UNLOCKED: How To ACTUALLY Budget - A Step By Step Guide

Welcome to the vault unlocked. where I take a deep dive into money topics that no one wants to talk about. And firstly, before we jump in, I absolutely wanted to say thank you so much for all your support of The Vault Unlocked and what we're trying to do. just gave such amazing feedback and in fact what i didn't know is on spotify you can actually send us a text and it's like love island like i got a text and honestly the team are so excited when they get feedback from you

Truly, truly is amazing. In fact, let's get some up now. Kelly Brown said loving, sorry, loved hearing more about your story and how Fallon Shell was born. This is in reaction to the first Vault Unlocked. You haven't heard the next one yet. It's a bit controversial, but hopefully you enjoyed it because you will have done by the time this is live. And.

Hannah W. Love this, Laura. Felt like we were just sitting down and having a chat and a coffee. There is a coffee emoji. She also says, I also have the cringy Louboutin heel flick picture. I hated them so much, never wore them. And so glad I got rid of them and put the money towards my debt. Oh my God, we are Levouton sisters that like we can be. Healthily embarrassed together, Hannah. Emma Smith says, loved learning about all this.

you've given me an extra boost to sort out my finances and that's so those are some of the ones on YouTube and then some people have also messaged in I'll have to find more a different time to share with you but you can message directly and via Spotify which I find totally cool and also we got an amazing voice note from a listener who you know one of the things that she said was

I think that it was refreshing to hear from me that like I've not always had my shit together and that's a normal thing. I think so many people, and listen, it's a female thing. Like we always want to appear perfect and we always want to, you know.

curate this kind of image and really if we were just a bit more vulnerable and honest we'd all feel a bit better but that's really really hard to do and actually to that point this is going to be more relevant for our YouTube watches because you'll see obviously I'm at home I'm in my kitchen again and I'm in the coziest Zara set it's like this cashmere-esque but it's definitely not cashmere um like tracksuit I'm gonna stand up a little bit so you can see it it's like it's like

Look, this is an awful camera angle. I'm sorry, but you can see it's like wide leg trousers. It's just a really, really good vibe. It wasn't on a list and it wasn't in the budget. And what basically happened was I fell for the retail tricks that I help people avoid. We were buying two perfumes from Zara pre-Christmas as Christmas gifts. They are £22.99 each. And if you spent 50, it was free delivery. So I like the free. I am taken in by this just like everyone else. And so I hunted.

on that website for anything that I could remotely get to get me over the 50. I looked at basics. I looked at costume jewelry. I looked at children's clothes. I looked at everything to see what in our life could we do with that would tip me over. And so when I was in basics, I then got into like lounge wearing. I have wanted for a while, like a cozy tracksuit that I can wear at home that really you probably wouldn't wear out.

And I stumbled across this. And so if you got the top, you then need to get the bottom. And so I ordered them and I got a free delivery. And I can't remember how much I spent on them, but... I am telling you like probably 30, 40 pounds on this set. I didn't need it. It wasn't on the list. I wanted free delivery. Zara, you had me. And actually I also...

My husband kind of fell for this and I nearly did. I've ordered some dresses for his 40th birthday party. We're going to be having his 40th in the village in a couple of days actually. And... this i ordered four dresses because i'm kind of in between sizes at the moment but i really do like club london for um party wear i've had a black dress from them that i've worn six times this year it was the best buy at the beginning of the year for one of our friends

our friend Tom's got a business and he had a an event and I bought it for that and I have worn it and worn it and worn it so I wanted something new but I was still so I went to Club London ordered four dresses and a pair of earrings and luckily one of them worked out

Didn't use buy now, pay later. Had to fund, I think it was a £300 and odd order, which there is not that in the clothing budget. This is where you kind of like have to... rub from Peter to pay Paul in your parts and so when you're thinking from parts I moved money around and

put it paid for it and then tried them on pitch the one and picked the earrings are fine you can't send back anyway but pitch those and like holly was around here and she was like okay send them back now because we need that money back like you want that money back and so don't forget and it's we're going on holiday

and stuff we need to return them so got them packaged up marched straight back to the post office posted back the three I didn't need less the delivery fee which just is frustrating but hey ho and lo and behold the next day Carl got a...

It's not a win back email. A win back email is where you might leave stuff in your basket or you like hearted some stuff and you didn't actually convert. So I had converted. I bought four dresses, but they saw me come in. And so they said, did you get everything you needed or anything else? you need we'll give you free delivery in this promotional email and Carl forwards it straight to me and I open it and go I'm looking I'm going

What the fuck? I don't need it. Like, I don't need a dress. I've got the dress. How often do I need a party dress or a ball gown? Not that often in my life. I'm sat here in the loungewear, remember? And it just goes to show, you know, we are all human and billions and billions.

of pounds is spent on trying to get us to part with money so if you fall for a sales sticker a free delivery a whatever once in a while you are forgiven you are not in financial jail because otherwise i'd be in there with you so Suffice to say, thank you very much for your feedback.

On the pod, I'm loving having double episodes out for us now. The one with the team that we film with all your dilemmas. And then the one where we do deep dives. And on that note, let's get into this week's. Vault unlocked. I'm going to be saying the B word a bit. Not that naughty one. I don't say that word actually. I do F a lot but I don't do that one.

s-h-i-t a lot as well i've already said that in this thing i don't know why i'm censoring myself and we're going to be talking budgeting but this is not going to be a tutorial do not think that you're going to sit here and listen to me lecture about how to. You will pick up tips. You will be able to then re-watch this later and re-listen to it and kind of build your budget if you want to. But this is bigger than the budget.

This really, really is. And I'll tell you why. Budgeting gets a massively bad rap. People view it as stringent and like... frugal and restrictive like oh like a corset that's what i'm picturing like it's tightening and tightening and tightening

And it's kind of made out to be something that should, if you're on a budget, you're either super organized maybe, and that's a good thing, or it's because you need to be. And obviously in society, we do not like the idea that people would think we're struggling and that we've got. a problem and that we need to be on a budget and so it's got a bad rap and

It's like, well, not a great budget, but the countries run on budgets. Very successful businesses run on budgets. A budget is merely a plan that you put in place and it doesn't have to be restrictive. You can have what we... call a bougie budget a bougie budget everyone should design their own bougie budget which is imagine if um you know money was no object what would you put in each category because you know what what's hilarious is you actually once you get past a certain level

and tell me what yours is you struggle to spend it because once you've taken care of you know a more luxurious version of your current life we're actually all very content. And actually, there's only so much spending we can do, which is very interesting for lots of different reasons. But you can have a big budget. It doesn't have to be a tight budget.

maybe you know you've tried budgeting before and you've not been able to stick at it and you've given up so it's kind of got a bad reputation in your mind you know it's a failure thing it's something that you tried and it didn't really work out I mean

The biggest thing that people say is, oh, I can't budget. I'm shit with money. I'm shit with money. I can't do it. And, you know, we've talked about this before, but there's like lack of this negative self-talk and this lack of positive self-talk, you know. It will come true. If you say you're good at budgeting or bad at budgeting, it's true. And so that's why in this week's episode of The Vault Unlocked.

We are going to be getting deep into budgeting, the best way to do it, what you should avoid and why it's going to change your life. So let's get into it. So historically, we've already talked about this, like budgets is seen as rigid. And it's a guilt inducing plan and you should be ashamed of it. And it's like that crash diet.

the thing that we've talked about before which is like all or nothing it's like i'm going in i'm going to cut everything i'm not getting coffees i'm taking my lunch to work every day we're never i'm not buying anything and we just literally set ourselves up to fail When we think like that, we really, really do. Budgets can really bring freedom. They can bring this kind of like clarity, like everyone of you, especially if you're budgeting a couple, which we talked about last week.

managing money together. it gives you clarity but even on your own like life's hectic and so what are your goals and what does your budget say about those goals like how clear are you on where money's going where it comes from where it's going and if it's going towards the things that are gonna you know help you financially there's some

Lots of popular traditional budgeting methods. Lots of people will know of the 50-30-20. The 50-30-20 is where you have 50% on needs, 30% of your expenses on wants and 20% on savings. and investing which I can understand why this is a popular one we always like to be told what to do like we're human nature like we just love being given a framework and a guide and the big problem with the 50 30 20 is a couple of things

One, it assumes that we all have similar cost ratios. So, you know, we're in the north of the country. It's fairly expensive to live in our village. There are more expensive ones, but generally the cost of living and cost of housing here is not too bad compared with central London. So when you compare that city or when you compare that highly populated or higher cost of living area, my budget is going to look different to someone else's just based on our postcode.

You then could look at the difference between like if you've been a single or if you're in a relationship and you manage money together and you're sharing those household expenses. The single tax is a massive issue for the 50, 30, 20 because someone running the 50, 30, 20. may find it incredibly difficult to limit their needs to 50% of their income because they're shouldering the needs like the essential bills themselves.

And so, you know, that's not even in counting things like children, commutes to work, travel, any particular medical needs. So it's great as a guide if it's a rule of thumb for the majority.

But we're not about the majority here. We want everyone to be able to build a system that works for them. And this is why the financial method, which we talked about earlier and we're going to go into again, it really helps to... you to build your own plan you to build your own budget but with some frameworks because we like frameworks um and so the 50 30 20 is possible there's other ones called like zero based budget this is very similar to ours actually where you you kind of make sure every

pound or dollar is allocated and that's really important to make sure that there's no free money sloshing around and you suddenly think you don't have a lot. So we'll come on to that when we look at the financial one.

There's also a few budgeting pitfalls that I want you to think about and think, is this you? Firstly, people kind of... go backward looking so they look at what they spent and that wasn't a plan that was just what you spent and that was driven by impulse time of year um what came up that month And you may have a situation where you have...

a really really busy social month and then you might build a budget on the back of that and that's not realistic because not every month you're going to have that and so backward looking budgeting is isn't great place to start it's great to budget and then check in and make sure that you're going to be accurate

The next point is people forget irregular or annual expenses so easily when you're just looking at the month before and when you're just building like what you think is your typical bills. And I bet a lot of you got it now. I'm going to think a lot of you will have a notes section in your phone.

And you will just list your expenses and your notes. And they will be like your fixed expenses. And maybe some stuff like groceries and stuff. But you won't be thinking about things like your car tax and your MOT due. and your annual insurance, and the fact that you like to travel every year, and the fact that Christmas comes the same time every year. So these big one-off expenses that don't appear every month, I suspect will not appear in your budget if you do it that way.

And so another pitfall is massively over and underestimating expenses. Typically underestimating, I think that... I don't know about you, my brain sometimes gets stuck in 10 years ago of what things cost. I really struggle to understand.

um or to accept not understand i struggle to accept the consequences of inflation it's not that i don't understand it i obviously understand the technicalities of inflation um which is like the cost at which goods and services are rising for us year on year and actually especially in recent years they've gone up a lot when you look at things like the typical shopping basket when you specifically look at the things that we need to run our house but I just

things feel expensive all the time it's like I'm not prepared sometimes to increase the categories in my budget and then I get shocked when when I go over it and I think that's a really hard thing a lot of us underestimate our expenses and only when you say it out loud like if we went out for dinner the five of us let's say no wine or beer soft drinks you know Maybe some starters, maybe some desserts. I mean, between 100 and 150 for a family of five.

We've kind of had a bottle of wine in there. Quite frankly, just some Diet Cokes would push it over the edge and probably get it closer to 160, 170, 180. And that's expensive. That's one meal. And it's so easy to kind of join friends out for dinner and, you know, go out for someone's birthday meal and suddenly it kind of all adds up. And so this underestimating is very, very typical pitfall as well.

So when this is a bit of the financial method, but when I was working out how to budget years ago, I was falling down on the 50, 30, 20 because I was solo running a house and I felt like I couldn't hit. you know those frameworks and I was also obsessed with this idea of what later became the playbook which was nailing one thing at a time and it was making sure I build emergency savings making sure I then pay down my debt making sure I build bigger emergency savings

then I'm saving for my house deposit and so on and so forth. And it was really, that was a great plan, but I really had to. build a plan on a strategic basis a regular basis that would help me hit that plan um you know we're going to be talking about goals setting in a different episode i think it might be next week but you can't

It's all right setting the plan, but you have to know how you're going to deliver it. And the budget is the key to it. And this is the, if there's one thing I definitely want you to take away.

It's that the budget is not just a spending plan. It is the plan to hit your goals. And if you do not have your budget in order, your monthly or your weekly or however often you're paid, if you do not have that budget planned in, then you're not going to hit your goals or you'll hit them really slowly, which is boring because the two are intrinsically connected completely.

And this is what I want you to take away, which is if anything else, if I've got a goal to pay off my debt, to go to nice places on holiday, to start investing for my children, to buy a home, et cetera, et cetera.

