over the last 5 years I have tried and tested so
many different strategies to manage my money and I've done that because understanding how to
manage your money and be in control of your money is one of the most important life skills
we can learn today it doesn't matter if you're making 50,000 or a 100,000 a year the number one
thing that makes a difference is how you're able to manage that money and the real skill of money
management is about making the most of the money that you have not just for investing and for
growing wealth but instead to find the perfect balance between living in the moment and planning
for the future when you find something that a is easy to do and B it's easy to maintain then
managing your money stops feeling like a chore so in this video I wanted to talk you through my
three-step method for effectively managing your money in a way that makes you feel in complete
control of what is coming in and out of your account every month I'll also give you some of
my favorite tips along the way if you want to use the same template that I have created then
in the description box you can find completely for free the link to to download and use this
to incorporate for your own finances as well okay so this is what the tracker looks like it's
got the colorcoded spending categories the income section at the top and then the overview on this
table over here so these sales will change color as you start filling in the sheet you'll see in
just a moment you just have to click file make a copy and then you can duplicate it and use it
for yourself now step one is to define the three fword wait for it a key part of being in control
of your money is defining where you want to but before we even do that you need to First figure
out exactly how much money you're bringing home each month so this is the amount that lands in
your bank account after tax if you have multiple income sources you want to include all of them
in here your 9 to-5 day job your weekend gig your freelancing work that you do on the side maybe
some Investments that are paying off whatever these numbers are you want to put them in the
top left blue section over here for example if I'm making 3,000 a month after taxes for my day
job I'll put that here another 200 a month let's say from my creative side hustle and 500 a month
from freelancing so you just plug in those numbers at the top now if you're employed the number
is pretty straightforward it's the amount that lands into your bank account each month after
tax and other state contributions have already been deducted so in this case that's a 3,000 a
month but if you already contribute towards your workplace pension you actually want to add that
number back in So if you contribute say 200 a month towards your pension add that 200 back into
this and so that number would instead be 3,200 the reason for this is because the amount that
you're putting towards your pension contribution actually goes towards the future U category
which will come to in a second now if you're self-employed or you're a freelancer you need
to take into account taxes the last thing you want to do is assume you have all this money
coming in and Define your goals on a higher number than you should and then be disappointed
when you don't hit your goals so in this case the 200 from my side hustle and the 500 from my
freelancing work that is after tax once you put those numbers in your total income is calculated
now that we've done that we can Define the three FS the fundamental bucket the fund bucket and the
future you bucket you want to decide how much of your net income so the 3,700 in this case you
want to put towards each of these buckets the funds allocated to the fundamental bucket are
dedicated to your essential needs these are the non-negotiables of Life housing Transportation
food money placed in the fund bucket those are the costs that enrich your life with joy with
experiences and then lastly everything you put into the future you bucket that is an investment
towards the life you envision years down the road in the world of budgeting there is a popular
guideline that you may have heard of called the 50320 rule it suggests that 50% of your
net income should go towards the fundamental needs 30% should go towards the fund bucket and
20% should go towards the future U so those are the percentages that I'm going to put into this
column right here so 50% towards fundamentals 30% towards fun and and 20% towards future me
and what you'll see as we start filling in the sheet and putting your numbers and your actual
spending in is that the colors of these sales will change depending on whether or not you're
in line with your goals or if you're overspending or under saving I do want to make a quick Point
here actually about the 50 3020 guideline it was introduced in 2005 in the book all your worth the
ultimate lifetime money plan and so it was during a different economic landscape over the years
we have seen inflation Rising healthcare costs inreased student loan debt fluctuating housing
markets all of these factors have really impacted people's disposable income and the proportion of
their income that goes towards their fundamental needs so you may want to modify these percentages
and tweak them based on your unique circumstances you want to start filling in the three colorcoded
columns in the middle so the fundamentals the fun stuff and the future you the fundamentals like
we said are the non-negotiables they are the fundamental things for your day-to-day living
so this includes things like housing your rent or your mortgage payments includes utilities
and other bills so we're talking about um water gas electricity it includes Transportation
so your car payment train tickets to get to work or any other mode of Transport that you pay
for groceries would also go into here Insurance minimum debt payments for your debt o ations and
you want to find what you spend on each of these by looking through your bank statements so your
debit card statement your credit card statement or any apps that you use it may be that your app
automatically categorizes your spending for you so maybe all your utilities come into one so
you can put that one number as a total let's say 200 into this cell over here or you can split
it up so break it down by water gas electricity it depends on how detailed you want this to be when
