When I log into my online banking, I always find two account balances: the one I see on the screen (duh) and the one I need to figure out in my head (ouf!). The worst part is, neither of them are accurate or satisfactory...
“How much money do I have? I mean, really?” I'm asking when I log in. Keyword: really!
As a user, what I want is to have my financial commitments already factored into the figure I see, instead of just my account balance. I’d like to know how much I can realistically dispose of. Similarly, I’d also like to know how much I can actually save every month. In an ideal online banking world, I would have a holistic view of my entire financial situation, which means aggregating all my accounts (but that's a story for another post...)
Basically, what I want to see as soon as I log in to online banking is what I'll call my “OK-to-Spend” amount. How much can I spend (or save) guilt-free?
how to calculate OK-to-spend
The basic calculation is relatively easy:
[ OK-to-Spend ] = [ Income ] – [ financial commitments ] (i.e. pending transactions, upcoming scheduled payments and direct debits)
Adding a bit of intelligence provides additional guidance that is highly valued by the customer:
[ OK-to-Spend ] = [ Income ] – [ financial commitments ] – [ contributions to Savings Goals (if any) ] – [ identified spending patterns ]
“The contribution to Savings Goals” refers to virtual piggy banks where the customer can provision money for specific future expenses or investments. As these are serious “contributions”, the amounts should be subtracted from the disposable amount. By the way, these virtual buckets can actually become real savings accounts that are instantly created and provisioned by the bank.
We all have spending patterns we are more or less aware of. I have a rough idea in my head (or in the Excel spreadsheet I built a few months ago and haven't updated since!). I would love my bank to shed more light on my spending patterns and use them to help me manage my money better, wouldn’t you?
Naturally, my OK-to-Spend is the very first figure I’d like to see in my digital banking home screen. Next I’d like to take action on it, for example saving that spendable amount with just one click.
What if I could even see what's OK-to-Spend without logging into my bank's mobile app at all? If I can access LinkedIn, Facebook and Twitter (containing all my valuable social relationships) directly on my smartphone, why shouldn't I be able to quickly check my valuable OK-to-Spend? Or receive a notification at just the right moment - in the middle of a shopping trip, for example?
Actually, on my mobile, OK-to-Spend becomes a financial advisor on the go. A quick check lets me know if I can afford the GoPro I’ve been looking at or if it is the right day to book a long weekend in Thailand.
With OK-to-Spend, interaction with my bank becomes more frequent, contextually helpful and aligned with my everyday life needs. But, it's only one part of a holistic PFM solution - learn what else is needed for a complete digital banking experience in our white paper, The Essence of Digital Banking: