ARCHIVE: How To Budget To Get More From Your Money

0:00We're off this week, so we're diving into the archive and we're going to bring you back one of our first episodes where we talk about budgeting. We went through three months of each other's bank statements and some secrets were definitely revealed. I have been looking forward to this one, T. I haven't. I have not at all. I've been trying to avoid it for a while. Yeah, I think this is going to be enlightening.

0:25I have been wanting to do a budget with you, probably since I met you. and I like most people don't like to do a budget 70 % of people don't do a budget I feel better now I think people almost see it as I suck an eye roll it's like oh it's so basic you know have a goal I think it's also daunting it's just like and it's not that it's a discipline you've got to stick to it once you do it but if you don't have one you can just do what you want yeah I think there's something important in that that a budget is something that you need to do you don't just do it once and it's done it's something that you continuously do but I actually think I think it's a good tool for...

1:00It's not about cutting back and discipline, it's actually freeing in the sense of your personal finances. The first bit that we're going to do now is brutal. And that's what we're going to do now is go through the last three months of transactions and just look at your real spending habits. Because I have a sneaking feeling, like most people, when you go through three months worth of bank statements, that you'll actually find a lot of stuff in there that you didn't really know you were spending as much as you are on. This is something that I do with myself every few months just because the process of budgeting is not like you do it once and then it's done.

1:34It's like this constant journey to keep yourself on the straight and narrow. And what I want to do is run through you with yours and develop a budget. But I think that all starts first of all with looking at what you spend. Not like what you think you spend, what you actually spend, right? So I asked you to print off three months worth of bank statements. There you go. I got mine as well here. Don't expose me too much. we do a little swap

2:02so I think the first thing you need to do is you get three months because it gives you a good cross section of actually what you spend we can all have a bad month we can all have you know you go on holiday one month and you spend more than you should but I think over three months you get a quite a good look at what you're doing and the process is just to go through it each item and mark off you know is this essential spending Is this discretionary spending? Is this something that I didn't think I was spending much on and just total them all up in category? I mean, let's just have a look at what you've got going on here.

2:36I'm not going to lie. Some of these jump out on you. What in the world is Blackpool Pleasure on the 1st of April? That's a great time. No, that's the Pleasure Beach, Rick. A Pleasure Beach? Tell me more about the Pleasure Beach. It's like a theme park. Oh, a theme park. Yeah, yeah. That's definitely what I was thinking. What's a zip car? Zip car, for us Londoners, is a car you rent when your car's broken. You've got a car. Yeah, I know. My car tends to have a lot of issues. The third of the first, no, the first of the third, it's in March. Zip car, zip car, zip car, zip car. Zip car extended. Zip car, that's nine zip cars in one day.

3:13Had a lot of places to be that day. Where have you been? Well, look, they charge you per hour. I suppose that is your close brothers. That's the finance for your car, isn't it? That's my car insurance, yeah. So how many, you've got two cars? I've got my car and then when it's broken, when the garage needs repairs. You valeted your car on the day that you got nine zip cars. So you drove your car to the valet and then took zip cars around. Is that legit? Look, I spent too much money on my car. You spent too much money on other people's cars. Zip car, what is that? It's like a Boris bike. Like those bicycles you line bike, you rent them for like an hour, half an hour and they charge you per minute on the zip car.

3:49It does add up. Sounds financially sensible. It does. I love the fact that you paid your car finance in the morning, took the car to Westfield Shopping Centre to get it valet, bought a boost juice and then drove home in a zip car. Look, I don't know. I think that day my car got clamped or something. I don't know. A lot of things happen with my car. We'll talk about the car and that, but you seem to have a lot of spending on the car at a glance and cars that aren't even your car. All right, then. Take it back to you then, Mr. What in the world is manual? Oh, don't do me like that. What is manual?

4:22It's hair loss treatment. Hair loss treatment? You've got loads of hair. Well, I guess this is a plug for manual. Because of the manual. Apparently they're doing all right. This isn't even sponsored, mate. No, they do these kits where they send you hair through the... Through the post. Not hair through the post. You're getting packs of hair in the mail. Yeah, yeah. No, it's like creams and gels that you rub on your hair. I went to my barber the other day and he was like, I don't know how to break this to you, but you're going bald quite quickly. Are you sure this works or have you just been scammed by like an Instagram advert?

