How to Create Budgets with the Financial Coach?

Step 1: Download the App and Connect Your Banks

If you’re not our client yet, it is necessary to download the Finax app from either App Store or Google Play and create a free investment account via registration. The registration is non-binding, and you may use all the functions of the Coach without making a single deposit. Upon finishing the registration, you just need to connect your bank accounts to Coach.   

Step 2: Find Out How You Spend Your Money

Look at your expense overview. Your four largest expense categories will immediately appear on the Coach homepage. Tap the Financial analysis > button for a more detailed overview. You can tap each of the listed expense categories to break them down into further subcategories. The purpose of this feature is to help you identify areas where your spending might be higher than you originally thought.

Three special expense categories 

When using the Coach, you will likely come across some special types of transactions, which you should set up according to your preferences.

a) Expenses you wish to exclude from the overview

If there is a payment you don't want to include among your expenses or income (for example, transferring money between your own accounts, one of which isn’t linked to the Coach), simply open the payment detail and turn off the option: Include in analysis. 

b) Rules for uncategorized payments 

Coach categorizes most bank transactions automatically. However, it might not be able to do so in certain cases, especially with foreign payments or bank-transfer purchases. In such cases, you can assign the category yourself. If it’s a recurring payment, you may create a rule – just fill in the word base included in the payment’s description and the Coach will categorize it automatically next time.  

c) Cash and credit-card payments 

If you withdraw cash from an ATM

• and use the entire amount for one payment, you can just assign the expense to one particular category,
• if you use the cash for multiple payments, you can click on Split the payment and assign it two or more categories,

• if you don’t know how you’re going to use the cash yet, just label it as ATM withdrawal in the payment detail, and the Coach will automatically increase your cash balance by that amount. Don’t forget to record cash payments through the large round button at the bottom (option expense will pop up after tapping it).  

Similar situation occurs when you pay off credit card debt. You can use the three options above in this case as well. However, the most practical solution is to set up a separate cash account and record the expenses manually, since the Coach is unable to recognize them yet.  

Step 3: Determine Where You Can Save

How much should you save every month? 

Most households aspire to save at least 10% of their income and invest it reasonably afterwards. Of course, the more you can save each month, the sooner you will reach your financial goals. However, don’t do it at the expense of the quality of your life too much. It is important to enjoy your money as well.

Dedicate 60% of your income towards necessities, i.e. groceries, rent, transportation, insurance, etc. Allocate the remaining 30% to “nice-to-have” expenses which make you happy, i.e. trips, sports, hobbies, fashion, electronics, etc.

If you need to save up some money quickly, then start by cutting the “nice-to-have” expenses, as they aren’t necessary for survival. That, of course, doesn’t mean it will be easy. It shouldn’t even be your long-term goal. However, in case you don’t have an emergency fund or need to save for another urgent target, cutting these is more than advisable.  

In the long run, saving on necessities is the most efficient approach. That, however, requires more radical changes. Here are a few ideas:

• Transportation: „I will work from home for two days a week/I will use the public transport/I will bike.” Alternatively “I will try to find accommodation closer to work”.
• Telecommunications: „I will thoroughly go through the available offers of the telephone/internet providers and find a better, cheaper, deal.”
• Banking: „I will open an account at an online bank with lower fees.”
• Accommodation: “With a more minimalist lifestyle, I could live in a smaller apartment.”

Step 4: Learn About Your Average Expenses and Create a Budget

Your average expenses will help you set a budget for the upcoming months. You will find them upon opening the Budgets section. Click on “New” and choose the desired category, e.g. Food>Groceries. The Coach will show you a bar chart displaying how much you’ve spent on that particular category in the previous months and will allow you to set up a budget immediately.

We recommend splitting at least the following expense categories into further subcategories:

• Food: Groceries and dining out
• Transport: Public transport, Fuel, and Insurance

When viewing the budget, the Coach will use a dashed line to mark the time of month you’re currently in. You will be able to easily check whether you’re spending at the right pace, whether you’ve gone over the budget, or how much more you have left to spend until the end of the month. This comes in particularly handy with budgets from which we spend on a daily basis, such as grocery shopping. You will find a simplified budget overview on the Coach homepage as well. 

When creating your budgets, start with the necessities. As they have to be covered at all times, include them in your budget as first. You will then split the remaining amount between nice-to-haves and investing.

Continue with designating some amount for investing. If you don’t have an emergency fund for unexpected expenses yet (small repairs, prolonged sick leaves, etc.), start building it up as your first saving goal. Once you have it, start saving for retirement. Besides that, use a portion of monthly savings to reach other financial goals, such as the education of your kids, vacations, or a new car.

Lastly, take care of the nice-to-haves. Let’s be real, most of us have much more desires than money. If you don’t know how to divide the rest among the things that you want, try a simple exercise. Write down 10 things that make you happy. It might be time spent with your family, walks in nature with your dog, coffee dates with friends, whatever… Then prioritize expenses related to the items on your list when allocating the rest of your budget (and cut out those which didn’t make it there). This should allow you to keep living a fulfilling life while saving money.

Keep in mind that a budget doesn’t constitute a spending ban, it is a permission to spend without regret. If the Coach shows that you can afford something, go ahead and use the money as you please.

Six tips to conclude the article:

1. Each month, adjust your budget to any special events that await you (e.g., birthday celebrations of your friends, Christmas, etc.).
2. Spread big expenses (e.g., a vacation or insurance payments) across multiple months.
3. Don’t forget to keep track of cash payments.
4. Don’t be too hard on yourself. If you can’t stick to your budget for a month or two, don’t give up. You will surely fine-tune it over time.
5. Be at one with your partner and plan the budget together.
6. Have clear goals in mind, so that you will always have a reason to continue.

You have taken an important step towards financial health – you acknowledge your habits, you have a plan, and you work to improve yourself.

We’re happy for you and wish you lots of success!