The Salary Calculator

Personal finances in the digital age

by Madaline Dunn

There’s no escaping the fact that technology has revolutionised personal finances. We’re currently in the depths of the digital era, where almost everything finance-related has a tech element. It’s helped people streamline everything from bills to budgeting, with mobile phones acting as a personal finance hub in people’s pockets.

This week, at The Salary Calculator, we’ll explore the different ways tech and digital have transformed our personal finances for the better…and worse, including:

• Automation in personal finances
• How your phone can act as a personal finances hub
• How people are learning about finances through new mediums
• What the future holds for digital personal finances

Automating personal finances

Gone are the days of bankbooks, paper bill bank statements and cheques (for the most part). These days, with an internet connection, you can access a wide range of automated personal finance services. This has led to a significant reduction in the number of bank branches across the UK; recent figures show that, since January 2015, the number of banks and building society branches that have closed, or have scheduled to close, is 5,579.

Automation comes in a range of forms, including:

• Automatic bill payments,
• Automatic fraud alerts,
• Bookkeeping: What began with Excel has morphed into more modern accounting tools such as Xero, QuickBooks, FreshBooks and Zoho Books, which streamline and simplify bookkeeping.
• Automatic savings and emergency funds,
• Automatic retirement and investment contributions.

That said, it’s important to note that automation is not without its downsides, and some warn against the increasingly popular “set it and forget it,” approach arguing that “out of sight” becomes “out of mind,” and that when you’re not required to engage with your spending habits, you may forget about a monthly service you’ve signed up for. However, in the digital age, there’s an app for that too; Emma, for example, allows you to see all your subscriptions in one place, and get rid of the ones that are no longer useful to you. There are other risks though, too; for example, automated finances can lead to you becoming overdrawn and incurring fees; it’s also true that you can miss potential errors and signs of scams.

Your phone as a personal finances hub

In 2023, phones are more advanced than they’ve ever been, and it’s no wonder, considering that technology has been growing exponentially, doubling every one and a half to two years since the 1960s. Of course, the technology’s evolution has come with a raft of apps to simplify day-to-day life, and give you more control over and confidence in your finances.

Research from Plaid found that these days, people in Britain use an average of three fintech apps to manage 67% of their money online. According to the study, the majority of those using the apps feel confident in their usage of technology to manage their money, perhaps explaining why the number of online services usage is set to increase by 25% in the coming six months.

Some of the most popular personal finance apps include:

• Money Dashboard – This app is considered a bit of a pioneer in the personal finance management world. It’s a free app which helps you keep track of your personal finances and spending by pulling in information from your online banking accounts, keeping it all in one place. It allows you to view and categorise your spending, review your spending activity, set budgets and pay cycles, and track your subscriptions. It’s also FCA regulated.
• Splitwise – Perfect for household finances; if you live in shared accommodation, are planning a holiday trip, or dining out with a group, this app allows you to add different bills, keep track of money-owed, do the number-crunching, and make sure bills are settled – which will be a relief for those who hate excel spreadsheets.
• Chip – If you’re looking for a stress-free way to save, Chip is often highlighted as a good go-to. It utilises AI to gauge how much you can affordably save based on your typical spending habits. It also doubles up as an investment app, and allows access to a curated selection of funds from some of the world’s biggest asset managers. This brings us on to our next point…

Not only do phones allow you to keep track of purchases, spending, and budgeting, you can now access investing on the go. Research shows that, at this stage, people even prefer to invest via their phones. Brokerchooser.com research, for example, revealed that 53% of people in Britain now choose to invest this way; although it also highlighted that the majority of mobile investors are beginner investors. The Royal Mint, which recently conducted a study into the investment habits of young people, has also found that around 80% of young people are now investing. Nutmeg, InvestEngine, and eToro are cited as some of the most popular investment apps in 2023.