None of that will happen for the majority of us unless we sort our shit out with our budget. And that is just, it's just... what's going to happen because you know unless there's a windfall a lottery win a bonus that appears but even then we're likely to fritter it away because we've not learned how to manage our money

So that was the super important thing that the budget is the key to hitting these goals. But the second thing is this realization of... how much control you have over how fast you hit those goals or how slow you hit them because The Fran and Shell method is all about doing one thing at a time and you create a budget and you use an excess to hit the goal and to put towards the goal and the bigger the excess, the quicker you hit the goal.

So this is why, and I honestly haven't seen this anywhere else. This is why the... Financial budgeting method on a personal finance level is actually more like a profit and loss account in a business. It's much more designed to be in your control than these set parameters.

So let's go through them. So this could be something that you come back to later or that you get the app out later and get it out and create your first budget. You might do it on a piece of paper. You could be a spreadsheet girly old boy. get that out so whatever your mode of budgeting you don't have to do it all in detail now but just picture this in your mind okay we're gonna talk about income

This is, like in a business, so, so important. It's the top of the budget. Now, most people will just put salary and crack on. And well done if you've got a salary. Great starting point. But. It can't end there because that's not strictly true about income coming into the household. And if you think about our business, when we report on business income, we are reporting all the sources of income.

Let's take a supermarket. This is a bad example, but let's see if I can use it as an example. You will get the sales from food, okay? Let's say that that's the biggest revenue line. But there might be another revenue line which could be sponsorship. So someone, I don't know if this happens by the way, you can tell me, but I'm just making it up. A brand could pay to...

have a promotion in the supermarkets magazine or website, you know, have a priority of sales. They could pay for that. So let's call that marketing revenue. The business report, all the revenue added up together. It doesn't just talk about its sales in UK supermarkets. It also talks about the marketing revenue that it made. And then it also, if it opens up in a different country.

will bring in their revenue from the different country. So then they'll divide their income up by different streams, but it all adds up to one income. And the reason why that's important... to think about is you need to know what's coming in and what i often see is this let's pretend we've got a single budgeter household this is my salary I've got 2000 pounds and that's what I budget. Oh, but I do get child benefit. Oh, and I do get maintenance, but that goes in a separate account for the kids.

Oh, and then I actually have a part-time job. I do this on a weekend. Every so often it's like cash in hand and I just don't really think about it. And so that goes in a little pot and I save that for Christmas. And so she'll... This, I'm saying she, like she's an original person, let's call her Emily. Emily, with her £2,000 salary, might budget and feel that's tough.

she might sit there and go, oh, like I just, I can't invest and I can't save and I can't afford to do this and I can't afford to do that and I can't pay down my debt and I'm really struggling. And then you'll kind of go, well, hang on a minute, there's another £1,000 or £500 worth of income coming in that you've already siphoned off to different places. So it's out the picture.

So we don't know it's there. And if it's one of the biggest, biggest things that... is a revelation for lots of people when they realize they actually are making more money than they think and there's two things that this does one it helps us know what to allocate we've got more money to play with but two it makes someone feel more valuable

There is more money. You are making more money. You are doing okay. And the mental side to that is actually probably more important than the math side. So we need to know.

all these income sources and this is another thing to think about if you're budgeting as a couple because the big problem with not including the full salaries of both working people in the house in the household and splitting bills 50 50 is if you got goals as a couple you're leaving money on the table in each of your own your own separate tables your private tables that isn't contributing towards that goal because you've siphoned it off you've just passed on the household bill split and so

the beauty when you're in the right place for it and go listen to that episode because there's lots of ifs and buts and do's and don'ts to this but when you're in a place where you can budget together and you just basically go all in apart from all the other amazing stuff that we talked about like about how it can bring you together and um it can really help your relationship when you're in the right space for it actually you

You hit your goals quicker together because all the money's together. It's on the page together. And that's really important to think about because the speed at which you jointly hit your goals is completely determined.

by your joint budget. And the biggest drive of the budget really is income. So that's income. So when you're doing this, I want you to think about all the different sources of income. And in a particular month, and I'm skipping ahead a little bit here, but if you happen to sell it, In the budgeting app, we do budget and we do actual because your actual can change from what you forecast would happen.

