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

💸 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 narrative
• Common pitfalls like rigid rules, guilt, and forgetting irregular expenses
• The Financielle Budgeting Method—a simple, flexible way to take control of your money
• How to work with your emotions when budgeting, from guilt to frustration
• Why budgeting isn’t restrictive—it’s empowering

This 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 thevault@financielle.com

👉 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.

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About 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
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Transcript

0:03

Welcome to the vault unlocked, where I take a deep dive into money topics that no one wants to talk about. And 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 LoveIsland, ‘we’ve 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. So I loved hearing more about your story and how Financielle 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. Hannah w I loved this, Laura. It 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 cringey 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, 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 of more different time to share with you, but you can message directly in 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 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. And actually to that point, this is going to be more relevant for our YouTube, watchers, because you'll see, obviously, I'm at home, I'm in my kitchen again and I'm in the Cosiest Zara set. It's like this cashmere esque but is definitely not cashmere, like tracksuit and 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, like trousers. It's just a 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. And 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 jewellery. 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 cosy tracksuit that could wear at home that really you probably wouldn't wear out. And I stumbled across this and so if we get the top, We then need to get the bottom and so I ordered them and I got free delivery. I can't remember how much I spent on them, but I am telling you like probably £30-£40 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, husband kind of fell for this, and I nearly did. It's. I've ordered added 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, party wear, I've 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 friend, our friend Tom's got a business and he had an event and I bought it for that. And I have worn it and worn it and worn it, so I want wanted something new. But I was still so 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. I had to fund, I think it was a £300 order, which there is not that in the clothing budget. This is where you kind of like have to rob from Peter to pay Paul in your pots. And so in my sinking fund pots, I moved money around and, put paid for it and then tried them on, picked the one and picked it. The earrings are fine. You can't send back anyway, but I picked those I like. Holly was round 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 hol, you know, 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 Karl 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 need? Is there anything else you need? Will give you free delivery in this promotional email? And Karl forwards it straight to me and I open it and going ‘da da da da da’, 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 I, 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 sale sticker, a free delivery, a whatever once in a while you are forgiven. You are not in Financielle jail because otherwise I'd been 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 did. 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. 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 rewatch 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 all 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 organised 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, 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 country's 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, 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 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, 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. And, 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'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 this 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 you’re bad at budgeting, you’re True. 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 are 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 gonna 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 in front of you, especially if you budget in a couple, which we talked about, 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 going to help you financially. There's some lots of popular traditional budgeting methods. Lots of people will know of the 50, 30, 20, the 50 3020 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. And the big problem with the 53 to 20 is a couple things. One, it is 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 you being single or have you 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 accounting things like children commutes to work, travel, any particular medical needs. So it is a great as a guide. It is 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 Financielle method, which we talked about earlier, we're going to go into again, it really helps to use 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 ours 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 Financielle 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. 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. So backward looking budgeting isn’t a 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 when you’re just building like what you think is your typical bills and I bet a lot of you have 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 ten years ago of what the 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 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. I'm 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 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 dessert. I mean, between 100 and 150 for a family of five. If we kind of had a bottle of wine in there, I just, 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 all adds up. And so this underestimate is is very, very typical, pitfall as well. So when, this is a bit of the Financielle 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, 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 built 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. Yeah. Well, we're going to be talking about goal setting in a different episode. I think it might be next week, but you can't do this. 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 you often your pay, 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 freeze right away because we've not learned how to manage our money. So that was a super important thing, that the budget is the key to hitting these goals. But the second thing is this realisation of how much control you have over how fast you hit those goals. or how slow you hit them because the Financielle 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 Financielle 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 the 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 girl 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 is 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 in to 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, 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 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 that 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 £2,000. And that's what I budget. Oh, but I do get, child benefit. Oh, and I do get maintenance, but that goes into a separate account for the kids. Oh, and then I got to 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 think about it. And so that goes in a little pots. I, and I save that for Christmas. And so she'll this. I'm saying she like this. She's an imaginative 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, 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 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 realise 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 it is another thing to think about 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 5050 is if you’ve got goals as a couple, you're leaving money on the table and each of you own your own separate tables. Your private tables isn't contributing towards that goal because you've siphoned it off. You've just passed on the household bills split. And so the beauty when you're in the right place for it and go listen to that episode because there's a 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, it can really help your relationship when you're in the right space for it. Actually, 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, your goals is completely determined by your joint budget. And the bigger DRI, 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 that 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, 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, it might be in operational costs, might be in finance costs. Whatever 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 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. 