The Vault with Financielle - UNLOCKED: How To ACTUALLY Budget - A Step By Step Guide

Episode Date: December 30, 2024

Send us a text💸 Welcome to The Vault Unlocked – a special bonus series of The Vault Podcast, where we deep dive into the big money topics no one wants to talk about.Budgeting gets a bad rap—it���s seen as restrictive, boring, and only for those struggling financially. But what if budgeting could be the key to freedom, clarity, and progress?In this episode of The Vault Unlocked, we’re exploring:Why budgeting has such a bad reputation—and how to flip the narrativeCommon pitfalls like rigid rules, guilt, and forgetting irregular expensesThe Financielle Budgeting Method—a simple, flexible way to take control of your moneyHow to work with your emotions when budgeting, from guilt to frustrationWhy budgeting isn’t restrictive—it’s empoweringThis is your guide to creating a budget that works for you and transforms your money mindset.💬 Have a topic you’d love us to unlock next? Email us at [e-mail]👉 Subscribe to Financielle for honest conversations about money, and let’s rewrite your money story together.The Vault is an entertaining yet thought provoking podcast that answers our community’s dilemmas and confessions surrounding women and money.Visit https://www.financielle.com to download our app.Watch the podcast on YouTube.Follow Financielle for more:▶︎ TikTok▶︎ InstagramAbout Financielle:Financielle is a female focussed finance app helping women to take back control of their money, ditch debt, increase savings and invest in their future.Recorded and Produced by Liverpool Podcast Studios▶︎ Web ▶︎ Instagram▶︎ LinkedIn

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 everyone 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, I got a text. And honestly, the team are so excited when they get feedback from you. It truly, truly is amazing.

In fact, let's get some up now. So Kelly Brown said, loving, sorry, loved hearing more about your story and how Fan and 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 um Hannah W loved this Laura felt like we were just sitting down and having a chat and a coffee there is a coffee emoji and 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 Louboutin sisters that like we can be healthily embarrassed together Hannah um 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 um 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 um 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 and really if we're just 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 um and and actually to that point this is going to be more relevant for our youtube um 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 it's you can see it's like wide leg trousers it's just a really good vibe um

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 um we were buying two perfumes from Zara pre-Christmas um as Christmas gifts and they are £22.99 each and 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 jewellery.

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 loungewear and 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've got the top, you then need to get the bottom and so I ordered them and I got 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 um it's I've ordered I did some dresses for um his 40th birthday party we're going to be having his

40th in the village um 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 got 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 friend 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 um didn't use buy now pay later had to fund I think it was a 300 pound 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 pots and so when you're sinking from pots i moved money around and um paid for it and then tried them on picked the one and picked the earrings were fine you can't send back anyway but picked 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 coming 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've been there with you so um suffice to say thank you very much for your feedback on the pod and i'm loving having double episodes out for us now the one with the team that we that we film with all your dilemmas and then the one where we do deep dives and um 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. I 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. 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 or like a corset that's what I'm picturing like it's tightening and tightening and tightening and it's 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 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 money was no object, what would you put in each category?

Because do you know what? What's hilarious is 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, like 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 I can 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. Um, 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. Um, budgets can really bring freedom. They can bring this kind of like clarity, everyone of you especially if you're budgeting a couple which we talked about

um last week but 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 saving 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. 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, you know, highly populated or, you know, 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 become 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. And so the 50-30-20 is possible. There's other ones called like zero-based budget.

This is very similar to where I was actually where 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 you know 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 um a 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 in 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 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, 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 um 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 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.

If we kind of had a bottle of wine in there, or just quite frankly, just some Diet C 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 all adds up and so this underestimating is is very very typical uh 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 is 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 just 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 etc etc 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 financial 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 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 girlie or boy and you 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 going to 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 like 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 a business when we report on business income we are reporting all the sources of income so let's take um 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. So the business reports 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 got two thousand pounds and that's what a budget oh but I do get um 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 um 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 this is an original person let's call her Emily Emily with her two thousand pound 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 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 thousand pounds or 500 pounds 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 it's 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've 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 goal your goals is completely determined by your joint budget and the bigger drive biggest driver 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 in the in the budgeting app we do budget and we do actual because your actual can change from what you forecast would happen a prime example of this could be you picked up an extra shift and you got an extra bit of overtime or you did um 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 a marketing costs. It might be an operational costs. It might be in finance costs. What are those costs are? We're going to divide our budget up in a similar way. 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 looking 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. And 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 look in in your account and it fixed doesn't mean like necessities so there could be like Netflix and um 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 um 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 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 for stuff 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, I would like £1,200 from, 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. 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 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 financial and financial will teach you how to do that. And the first time you do it, it's really annoying because you 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 say talk about it's where 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 gonna 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 some 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 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 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 ahead 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 sinking fund tracker so you might not have a digital bank account where you can have the separate pots with names but you could have a um one at an account like a good saver where they'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 Ibiza in July and I'm going to need three thousand pounds for me and my partner because it's going to be da da da da da da. OK, 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 and 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 like 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 year's, 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, 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 spaces 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 um we have a babysitting pot again is it sinking fun 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 and travel insurance we save up annually for um tv license we save up annually for we've got 120 pounds in at the moment and it says 75 full 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 that's something nice new for us.

It's helpful to have, again, money put aside monthly and then when you need it, 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 an 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, like, send us a text via 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 um 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 colour, his hair and possibly one of the one if not both of the two girls and so that's a punchy amount and 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 um i have started to get my nails done um at a cost-effective place in the village um 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 like, you know, no judgment, but it's expensive and it's coming out the grocery budget. And last time I checked, actually, I can't get the foundation

I get on the, um, as to delivery and, um, it shouldn't be in place of like, you know, chicken breast or meatballs. So I need to bite the bullet and I'm going to do, I might do it on socials next couple of weeks, but I need to build out my beauty sinking fund because makeup and skincare and, you know, all these 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 and 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 um and so I need to make sure that I'm being accurate with my beauty and hair hair and beauty sinking fund um 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 we'll 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 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 um 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. Okay, 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 £100,000 a year and the costs to run that business are £100,000 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 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 direct here about this,

you can go too far in either ways. Companies put profit before purpose, 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 you know, 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 goals. So remember 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 excess is a 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 and 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 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 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. You might get it like that number could change sometimes for the worse, but sometimes for the better. Also, you know, you may get to council tax and realize that you've been overpaying because you're a single person and you can qualify for 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 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, 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 I don't know 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 anything for us and for everyday things it's not business expenses so it could be for um 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 and 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, because 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 would be 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 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 and 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 ISAs. More recently, it's been going into the children's ISAs, and that actually doesn't grow our net worth but it grows theirs 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 just been we've worked a long time to get there my favorite budgets 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 the most like you know invigorating things and exciting things to do um on your own in a group with family like it's um i you know i 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 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 going to go intentional this month that is sustainable because for a short period of time um and so all that you know all all these choices and options that you have will improve your financial well-being no end um we call us our own fate on tiktok actually loud budgeting don't be afraid of loud budgeting tell your friends you're on a budget suggest more

cost-effective um 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 and it might be something that I incorporate into the new year I definitely could get a blow dry we could 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 hairdressers do it better than me so why wouldn't I invest in that if I have room in my bougie budget? Probably not the same time as adding nails in. So that I was going 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 what they spend people are so open they're willing to help you know you really don't have to do this um do this on that on your own so i you know 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 oh my God, you'd like this. And anything that you think would help you, let us know, email into helloatthevault.com and 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.