A primary example of this could be you picked up an extra shift and you got an extra bit of overtime or you did some Facebook marketplace selling and some money came in or someone owed you money. Birthday, whatever it is, you might... exceed your income and that's where your income target and so that's where your actuals comes in but think about all these different sources and total them up and have that bigger income figure to do the rest of the budget with

So we've done income and now we're going to go through expenses. And so a little bit like a profit and loss account where a business may divide up their different types of expenses. It might be in people costs. It might be in marketing costs. be in operational costs it might be in finance costs whatever those costs are we're going to divide our budget up in a similar way and we're going to pick three main areas with a cheeky fourth thrown in

So firstly, we're going to look at your fixed expenses. So when you look at this, the quickest way to do it is look in your bank account for all your direct debits. But we're talking mortgage payments. all your fixed bills, rent if you've not got a mortgage, your subscriptions, like your internet subscriptions, your insurances. It's not surprising if you don't know what those are. 52% of adults don't know the exact cost of their household bills.

And it's really easy to not think about them all as one. As a total and quite a big chunk of your total will possibly be fixed bills. So have a little look in your account. And fixed doesn't mean like necessities. So there could be like... Netflix and Google stuff and Apple stuff floating around and then fixed. It just means it's not within your control to change the price, largely. We'll come into that in a bit, but your fixed expenses can be driven by your...

bills. And the next one is sinking funds. So sinking funds are the holy grail of financial. They save lives. exaggerating a little bit but kind of not. No, I'm going to go with they do save lives. Sinking funds are pots of money. that we build up for planned expenses and it's it's easy to get tripped up if you've not done them before but a sinking fund for example could be for

the Christmas period, we've just been through the Christmas period. So for those that celebrate Christmas and buy presents at this time of year, it is punchy on the wallet, isn't it? And so if you can plan ahead and go, okay, I would like 1200 pounds. I'm going to do it from the December paycheck and for next Christmas by the November paycheck, I want £1,200. You need to put £100 aside. Well, that's... Fucking easier said than done, isn't it? I didn't do that for years.

You know, I would just kind of spend most of my November wage and kind of wouldn't have any money left over. I would use credit cards and would be, you know, most of us are paying Christmas off all year. We really are. It's quite shocking. And yes, people know you should save up in advance for things. But by golly, we don't because we're human. Unless you use Fan & Shell. And Fan & Shell will teach you how to do that. And the first time you do it, it's really annoying because you just...

Don't want to do it. I remember when I was doing this like years ago, I was like, oh, I don't want to move that money. I want to use it. I want to use it to pay off debt even, but I don't want to build up money in a pot for something until. Until you use the pot. And honest to God, it is one of the greatest days of your financial life. People may talk about the day they bought the home or the fact that they hit a big financial milestone. No, no. It's the day.

that you need to use that sinking fund that you meticulously, mindfully and gradually and slowly built up. And so what we want you to do is be the girly or the guy.

that puts money aside into a pot, digital pot in your bank every month. And then when it's needed, you go, oh, it's Christmas shopping time. I'm just going to go into my bank and get that money out. And then... spend it and it doesn't impact your budget it doesn't impact your goals because you saved in advance and there are some people with two or three sinking funds and there are people in the financial community that have

20 or 25 and whatever works for you if you love the detail go for the long ones if you want things a bit more simple then don't have as many but people have travel sinking funds is a great one to do i think we do spend a lot on travel as humans typically and it's getting more and more expensive it's so hard but we really don't want to be funding travel with credit unnecessarily i mean

side the point about credit cards and protection and stuff but just we shouldn't be funding it with money we don't have basically and so we don't want to be paying our holiday off the full year after we've been on it we want to be around that pool absolutely chuffed as a butty that we paid for it and we've not got this financial hangover and we don't have to be stressed because we've not had a situation come up and we need needed x y and z money it's paid for it's fine

And so travel is a really good one to do. And again, you do the same thing. You think in a head and go, how much will I need by when? And then work backwards. And in the financial app, actually, one of the free tools is you can go to trackers and there's a thinking from tracker. So you might not.

have a digital bank account where you can have the separate parts with names but you could have a um want an account like a good saver where you'll get interest rates on good interest rate on and it might have all of it together but in your financial app for free you can just document your different sinking funds and so sit there and go okay I want to go to in July and I'm going to need £3,000 for me and my partner because it's going to be okay.

how much do i need to save per month and then in your budget you put that monthly amount in and then you transfer it into the sinking fund pot so you've got travel you've got christmas you have insurances so we all know that insurances are more expensive if you pay for the monthly