TikTok as a math teacher

As recession looms, the cost of living crisis cripples, and inflation and interest rates balloon, it’s never been more important to be in-the-know about personal finances; and considering that finance education is still lagging behind in traditional education settings, more and more people are turning to the internet for financial education and advice.

With around two-thirds of young people citing a “lack of financial education” as one of the primary reasons that led them into debt, it’s no wonder that more people are trying to enhance their financial literacy. Research from Tommys Tax even shows that currently, as many as 60 per cent of people choose social media, specifically, as their primary tool for accessing financial advice and information. Right now, one of the popular social media platforms for this comes in the form of “FinTok,” the financial side of TikTok, populated by so-called ‘Fin-fluencers.’

It’s important to note that while this is undoubtedly a great starting point for equipping yourself with the tools you need to take control of your finances, it shouldn’t be your only source, and not all information you find on “FinTok,” and the like will be reliable, or, indeed, advisable. There are no educational or professional requirements when it comes to wearing the ‘Fin-fluencer’ hat, and views are profitable, meaning that while it can be a great source for personal finance information, there are also a lot of sensationalist videos.

Some helpful FinTok content creators include:

• Humphrey Yang of @humphreytalks
• Taylor Price of @pricelesstay
• Seth Godwin of @seth.godwin

It’s also worth noting that around 14 million people in the UK have a low digital capability, and a staggering two million households are struggling to pay their internet bills; so digital access is still not at the level it should be.

Taking digital one step further

While the personal finance world is nearly unrecognisable from the one that existed just ten years ago, more change is afoot, and digitalisation and evolving technology will continue to change the landscape. Experts predict that AI and blockchain will have more of a presence in finance automation and organisation. Further, with continued inflation and the rising cost of living, which unfortunately, shows no sign of slowing, predictions are that more people will seek out additional revenue streams through digital currencies. Brands are also increasingly adapting their payment processes to these digital currencies, too and some commentators predict the further merging of cash and crypto.

Likewise, a recent study by Link, predicted that cash payments are likely to fall to as little as 10 per cent of all UK transactions in the next 15 years. That said, recent research has also shown that paper cash reached a 13-year high amidst the cost of living crisis, so it appears paper money is here to stay, at least for the time being.

Elsewhere, some believe that, despite the MetaVerse being in its infancy and experiencing a number of challenges and failures, it will eventually have more of an impact on personal finances. For example, we are already seeing digital “property” ownership, and metaverse cryptocurrencies.

Tags: Financial education, fintech, investment, Pensions, savings

The new budget and how it will affect personal finances 

by Madaline Dunn

The new budget was announced as the country faces widespread industrial action, the continued cost of living crisis and record inflation. The first big budget since Kwasi Kwarteng’s budget under Liz Truss tanked the economy, it comes while the country faces the biggest ever fall in living standards. Moreover, projections are that the country’s tax burden is to reach a new post-war record.

You’ll likely have heard that this Spring Budget has some good and some bad parts, so at The Salary Calculator, we’ll guide you through what you need to know and how you’ll be affected. We’ll walk you through the following:

• The budget highlights
• Pension pot changes
• How your take-home pay will likely be affected

Budget highlights

While this Spring budget sent fewer shockwaves across the UK (and the world) in comparison to the last, there are a number of budget highlights to take note of.

The planned rise to the Energy Price Guarantee (EPG) has been delayed, which means that it will remain at its current level for another three months; this means that the average household bill will stay at around £2,500 a year. Further to this, prepayment energy meter bills will be aligned with direct debit, leading to savings of around £45 a year for prepayment customers.

Further, the freeze on income tax and national insurance thresholds has been extended until April 2028. This means that the income tax personal allowance will stay at £12,570 until April 2028. The threshold for top-rate taxpayers of 45% will also fall from £150,000 to £125,140.

Childcare support was another key highlight in the budget. Currently, according to the OECD, the UK has the most expensive childcare costs than anywhere else in the economically developed world; so these new measures are long overdue.

