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