This is because you actually take out a credit agreement to do them. It's actually borrowing, which blows a lot of people's minds. It shouldn't be allowed by the insurance companies. That's another rabbit hole we won't go down. But basically, you're being penalized if you pay monthly. So if you can take a year to get ahead. and save up monthly.

for next years, the day you use it is so, so good. And even myself this month, we've had a couple of, you know, MOTs and we've got services coming up and we put money aside every month for, in fact, let's get mine up.

i won't be able to i do it won't show because i've got a privacy screen on if i turn it around but let's have a look at my um spaces and because I think it's really helpful to see so we've talked about Christmas we've talked about travel we've talked about insurances and we have a babysitting pot

again is it sinking fund is it flexible expenses we'll come on to flexible but we've got babysitting um we have a dentist which we don't pay for every month and so probably once a quarter we'll need to pay for dentist and so to build that up in a pot is really helpful. Travel insurance we save up annually for, TV license we save up annually for, we've got £120 in that at the moment and it says 75% full.

We have a clothing sinking fund because you might not, you shouldn't need to buy clothes every single month. I mean, even in a family of five, we have up months and down months. And so to build up a pot of money for, you know, uniform changes and gym stuff and, you know.

the kids growing out of things and it's something nice new for us it's helpful to have again money put aside monthly and then when you need it it's there ring insurances, home insurances and also we have a home and garden space which is for things like whether we have a gardener that may or may not be regular or we want some extra window cleaning doing or a fence breaks and you want to get that sorted but you don't use your emergency.

fund I will take a breath sorry but that is how you work out your sinking funds and honestly just message in message in to helloatthevault.com or message in to um like send us a text by a Spotify comment on YouTube tell me your sinking funds share what yours are ask any questions about it because if there's one thing you can take away as a practice that you don't already do is implementing sinking funds I

Promise you, if you don't like it, just spend them later on something nice and don't budge it that way. But at least try it for me.

So you've got your income and then you've had your fixed expenses coming off and you've had your sinking funds. And now we're going to jump to flexible expenses, which come after sinking funds. The reason they come after is...

they're flexible and so sinking funds even though they're flexible once you've kind of decided the amount they're kind of locked in and they also can get like moved on day one of budget and stuff and into the pots and so they're a bit like a fixed expense that you've decided on

So then we come down to flexible. These are the expenses that can change every month. It might be groceries. It might be dining out or entertainment. It might be hair and beauty. You know, in our house, for example, hair and beauty one month can be. just my husband's haircut the next month it will be my hair cut and color his hair and possibly one of the one if not both of the two girls And so that's a punchy amount. I am tempted actually.

to change that into a sinking fund I love how we're having a debate live on pod but this is I recently have wanted to invest a little bit more in some of my hair and beauty and I have started to get my nails done at a cost-effective place in the village and I will look at other things I could be looking at my skin and stuff and I'm your makeup actually makeup is my downfall because I treat it

like it's a normal expense which it is like you know no judgment but it's expensive and it's coming out the grocery budget Last time I checked, actually, I can't get the foundation I get on the Asta delivery. And it shouldn't be in place of like, you know.

chicken breast or meatballs so I need to bite the bullet and I'm gonna do I might do it on socials next couple weeks but I need to build out my beauty sinking fund because makeup and skincare and you know all these um aesthetically linked spending items add up but I'm spending them and so the key with the budget is it has to be accurate remember we don't want to underestimate you know my husband should transparently know

what it costs to maintain my appearance in a particular way just so it's transparent you know and he this is not that you know he maintains himself as well and he you know um spends in different areas so it's not a you know a girls versus boys thing

But I don't want to hide it. Like, this is what it costs. And so I need to make sure that I'm being accurate with my beauty and hair and beauty sinking fund. But at the moment, they're flexible expenses for me. Every month, the budget changes. And so one month, I'll look ahead. and go okay what appointments have we got this is what needs to be in the budget hence it's flexible other flexible budgets could be um

Giving, we have a giving section of our budget and typically it's a fixed amount actually but we will flex it up and down depending on if there's different times of the year and different challenges coming up that we want to sponsor people on or different charities that we want to give to. So that changes around. what else are good flexible expenses people might have like pets and pet food you've got your insurances up top but down the bottom it might be you know fun money

It might be miscellaneous. It could be impulse spending. Like I've seen people put impulse spending pot and that's a really good tip for people. with impulsive spending issues because you've been given permission and so it's in a pot and so that's sometimes a flexible pot but go through all these pots and decide what should be in each one and then

You've got what's left over. OK, so we'll do a bit of a recap. We have our income and then the expenses are our fixed expenses, our sinking funds and our flexible expenses. And then we have what's left over, which is called the excess. Now, in business, this is your profit. So let's pretend we're a business and we make £100,000 a year. And our expenses are $150,000. We've spent more money than we made. So we've made a loss.