4:51Well, mate, I'm - Promoting hair growth. I'm going to Turkey at some point. If this manual doesn't work, I'm going to get the full Turkey kit, the hair transplant and the teeth. So, you know, if that doesn't work, but yeah, that's what manual is. The prodigy repayments. Student loan, mate. That's my most painful payment ever because it's my MBA student loan. How much is it? 821 pound a month. That's mainly, no, that's not a month. See, the problem is I ignore them and then they keep messaging me. And then after a while, they're like, look, you're gonna default on your whole loan and you're gonna owe us 30 grand.

5:23So you need to pay. So I'm like, here, have 800 quid. And then I ignore them again for like six months until they really get annoyed. Cause I'm not trying to pay them like, they want 300 quid a month. I don't have time for that. It's a student loan. I've already got the education. So they can get it back in their own time when I'm ready. I hope this isn't a recurring theme of like, I've got the service. Why would I need to pay for it now? Just keep the can down the road a bit. It's fine. But you seem to be having a great time in Bali here. Well, I mean, it was a work trip. It was a work trip, but it was, yeah, there was some.

5:50This was the day before we filmed the podcast, the first episode. How the hell, what the hell were you doing in Bali? Work trip, I told you. Just let's not talk about where I was in Bali. Work trip, Christina's Spa. Massages are very cheap in Bali, what can I say? To Damien Jordan, 20 pounds. There you go, that was in the pub. Were you paying me? Oh, that's when you were back from Bali. That was on the back, yeah. Okay, yeah. Cash at Tu Canal. Yeah, you look like you had a great work trip, mate. Oh dear. All right, let's have a little look and see what Damien's been up to. You do a lot of random food.

6:25So there's like Subway, Greggs, Greggs, fish and chips. Greggs, Greggs, Greggs. And then like fish loves chips and then co-op. And then - The Greggs are just pies. There's so much Greggs in here. Yeah, it's just pies. And what is Form B Models? Are you going for a little modeling quiz? Is that why you've got the hair last thing? So you can be a model? Yeah, Pleasure Landon, Form B Models. Form B models, they sell like car, like toy cars. For my son, it's like a car that we drive on the beach together and he writes it off every single time and I have to take it back and get it fixed. Cause - Well, like actually he physically drives it.

6:58No, it's like a little remote control car, but it goes like 40 miles an hour. It's like it's over the sand dunes, but he just breaks it. So - You do a lot of kids stuff. You've got like jumping, Jump Heaven Limited. I assume that's jumping around with your son. You will say that. The thing I learned about going through this myself was that I spend so much money on everything. It just goes on my son, essentially. It was actually quite eye-opening just how much I spend. And if I compare that to say when I was a child, the activities that I do with him that are probably standard, we have to go out on a Saturday and that were things that I probably thought were like once every year treats.

7:34Do you know what I mean? The cinema to him is probably boring. And I'm seeing that actually there's probably thousands of pounds a month going out on these activities. There's more money on food, Greg's, and your son's activities and you put in saving. And I know you save a lot of money, but I see 100 pounds to Vanguard and then a million pounds to Greg's. So how's that work out? This account is my spending account. So we'll get into that in a moment about how I structure my accounts to get around the fact that I will just burn money on experiences and pies if given the chance. So actually like you won't see any savings in this because this account is solely for spending.

8:08But we'll get into that. For eating and spending. Yeah, eating and spending, living. and the rest I waste. So yours tells me that you have a real issue with cars and you're just, I don't know, like what's your excuse for not using the tube? I'm too big for the tube. What, in stature or height? My status. Status, yeah. A little bit, but mainly I bang my head on the railing thing. You ain't that tall. I am that tall. No, no, you're not. Just because you're short, don't take an hour on me. No, no, we need to address this on air. The album art has done me really dirty. like they've made it look like I'm shorter than you and we're the same height.

8:45No, you're definitely not. And it's not just the hair. You got Cuban heels on, your little high tops. Anyway, so looking at this, I think for you, there just seems to be a lot of expenditure on what I would call convenience. You clearly take zip cars everywhere, even though you own a car and that's costing you probably hundreds of pounds a month. It's quite useful though on a night out, if you want to drink, drive there in a zip car, leave the zip car there, and then you can just find your own way home. On a night out at 2 p.m. Okay, so I like to drive everywhere. So the thing about doing this exercise that I find is for me especially, is it just reframes what you're actually spending your money on.