it comes towards spending towards your needs you want to as much as possible have this automated
have direct debit set up so that everything is getting paid automatically the more friction you
can take out of anything the more likely you're able to keep that thing up the last thing you
want is to receive constant monthly reminders to pay your bills and then you need to remember
your password log into your system enter your bank details manually transfer each month it's just not
fun and these kind of things make managing your money a chore it creates unnecessary friction so
once you go through and enter all these numbers so let's say 1,200 for mortgage 100 for utility 30
for phone and you keep filling in these numbers you can then check the table on the right and
that will immediately show how you are doing in relation to your goals so I had to set a Target
here of 50% of my net income to spend towards the fundamentals but this sale here has turned red so
I'm clearly exceeding that threshold so then you need to reassess that goal and that something will
come to in step three and this column by the way at the end it shows the actual amount that you're
spending in the currency that you're spending in this way you have a clear idea of both the portion
of your income that you're spending in terms of percentages towards each of these categories
but also the exact amount you're spending as well then we have the middle column and that is
the fun stuff now you want to be really clear with yourself here you want to clarify these
categories from the outset you really don't want your fun stuff creeping into your needs just
to justify some spending so the fun bucket is all the things that are not essential these are the
things that at the core are completely optional so examples of what can fall into the fun category
include subscriptions like Netflix Spotify Amazon Prime entertainment so things like going out
to the movies eating out getting that round of drinks self-care so things like your nails
facial haircuts and traveling these are all examples of what falls into the fun category
the fun bucket also includes those upgrade decisions that you make so if you're buying a
Mercedes instead of buying a more economical Toyota or if you're shopping at Marks and Spencers
instead of Tesla goes or getting a gym membership instead of working out at home those are all
upgrades they're little extras that you spend money on that makes life more enjoyable and more
entertaining so you can see a few more examples that I've put in there and again you could split
it out so I've got clothing as spending 200 100 in that category you could split that out and
make it as detailed as you want you could have a line by line jumper trousers or whatever you've
bought in the clothing section everything could go into here once you fill in all the categories
for your wants as I've done here the table on the right again will signal whether you're on track
or whether you need to cut back once again in this case I'm spending 25% of my net income on
my wats so the sale hasn't flagged up I've got some leeway I've got some room to spend more if
I want and then the third column is the future UB bucket and this is all about paying yourself
first there are a few ways you can do this but I always recommend setting up automatic transfers
from your bank account that you get paid into into a separate savings account as soon as you get
paid again when you create a system that works for you you remove the need for willpower you remove
any friction and there's no excuse not to save you don't get to the end of the month and realize
you don't have enough money to be able to save like you said you would at the start of the month
all of that push and pull just disappears in this category you can include things like investing
in stocks and shares topping up your emergency fund and putting money towards your savings funds
if you're not sure where you should start and in which order you should put money towards I have
a video right here that explains step by step where you should be putting your money and in
what order when it comes to your savings fund I would also recommend having a separate account
for each of your bigger saving goals so if you're saving for a house have a house fund if you're
saving for a car have a car fund have them all with specific purposes that way you're keeping
them separate and you could easily just log into your account and check what the balance is and
how far off or close you are to that goal it's a lot more motivating than having it all in one
as just a savings pop so there a sale right here for the future U category that works in reverse
if you're contributing less than the amount you initially planned for the future you the savings
and investment bucket then the sale will turn red indicating that you're not saving enough and then
we're on to step three and that is the reflections arguably the most important part there's no point
in coming up with all these goals and all these of questions you can consider and ask yourself is
have you paid all your bills on time are there any late payments if so why can you set that up to be
automatic are any of the sales read meaning either you spent more than you should or you saved less
than you should if that's the case why did that happen what did you spend on if it's that you're
spending too much in the fun bucket then are there ways to get the same thing for less or is it
that you simply need to reassess and cut some of those things out or maybe you spent less than you
thought you would in your fun bucket in which case you can increase maybe your savings an investment
section you could pay more towards yourself and pay off your debt faster it might be that this is
the first month that you're tracking your spending in which case these percentages might need
some tweaking to make it something that is more sustainable over the long run instead of just like
plugging the numbers and closing it and getting on with your life reflect at the end of the month and
see where you can improve your finances once again if you do want to download and use the same one
that I have it's linked completely for free in the description box below if you do use it this month
come back and tell me how you get on I'd love to see what what you thought and how it helped
thank you for watching and see you next week