Now, we're not going to go into business stuff now because it's not always a bad thing and there's always sometimes reasons for it that we won't go into. But we are going to liken our budget to a business P&L that we want. to be profitable so if a company can make a hundred thousand pounds a year and they the costs to run that business are a hundred thousand pounds a year

It made no profit, but it didn't make a loss. And what that means is it didn't need any extra cash or money from anywhere. It kind of just whatever it made, it spent.

The best workplace to be is when you're a profitable business. And to be a profitable business, you have to make more money than it costs to run the business. And then you've got your profits. And so what's really, really... helpful about a business P&L is the senior leaders or the directors or the you know strategic teams will sit around and go how can we make more profit and they'll

discuss ways to increase the company's income. And they'll discuss ways... to reduce the company's expenses and just with everything and i'm going to be very like you know direct here about this you can go too far in either ways companies put profit before purpose and so Let's not get too deep on it but there is an interesting angle here which is if you go all after the revenue and you expand too quickly or you try to do too many different things you can sometimes end up...

losing some revenue and if you try to cut expenses so so thin you actually might have a negative impact on revenue because you might not be able to deliver services properly this is true in the personal budget as well which we'll come on to but the idea. that in business, a team can sit around and go, how can we change these numbers? This is the mentality that I want you to have for your budget. And I don't think there's another method out there that is intentionally getting you to grow.

your personal profit to grow your excess in a way that suits you that doesn't confine you to certain percentages but it helps to give you a framework to do that in

And the magic happens with the excess, that your excess at the end of your budget, that the bit that's left over is the bit that you can put towards your goal. So remember at the beginning, I said that it is really important that when you set these goals, your life goals your money goals that you have a plan of how you're going to get there and the plan is derived from the budget and so this is the most important part of the budget the excess if your excess is too small

you will not hit your goals quick enough. If your excesses are negative, so if you've made a loss like we talked about with the business, you're probably using credit. to fund your lifestyle. Don't worry if that's you right now. If you've done this exercise and you're like, oh, I've got negative excess. Most people do on their first one. It's because we suddenly realize.

oh we are spending more money than comes in that's why i'm going in my overdraft that's why i use buy now pay later that's why i need to borrow money all the time it helps to make that like click in your head and so it's not a bad thing and the good thing about the budget and is you can tweak so this is you know you need to balance that budget get it to zero at first and then we see we can grow the excess and this is where the decisions come in.

and um you know the concept of squeezing a budget and so um we'll talk about excess percentages they will again change by person i think you know if you can aim for a positive at first that's great a positive excess where you have something left over and try and grow from there and you know getting up to 15 20 percent just like the 50 30 20 is not not a bad place to be at all it's a great place but it's not a rule

The biggest way to grow the excess, as we've said, is to increase income and decrease expenses. There's a really cool feature in the app. I think it's a free ebook called The Money MOT. And you go through one. line of your budget at a time and see if you can optimize it so income is about looking at you know can you get a pay rise at work can you change jobs can you do more qualifications that get you more earnings can you take on extra jobs for a period of time

are you entitled to benefits and that you've not really optimized well enough? And so that's the income side. But the other interesting side is I would go through every single expense and just challenge myself on whether there's room for it to... for it to be decreased so for example

You might have mortgage in your head. You're going, well, mortgage can't change because it's just fixed to the interest rate. No, but when it's coming up for renewal, you could be super organized and look to see if you can optimize that rate. Can you switch to a different bank as you're paying down? equity sorry paying down the mortgage and building equity in your home you might get a better rate um you might get it like

That number could change, sometimes for the worse, but sometimes for the better. Also, you may get to council tax and realize that you've been overpaying because you're a single person and you can qualify for a single person's discount. That could make an impact. You could shop around when it comes to energy providers.

or when it comes to different subscriptions, you may be able to pay annually for some and get money off. You can be... savvy with each line item in this budget and we can squeeze it and it's like I said before it's about squeezing it to a point where it's still manageable you know you're not living on nothing and being really miserable because it's just going to put you off and you're just going to fall off the wagon and you're not going to be able to hit your money goals. But being a bit...