9:25And I think when people budget, they set a plan, they go, that's fine. And then they don't actually go, well, did I hit that plan? Was it where I need to be? What I've realized even from doing mine, I would say I'm good with my money. I save a lot more money than I spend, but I just realized just how much I'm spending on activities around my son. And it makes me question, do I need to spend that much or should I just spend more time with him at home? And also the pies are clearly a problem with all the Greggs. There's a lot of Greggs in here. I just love a road pie and my missus is vegan. So it's like, I'd feel bad eating them in the house.

9:59So I just snaffle a hot sausage roll in the car. In the car. Yeah, yeah. She gets in the car, she's like, there's murder in here. She doesn't, she's not that bad. I'm making it sound awful, but you know, it's a guilt thing. So just be honest, mate, like going through this, going through the last three months, I know you've had to go through this and look at every transaction because I said to do that before we did it. How did it make you feel? Slightly depressed. I spend way too much money on things I don't need to spend money on. I mean, because you always think you've got an idea, you know, you've got the apps and it tells you what you're spending money on.

10:31So I kind of have an idea for last week, last two weeks. But when I did the last three months, I was like, probably didn't need to buy that takeaway, didn't need to take all those zip cars, didn't need to generally waste so much money. So when you see a lot of recurring payments, you realize how much you actually spend. When you pulled up nine zip car payments in one day, that was a bit of a shock. Yeah, so like one way that I've tried to reframe my spending over time, because I had this constant battle with, I shouldn't spend any money. And it's like, no, actually the science shows if you spend money on experiences, they make you happy.

11:01And what you can clearly see that from what I do, I spend all my money on experiences with like my son or with my missus and stuff. And those are things that you hold onto long-term. You couldn't even remember taking nine zip cars in one day. So it's like, has that enriched your life in any way? And the takeaways as well, it's like, you buy them out of convenience, but you never remember them, do you? You don't - And they're getting more and more expensive. And it's just, yeah, it's not, you might as well just cook. But it's just, like you said, convenience. You're working - And your missus is a great cook.

11:29Yeah, she's a great cook. She made that food last night that was amazing. and I remember that longer than I would have if we'd ordered a Chinese. That's true, but convenience. You know, she's busy. I ordered a lot when she was having the baby and like she wasn't cooking. So every day it was just takeaway, takeaway, takeaway. Yeah, understandable. I think with this exercise, by going through the last three months and by being really open and honest about what you're spending and facing it head on, you kind of shine, you're holding a mirror up to yourself that you look into and you see your spending for what it is.

11:56And this is something that I have to do. I don't do it every month. I do it once a year, once every six months. Because as we earn more money, we have this tendency to inflate our lifestyles to fit it. And we lean on convenience and we can sometimes tell ourselves, well, because I earn more money now, I can afford to take Ubers instead of this. And actually we end up worse off because we're spending so much money on these things. Zipcar was meant to be the cheaper version of the Uber, but I just take way more. Well, you took an Uber on the same day as well. Oh my God. What am I like? It's a brilliant day.

12:25It's just this one day, mate. You just rode round all day in other people's cars while your car was getting cleaned. just for your little boost juice.

12:37If you're a small business owner, freelancer or sole trader, then I want to tell you about one of my favourite finance tools in the world, Xero. It's accountancy software and we use it across all of my businesses. So this podcast, my channel and the newsletter. Xero is great because it makes accounting as easy as it can be. And I say that confidently because of my mum. I wanted to get her involved in my business to help with bookkeeping and accountancy tasks like creating invoices and filing receipts. And she said she would do it, but only if we use Xero because she had experience with it from her previous business and absolutely loves it.

13:09Your tax returns can be filed directly from within Xero as well, which is especially important with the changes to making tax digital. But what I like most is how easy it is to see what's going on across my businesses. Revenue, profit, cash flow, all the stuff that I need to be on top of. So if you're looking for accountancy software, you should 100 % check out Xero. You can get 90 % off for six months by going to zero.com forward slash making money podcast. There's a link in the description for you as well and a QR code on screen. So T, tell me the riskiest thing you've ever done. Mate, the cameras are rolling.

13:43I can't do that. You're trying to get me cancelled. I mean, most of my risky things were probably my teenage years. But one thing I could say about finance risks, definitely invested in stocks with zero research, just because my friend told me to, his research was trust me. It didn't go well. Wow. So clearly risk affects you in both your personal and business life. And that's why we're really happy today to be partnering with Vanta. They automate a lot of risk processes and help you see the risks in a centralized platform so you know what really needs your attention. Besides risk, the main thing Vanta does is automate compliance with security protocols that you need if you want to do business with larger companies or grow internationally.