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 to not think about them all as one. As a total and quite a big chunk of your total will will possibly be fixed bills. So have a little look in in your account and fixed doesn’t mean like necessities so it could be like Netflix and Google stuff and Apple stuff floating around and then fixed 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, the holy grail of Financielle. They save lives. Exaggerating a little bit, but kind of not, no, I'm going to go with the do save lives sinking funds. 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 £1,200 from I'm going to do it from the December paycheque and for next Christmas, by the November paycheque, 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 wage and kind of wouldn't have any money left over. I would use credit cards. And it would be, you know, most of us are paying Christmas off all year. We really are. It is 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 Financielle and Financielle will teach you how to do that, and the first time you do it is really annoying because you just don't want to do it. I remember when I was doing this like years ago, I was like, 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 might say, talk about is 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 girlie 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 2 or 3 sinking funds, and there are people in the Financielle 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 and 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, aside 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 round 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 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 thinking ahead and go how much will I need by when and then work backwards. In the Financielle app, actually one of the free tools is you can do a 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, one, an account like a good saver, You'll get interest rates on good interest rate on, and it might have all of it together. But in your Financielle 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 £3,000 for me and my, partner because it's going to be dadadada 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 them 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'll be penalised 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 I do won't show cause I've got a privacy screen on if I turn it around, but let's have a look at my, 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. We have a babysitting pot again. Is it sinking fund. Is it flexible? Expenses will come on to flexible. But we've got babysitting. 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 licence. We save up annually for £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 a 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 want to 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 to hello@thevault.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 budget 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 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 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 the expense 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 cutting 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 I've wanted to invest a little bit more in some of my hair and beauty. 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 makeup. So makeup is my downfall because I treat it like it's a normal expense, which it is, like, you know, no judgement, but it's expensive and it's coming out of the grocery budget. And last time I checked, actually, I can't get the foundation. I get on the, Asda 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 going to 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, 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, spends in different areas. It's not a, you know, 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 giving. We have a giving section of our budget. And typically it's a fixed amount actually. But we will will flex it up and down depending on if there's different times of the year in different challenges coming up that we want to sponsor people on our 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. 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 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 or some times 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 they 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 profitable, 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 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 the 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 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 my God, negative excess. And most people do on the first one, it's because we suddenly realise, 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 need to balance that budget. Get it to zero at first. And then we see if we can grow the excess. And this is where the decisions come in. And you know, the concept of squeezing a budget. And so 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. You know, getting up to 15, 20%, just like the 50 30 20 is not not a bad place to be at all is a great place. But it's not a rule. 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 e-book called The Money MOT, and you go through one line of your budget at a time and see if you can optimise it. So income is about looking at you can you get a pay raise 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 optimised 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 a mortgage and you had you go and one 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 organised and look to see if you can optimise that rate. Can you switch to a different bank as you're paying down equity? So 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 might get to council tax and realise 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 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 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 dunno savvy about it and aggressive and challenging yourself. And the big thing that we talk about, and, you know, it's a big thing at Financielle is to get rid of consumer debt. One of the reasons is if you have loads of consumer finance payments going out. So consumer means like I think for, 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, you 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 Financielle app about people tracking their net worth, no matter what their their net worth is, because it's a way that you can record these monthly growth steps. Yes, I pay down some debt. Yes, I built some savings up, yes, I invested in my pension. Yes, I pay my mortgage down and look, the graph went up, the nice pretty pink graph went up. And I'm 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 the 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 2 to 3 months budgeting, because you'll get it wrong. In fact, if you didn't get it wrong, you're weird because we all get it wrong and there's something that you'll forget or something that you'll skip off. Something will come left field. But if you can apply your budget to the Financielle 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 I'm where, you know, I feel super privileged to be is that you, 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 has 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 in each of their ISAs 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 excess is really important for us. But not, too much of a, compromise where we do like to travel and we do like nice things. And trust me we’ve worked a long time to get there. My favourite budget's. We've joked about this on the vault before, are when I'm paying off debt, I sometimes I wish that I had 25 grand debt today, and I'd start again because it's one of the most invigorating things, exciting things to do, on your own. In a group with family, like, it's, I know I'm joking a little bit with that. I hope it's landed in the right way, but it's just I miss being. Galvin galvanised around the goal and being super intentional and having that time where you realise you can live on less than you think and you can have tough months and, where life hits you and expenses are high and your excess 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 yeah, 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 it’s 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 call, 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 a 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. 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 might be 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. Do it 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, my God, you’d like this. And, anything that you think would help, help you let us know. Email in to hello@thevault.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 light-hearted chat about money topics and it's not financial advice. Take care. I'm.