Janelle's savvy about it and aggressive and challenging yourself. And a big thing that we talk about, and you know, it's a big thing at Financial is to get rid of consumer debt. And one of the reasons is... If you have loads of consumer finance payments going out, so the consumer means like for us and for everyday things, it's not business expenses. So it could be for a lease car or it could be for a credit card. It could be buy now, pay later. It could be a loan for us.

all those are consumer finance products. Those payments impact your excess. If you can get to a point where you don't have those consumer finance payments anymore, you don't have your debt payments, your minimum payments, you have more money. And so that drives the excess. And so I just love this idea that you have massive control over your budget.

And there are lots of things you can do. And sometimes, do you know what, guys? That makes us feel better. And if we feel better about money and we feel more in control, we're going to make better decisions. And you can really see how this budget, this excess is the thing that moves the bigger strategic goals. It's why I'm really passionate in the financial app about people tracking their net worth, no matter what their net worth is.

it's a way that you can record these monthly growth steps yes I paid down some debt yes I built some savings up yes I invested in my pension yes I paid my mortgage down and look the graph went up the nice pretty pink graph went up and

I am doing ace and this is all because of decisions and plans that I made at the beginning of the month. And so what I wanted to do obviously with this pod was to... Get you on side of budgeting. It doesn't have to be restrictive.

You don't have to track actuals if you don't want to. I highly recommend it, especially if you're in your first two to three months budgeting because you'll get it wrong. In fact, if you didn't get it wrong, you're weird because we all got it wrong. There's something that you'll forget. There's something that you'll skip off.

something will come left field but if you can apply your budget to the financial method of building an emergency fund and then paying down your consumer debt and then building a bigger emergency fund etc etc you'll eventually get to the point and where I feel super privileged to be is that you're in what's called grow and grow is where all your excess is being allocated towards

things that grow your net worth so our excess typically goes to extra pension it sometimes goes to ices more recently it's been going into the children's ices and that actually doesn't grow our net worth but it grows there as we've got this challenge to kind of hit 21 000

pounds in each of their ices before they're 21 and so we've got a challenge on our hands to kind of do that and so it is reducing what we're putting into you know our investments but that growing our access is really important for us but not at too much of a um compromise where we do like to travel and we do like nice things and we've trust me we've worked a long time to get there my favorite budget so we've joked about this on the vault before and when i'm paying off debt

Sometimes I wish that I had a 25 grand debt today and I'd start again because... It's one of the most invigorating things and exciting things to do on your own, in a group, with family. I'm joking a little bit with that and I hope it's landed in the right way, but it's just...

I miss being galvanized around a goal and being super intentional and having that time where you realize you can't live on less than you think. And you can have... tough months and um where life hits you and expenses are high and your access goes down you can also have intense months that you set a no spend challenge and you have a huge excess and I wouldn't recommend that every month but you know if you want to do that in January or February pick a month where you go right

we're gonna go intentional this month that is sustainable because for a short period of time and so all that you know all all these choices and options that you have will improve your financial well-being no end We caught, I saw it on TikTok actually, loud budgeting. Don't be afraid of loud budgeting. Tell your friends you're on a budget. Suggest more cost-effective things to do. But also don't be afraid to embrace bougie budget as well.

Think about what your budget would be. I've talked about mine would be blow dry. It might be something that I incorporate into the new year. I definitely could get a blow dry week and not have to wash it myself. And I could be doing work while I do it. And again, I'm justifying it. But also, I don't like doing it.

headdressers do it better than me so why wouldn't I invest in that if I have room in my bougie budget um probably not the same time as adding nails in so that I was something to wait for but yeah have a little think about that and you know I hope that you what you take from this is that budgeting budgets can be a friend and come into the community in the app share your questions ask you know

ask for people's opinions on stuff, ask people what they spend. People are so open, they're willing to help. You really don't have to do this on your own. So I wish you all the best. Before I lock the vault, I do want you to think about who may benefit from this pod. Send it to them with a little emoji going, oh my God, you'd like this.

anything that you think would help help you let us know email into hello at the vault.com tell us i want to learn more about this or i thought this when you said this because we want this to be really interactive i'm going to constantly read out the stuff you send in so please please do And yeah, just a disclaimer, The Vault Unlocked is a lighthearted chat about money topics and it's not financial advice. Take care.