14:20This is stuff like GDPR, HIPAA, ISO 27001 and SOC2. The beauty of Vanta is they make it easy to prove you're compliant with these standards, saving up to 90 % of the time it takes and on average half a million dollars. You can get started at vanta.com forward slash making money. There's a link in the description. Okay, so I think once you've done this, once you've gone through all of the transactions and you've highlighted them and you've separated them out into these are essentials. So these are the things that I have to spend to live, you know, your rent or your mortgage and all of that. you can then start to look at what do I actually spend on the things that I lie to myself about but food people always say oh I spend 300 pound a month on food they look at it and it's like oh my god I spend 500 yeah yeah travel um nights out and socializing I just kind of want you to before you start the budget to have an idea of where your money's going because I think then you can face the problem head on the only thing I've got covered is holidays I've got a little holiday holiday savings account so I just go wild on holidays but yeah the rest of it is just kind of chaos and i think like i want to be able to go wild i always go wild on holiday like i you know you live for that sometimes and i think that's like a thing within your life that you should be able to spend a bit of money on and if you value that that's fine and the experience and yeah as part of this you kind of got to ask yourself like what do i value do i value zip cars and takeaways or do i value big holidays and you know a budget really is about sacrifice and deciding what aspects of your life you're going to cut back on so that you can funnel money into the ones that you enjoy.

15:54And I think most people think the budget's been restrictive and like constraining your finances. Actually, they set them free in the sense of you go, my priorities are spending time with my son and my priorities are making memories. So I design a budget that allows for that. But that means I cut back on zip cars and takeaways and boost use and stuff like that so that I can enable that. in order to do that you need to face up to what you're actually spending so T do you do a budget at the minute I do I do several budgets but the main way I do is saving cash that I would have spent otherwise how do you do that well I'm glad you asked I'm glad you asked this is for my boy we put all the all the coins in there and then like loads of notes that's actually added up quite quickly and then this is for me this one's for me this one's just got you just got this the wrong way around No, no, no, it's a small fortune here, but don't worry about that.

16:47This is my retirement fund here. Yeah, this is full of notes, but I accidentally put like a few coins in, but it's mainly for notes. And then this is for everything else. You legend. So this is almost like envelope stuffing. Yeah, pretty much. Every week I make sure I put like 50 quid in each. What I love about this is that like, you budget however you want and what works for you. I love a tub like these. I love them. This is easy, because this one I sometimes dip into. Yeah, exactly. Because it's my son's. It prevents it. And if you have a rule that every time you walk in the house, any cash you got in, you put it in there.

17:16All the coins straight in there. It adds up a lot. But I wouldn't really call that a budget. It's almost like a form of savings. A budget really is just a tool for telling your money where it's going to go. So there's loads of ways that you can do that. And there's loads of popular types. There's the 50-30-20 rule, which is probably the most widely quoted, but it's slightly controversial because it's hard to stick by now, where 50 % of everything that you spend should be going on your needs. so this is your rent your mortgage the things that you need to survive then 30 goes on your wants these are things on top of needs socializing or let's say you value having a nice phone i could argue that a 20 pound phone is a need but a 90 pound phone is a want right and then 20 into savings is the the final piece of that this is how they say the ideal budget should break down but we find that with the cost of living crisis, that gets really hard.

18:15I mean, how much do you think you spend on rent? Not as a figure, but as a percentage of your income. More than 50%. Yeah, probably more than 50%. If you count renters, rent, bills, heating, water, gas, yeah, over 50%. Yeah, I think the key thing about the 50-30-20 rule is it's thrown in people's faces online. What I would say is it's almost like a target you work to over time. And if you say, I'm hitting these key areas at the moment in terms of these percentages, I'm a bit off here. I can kind of massage it over time. You don't need to get there. Some like straight away, some people like you, they like having physical cash because I mean, the data shows that you spend less when you use cash than you do on card.

18:55I think it's about 15 to 20%, but I'm just pulling that number. As you can see from my bank statement, I just tap all day long. So yeah, cash is a lot safer for me. Yeah, exactly. So there's a method called envelope stuffing, which is where you set a budget and then you get a series of envelopes on each envelope, you write what that expenditure is. You might put rent, food, et cetera. And over the course of the month, as you spend on items, you take money out of the envelope. And then obviously once the money's gone in the envelope, you know you've reached your budget, okay? And then there's also, you'll hear pay yourself first, mentioned a lot.

