Introduction
The Spend FHI is displayed at the top of the dashboard to the right of the Borrow FHI.
The Spend FHI is comprised of three categories that a loan assessor should consider when reviewing an application:
Needs (essential expenditure)
Wants (discretionary expenditure)
Commitments (savings, pensions, loans, debt collectors)
The theory
Elizabeth Warren wrote “All Your Worth: The Ultimate Lifetime Money Plan” in 2006. Within the book’s 300 pages, there’s a simple premise: better budgeting with the 50/30/20 rule.
The method is simple. Households split their income into three different categories: essentials (needs: 50%. Flexible spending (wants: 30%). And financial goals (commitments: 20%).
Housekeeping, bills and transport fall into the first category. General shopping, restaurants, hotels and holidays are not essential. They’re classified as ‘wants’.
Finally, 20% is spent on financial goals. Paying down debt, saving for the future.
A full list of categories used can be found here.
RAG status
Each slice is colour coded.
For needs and wants this is based on the proportion of spend. For commitments it is based on the nature of the spend.
Needs
Red: Must have crash zone. Expenditure on needs exceeds 65%
Amber: Must have danger zone. Expenditure on needs is between 50 and 65%
Green: Must have balance. Expenditure on needs is below 50%
Wants
Red: Splurger. Expenditure on discretionary expenditure exceeds 30%
Amber: All work and no play. Expenditure on discretionary is less than 20%
Green: Wants in balance. Expenditure on discretionary expenditure is between 20 and 30%
Commitments
Red: Debt problems. Any item in the commitments donut is red; that means the presence of high cost creditors and / or debt collectors.
Amber: Caution. There's spend on other credit commitments.
Green: Saver. Expenditure on commitments is all focused on building savings.
The Spend FHI in detail
Clicking on any of the slices reveals the Spending Tab.
Four donuts are displayed; income and each of the three categories (needs, wants and commitments)
The name and details of the bank account are displayed underneath the four donuts.
Clicking on any of the slices reveals a table with detailed transactions:
There is also a search box if you want to look for a specific transaction.
Next: View the detailed transaction categories.
or skip ahead & read more about income, needs, wants and commitments.
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