND actually helpful. Let’s hope it stays that way and that I’m not treated condescendingly like I was at N26 at some point. N26 also had great support in the beginning.
Vivid has the downside that its interface has too many bells and whistles I don’t need and can’t hide. I don’t want a stock rewards account, and the cryptocurrency features aren’t something I need, especially since you don’t have your own wallet. I would find that really interesting. But the Vivid account solves my problem of wanting to budget and automate things. However, I still have my salary transferred to a classic account with ING. Eventually, I would like to only have one account.
I also find Tomorrow interesting and would love to use them, but unfortunately, they don’t offer IBANs for their Pockets, which are similar to the Spaces at N26. When I asked, they said it was on their radar, but they couldn’t say when it would come.
What I don’t understand: Why aren’t direct banks doing anything about this? DKB offers an additional account, and so does ING, but more than one isn’t possible. Both banks responded with corporate blah blah to my inquiry. Both offer free current accounts and could finally make money from current accounts. But something is stopping them. I find it completely incomprehensible.
Conclusion
In conclusion, it can be said that no bank completely solves the problem. While direct banks offer very friendly support, they fail to launch accounts that enable proper budgeting. And the neobanks mainly suffer from poor and unfriendly support (except for Vivid), as well as bugs or missing features that don’t occur with the larger banks. I believe there is a real opportunity to solve this problem, but maybe not enough people see it as an issue that they can’t manage their finances without budgeting 🙂 Or when you think of overdraft fees, maybe these are just too good a source of income for banks to want to help customers manage their money more wisely.