19:27I think this isn't really a budget. This is a method of saving, again, like this, where simply when you get paid, the first thing you do is you save. You say, I do this. like to me the best part of earning money is the money I save not the money I spend so as soon as the money comes in I'll transfer money into my savings and stuff but again that isn't really a budgeting method it's a saving method I think the key thing is what I do I just list my incomes and I list my outgoings and how I want them to be so the first thing you need to do is figure out exactly how much you earn I think in the show notes we can put a link to my budget and it's really crap it's really simple it's just an in and out column on an excel but i'll let people see it and they can use that if they want there are more sophisticated ones like you need a budget uh which is a paid for service i find it slightly like i don't know how i feel about paying for i was about to say i'm not paying sounds like something you would do six times in one day zip budget give me some of that yeah so for me just the google sheet with an incoming and outgoing and once you've been through all of these transactions over like three months you should have a good idea of what's coming in and what you want to do is is order it in the the order of the needs the wants and then hopefully the savings if you can't afford to save at the minute that's okay the process is to actually just get control of your finances you know a lot of behavioral psychology shows that people avoid budgeting that feel like they're bad with money because they don't want to face up to it.

20:59And that's a cry and shame really, because they're not giving the antidote to the problem that they're worried about, if that makes sense. Yeah. I mean, people don't like bad news, do they? No. You always want to, yeah, you never want to look badly on yourself. Why don't you budget? You know me, I'm quite an optimistic guy. I don't really like, I'm like, I'm very impulsive. So if I see something, I buy it. I don't like to feel constrained and I feel like a budget kind of limits what you can do. And then again, as an optimistic person, I obviously I work heavily in crypto. And I think with my knowledge, I think that my investments in crypto are going to go quite well.

21:30Not that I recommend other people to invest in crypto like that because it's my full-time job. But yeah, I think I'll be all right in the long term. I save like, I budget on a whim. I don't really budget, to be honest. I just like put some money in savings now and again and I buy this and I buy that. And then, yeah, I'm pretty, you know me, I'm quite a spontaneous guy. Yeah. So the way I see it is as a business grows, they need more and more people to run the finances of that business. as they get more and more complicated. So as you grow, then you should be managing the finances more and more.

22:00But when I do try to budget, I always get like unforeseen, unforeseen, like unpredictable things happen. Like my car gets clamped, you know, get a flat tire. The engine starts like steaming and then you go to the car guy and they're like, yeah, it's a two grand to fix your car. And I'm like, what? I only paid eight grand for the car. So yeah, like things like that just keep happening. And then have a little kid, you know, that messes up all your like - Surprise. Where did he come from? Didn't get any notice, he just popped out. So yeah, I think things like that just kind of derail your life. And obviously as a first time dad, it's like, yeah, this whole budgeting for a child is not something I couldn't even like consider thinking about.

22:36Yeah, but the reason that you find that - It's just daunting. It's like, yeah. The reason expenses come out of the blue and knock you off track is because you haven't budgeted and you don't have adequate savings behind you in terms of an emergency fund or something like this. You know, it's this point of over time, you need to get to a place where the unexpected will happen. things will shock you. There's always going to be financial shocks. There's always going to be issues. There's always going to be flat tires. We need to prepare ourselves through a budget for those, you know, what is it that, you know, anything that can go wrong will go wrong on a long enough timeline.

23:07So they're not shocks or surprises. You're just not prepared for them is like one way of saying. I'm a very optimistic guy. I don't think there will be any shocks ever. I think maybe I'm pessimistic and that means I prepare, prepare, yeah, yeah, yeah, yeah. You're like rich dad, poor dad. Yeah. Not really, but I think, I'm prepared dad and unprepared dad. I would like to be more optimistic, but my pessimism means I prepare for the worst, you know? And I think you could do with a little bit of that. If you think that things are always going to get better, but you don't actually make them, they're not going to be as good as they could be.

23:38I mean, I feel like, I mean, I'm still here. My bills are paid, my car works today. So like - Where could you be? Where could I be? Where could you have been right now? If you'd have like directed the flows of money and saved more aggressively - Or a house by now and have a G wagon, dream car. Yeah. Yeah, but yeah, probably spend two. And then you'd just spend all your money on zip cars anyway. Yeah. Yeah, I don't know. I feel like budgeting's, I feel like it's a luxury. What? I know, I know. But like, look, say you're living - Zip cars are luxuries, mate. Like, budgeting is not a luxury. Budgeting is basic.