There will be a phased introduction of this enhanced childcare support, as follows:

• From April 2024, working parents with children two and over will be given 15 free hours a week.
• From September 2024, these 15 hours will be extended to all children over nine months old and be introduced from maternity leave’s end.
• From September 2025, those who are eligible with children under the age of five will be provided with 30 hours of free childcare.

In addition, there will be a change in how support is delivered to those on the lowest incomes. For those using the Universal Credit system, childcare costs will be received upfront. That being said, the childcare support changes have not been without criticism. For example,

Child Poverty Action Group’s Chief Executive Alison Garnham outlined that the stringent job-search requirements for parents on universal credit (UC) are “concerning.”

In April, the National Living Wage will rise to £10.42 per hour from £9.50 for over 23-year-olds. Meanwhile, for those:

• Aged 21 to 22 years, it will rise to £10.18,
• Aged between 18 and 20, it will increase to £7.49,
• Aged 16 to 17 and apprentices, it will rise to £5.28.

Additionally, further to Hunt allocating local authorities the power to charge more Council Tax without holding a referendum (5%), from 1 April, 2023, millions will be faced with the biggest council tax hike ever, with three in four councils increasing council tax by the maximum amount allowed.

For consumers, it’s also worth noting that there will be a 10.1 per cent rise in alcohol duty rates in line with the Retail Price Index (RPI), which means that a bottle of wine could increase by 44p. However, due to the Draught Relief scheme, the tax on draught beers will remain the same from 1 August. Duty rate on all tobacco products will rise by 2 per cent above RPI inflation, too. Hand-rolled cigarettes, specifically, will see an additional 6 per cent rise above RPI.

Pension pot changes

The budget detailed significant changes to pensions. The annual pension allowance (how much you can pay into your pension and get tax relief) was originally £40,000 or your total earnings, whichever was lower, however from 6 April 2023, it will be a maximum of £60,000.

Additionally, while the lifetime allowance (the total amount you can pay into your pension during your lifetime) is currently £1,073,100 and was intended to stay this way until 2026, in the budget, it was announced that the lifetime allowance will be removed completely from 6 April 2023.

How will your take-home pay be affected?

Everyone’s take-home pay will be affected by the budget announcement differently depending on their earnings, whether or not they have children, are retired, or have student loans.

For example, because the tax brackets have been frozen and are not adjusting to keep pace with inflation, experts say that both basic and higher taxpayers will face what economists call “fiscal drag”. The Office for Budget Responsibility estimates that this will create an additional 3.2 million new taxpayers, with 2.6 million more people paying the higher rate of tax.

Further, changes to student loans mean that the Student loan repayment threshold will drop from £27,295 to £25,000 for those starting courses in September 2023. The thresholds are as follows:

• If you’re on a Plan 1 student loan (you started your course before 2012), you’ll begin repaying when your income is over £22,015 a year,
• If you have a Plan 2 student loan (you started your course between 1 September 2012 and 31 July 2023), you’ll start repayments at £27,295 a year,
• If you’re on a Plan 4 student loan (you’re a Scottish student who started your course anywhere in the UK on or after 1 September 1998), you’ll only repay once your income has exceeded £27,660 a year,
• Those on a Plan 5 student loan (you started your course on or after 1 August 2023), will start repaying their loan when their income goes over £25,000 a year,
• For those on a Postgraduate Loan repayment plan (a Master’s Loan or a Doctoral Loan), repayments begin at £21,000 a year (before tax and other deductions).

If you’re on Plans 1, 2, 4 or 5, and your income exceeds the threshold, you’ll start repayments at a rate of 9%, and 6% if you’re on a Postgraduate Loan plan.

At The Salary Calculator, we know that working out what you owe can be a bit of a head-scratcher, so we’ve simplified things with our updated Take-Home tax calculator. To get a breakdown of how you’ll be affected by the budget, head over here.

Tags: 2023, budget, childcare, Pensions, student loan