S1E5: How to budget to make the most from what you earn

0:28Right then, T, time to record the Money Week advert. it summarises the biggest news stories that you need to know about, from pensions to investing, tax to the budget, or even what to do with the£1 coins while you're sat on the toilet. Along with their own analysis, they pulled together pieces from the top publications, like the FT, Economist and Wall Street Journal, to give you a balanced look at what's going on. If you want to give Money Week a try, you can get six issues in print and on the app for free by visiting moneyweek.com forward slash money. After your trial, you'll save an extra£5 on a quarterly subscription, exclusive to Making Money listeners, so that's moneyweek.com forward slash m-o-n-e-y there's a link in the description 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

1:17i 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 yeah i feel better now i think people almost see it as like 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, oh. 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.

1:47It's something that you continuously do. But I actually think it's a good tool for, it'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 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 And it's like this constant journey to keep yourself on the straight and narrow.

2:30And 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'll do a little swap.

2:54so 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 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.

3:28I'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.

4:05Had 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 or 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.

4:41It 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?

5:14It'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?

5:43Well, 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.

6:15So 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.

6:43This 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. You're paying me. Oh, that's when you were back from Bali. That was on the back, 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. So there's like Subway, Greggs, Greggs, fish and chips.

7:22Greggs, 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. No, it's like a little remote control car, but it goes like 40 miles an hour.

7:53It'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.

8:26Do 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.

9:00But 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.

9:37No, 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 then 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 and 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 was it what was it where i need to be what i've realized even from doing mine, I would say I'm good with my money.

10:30I 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. So 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 her sound awful, but you know, it's a guilt thing.

11:05So 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. So I kind of have an idea for last week, last two weeks. But when I did the last three months, So I was like, probably didn't need to buy that takeaway. Didn't need to take all those zip cars.

11:31Didn'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. And 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.

12:04You 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? 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 late. Yeah, 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.

12:33So 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. And 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.

13:04And 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. It's just this one day, mate. You just rode around all day in other people's cars while your car was getting cleaned. just with your little boost juice.

13:28Okay, 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? 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, 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.

14:02The only thing I've got covered is holidays. I've got a little 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 on holiday. I always go wild on holiday. 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. The memories 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?

14:31And, 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. And 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, So 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 juice 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.

15:05So 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 coins in there and then like loads of notes in there. 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. A small fortune. No, no, no. It's a small fortune here, but don't worry about that. This 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.

15:39And 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. Like I used to - 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 - All the coins straight in there. It adds up a lot. But I wouldn't really call that a budget.

16:06It's almost like - A saving mechanism. 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.

16:43I 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 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. I 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.

17:22And 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. I 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 and on each envelope, you write what that expenditure is.

18:00You 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. I 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. 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.

18:35But 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. It's really crap. It's really simple. It's just in an 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, which is a paid for service. I find it slightly like, I don't know how I feel about paying for a budget.

19:07I was about to say, I'm not paying for that shit. Sounds like something you would do six times in one day. Zip budget, give me some of that. Yeah, so for me, just a 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 order it in 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 they don't want to face up to it and that's a crying shame really because they're 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 to me do you want to hear a fun fact about tax don't get me excited I'm all about tax facts.

20:03Are you? I love a bit of tax. This is new to me. Well, okay. So in 1970, the tax code was around 1 ,500 pages. Now, today, 2025, it's 22 ,000 pages. Hefty. Very. So there's around 10 million words and there's more written about tax than any other type of law or legislation in the whole of the UK. It's one of the most complicated tax systems on the planet. We know how complicated tax can be, but we've got a tool that can help. TaxApp. TaxApp make it really easy to file your self-assessment. And if you're one of the 12 million people that needs to do that, the deadline is coming up on January 31st.

20:42With TaxApp, you don't need to have a lengthy back and forth with an accountant. And you don't need to navigate the complexities of HMRC on your own. You just sign up, add your info, and they'll guide you through it. So you can submit your tax return in as little as 15 minutes. We've left a link in the description. prices start from£49, but if you use the code MONEY10, you get 10 % off your first tax filing. That's M-O-N-E-Y-1-0. There's also a QR code on screen if you want to use that. Okay, T, talk to me about your attitudes towards risk. I mean, I like a bit of risk in my investments, but I definitely would say since the podcast, I've toned it down a little bit, not quite as gung-ho and like carefree as I was in risk.

21:23Yeah, shooting from the hip all the time, weren't you? Yeah, I think personally that you should take risks, but it should always be in areas where you have a unique skill set, an edge, expertise, like your job, things like this. One area that I wouldn't take any risks is compliance. Yeah, the risk changes you grow in business and you need to be on top of it, which is why we partner with Vanta. Vanta automates a lot of risk processes and helps you see your 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 you need to scale, like GDPR, HIPAA, ISO 27001, and SOC 2.

22:02The beauty of Vanta is they make it easy to prove you're compliant with these standards, saving you up to 90 % of the time it takes, and on average, half a million dollars. If you know what these acronyms like SOC 2 are, you probably need Vanta. You can book in a demo at vanta.com forward slash making money. There's a link in the description. 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.

22:37And I think with my knowledge, I think that my investments in crypto are going to go quite well. Not 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. 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.

23:08So as you grow, then you should be managing the finances more and more. But 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.