There's a simple rule of thumb for the order in which people should ideally be paid:

• Debt
• Savings
• Bills

The first two are paying yourself first. It might seem that paying debt is paying someone else, and it is, but every penny you pay off your debt incresaes your net worth.

Paying yourself first is important because of Parkinson's Law - Expenditure rises to meet income. We'll never have 'anything left' to save at the end of the month; it just doesn't happen that way. So the only way to make sure the money goes away for your own future is to pay yourself first.

Having two bank accounts is a simple but huge life hack that someone taught me once. I remember it being a total revelation to me at the time. I didn't even know you COULD have two current accounts!

The idea is that you have one account for regular monthly bills, direct debits and standing orders. The other is for the day-to-day spending.

This is your first task this week - if you don't have two current accounts, set up another one with your bank now. Make sure it comes with a debit card and doesn't cost you anything.

This new account will become your spending account. This way, you don't have to change any of your direct debits - they will continue to be paid from your existing current account. Chances are you're being paid into your first account too, and this doesn't have to change either.

Having a two-account system basically halves the amount of things you have to budget - so simple, yet so powerful.

If you're single or are managing your own budget with no-one else involved, then you can skip this lesson.

Every family is different. There is no RIGHT way to manage your financial relationships.

Every couple manages their finances differently. Some combine everything, with joint accounts across the board. Some have a joint account for household things, food, utilities and the like, and maybe holidays are paid for jointly, but everything else stays in their own account.

We need to recognise that everyone has different strengths. If one of you is REALLY bad at overspending, they probably shouldn't be in charge of the family budget!

The best thing is to TALK. Even if only one of you does the running with this, make sure the lines of communication remain open.

At the beginning of the month, usually when you get paid, but not necessarily, we need to set up for the month ahead.

Here, we are telling our money where it will go this coming month. We're looking forward, not back. We're planning, not reviewing.

To do these, I use a one-page sheet. I use an Excel spreadsheet to do it which is in the resources section, but you can just as easily print off the paper version and fill it in by hand.

The video below walks you through it...

Here at the end of week two, I have some simple-ish tasks for you to complete before moving on to week three. If you have watched all the lessons this week, you should know what all these mean and be able to complete the tasks:

- Set up second current account

- Identify all monthly bills paid out of your bills account

- Try setting up a first monthly budge

Reconciling is the process of making sure your records match the bank statement. It's a chance to check the bank haven't made a mistake - it does happen!

Here's the process:

• You enter your transactions from receipts
• Download your bank statement, or work off the paper one
• Check off the transactions, one by one
• Add any you've forgotten to your sheet
• Query any errors with the bank!
• Total your categories for the weekly review

In the video below, I show you how this process works. The spreadsheet I use in the video can be downloaded from the resources section.

WARNING - this spreadsheet is experimental; you may be better off with a pen and paper!

Ok, once the budget is set up, the plan is laid, then reality hits! It's time to start living in accordance with the budget!

Problem is, a month is a long time to just wing it an not know if you're on track or not. The solution to this is the weekly review. This needn't take more than 10-15 minutes a week. Here's how it works:

Something's amiss - what do we do?

What's gone wrong?

• Unexpected bill, or one forgotten in planning - It's your cousin's wedding and you have to get a gift AND pay for a hotel room at the reception venue.
• Wrong estimate as to costs - both ways: higher/lower than expected

What to do? The Weekly Review is there to enable you to react quickly to unexpected bills during the month. Here's how:

Here are your two tasks for this week:

1. Practice a bank reconciliation. If you're really advanced and are using budgeting software, then you could try this by downloading your electronic bank statement and uploading it into the software
2. Maybe practice, with a sample budget, how you might adjust things if suddenly you had a £100 bill come in that you weren't expecting

These are core skills for money management - so important!

It may be that if you haven't managed to set and stick to a budget before, that you have some debt. we need to define good debt and bad debt:

• Good debt: low interest credit to buy things which appreciate, e.g. a mortgage for a house, or a student loan to better you education
• Bad debt: high interest credit to buy stuff which goes down in value, e.g. store care or credit car to buy a new camera, or a car loan.

Good debt can usually be left to run its course, but bad debt should be eliminated as quickly as possible. Remember, you're paying someone else to get rich, and not yourself, but it doesn't have to be this way.

• Step one - Consider shifting credit card/store card balances onto a Zero interest credit card if possible, and plan to pay this off by the end of the zero interest term.
• Step Two - Begin the Debt Snowball (Credit for this to Dave Ramsey at daveramsey.com)

Most of us have a fixed income coming in each month, but many do have an income which fluctuates, and this can make budgeting tricky.

Reasons for this can be varying overtime, sales commissions rising and falling and maybe even zero hours contracts making your working hours, and therefore your pay, totally unpredictable.

The vast majority of us will have a baseline income though. You need this to be able to budget. Think about it, if you were committing to a set of payments, such as renting a room or a house, taking out a loan or whatever, you wouldn't do that without knowing you'll have a minimum income coming in to cover these. It's much the same with a budget...

It's easy enough to plan for bills which happen nice and tidily on the same day of each month, but what about things which come once or twice a year?

The answer is, where possible, to get ahead.

Take Christmas for example. It comes at the same time each year, and yet it seems to surprise so many people, who get to December and have to try and pay for Christmas out of their December pay packet. This doesn't work, and leads to credit card debt and misery. If you're lucky, you'l just about pay it off by next November and the cycle will begin again.

How much better to save up in advance for Christmas by putting aside an amount each month?

So if your Christmas spend is £500, divide that by 12 months and that's £42 per month to save.

Better still, divide the figure by 10, and then you'll have a nice extra buffer. £500 / 10 months = £50 per month, but that'll actually give you £600 to spend at Christmas. (I like Apple Store vouchers). Or an extra £100 to enjoy yourself.

If you do need to dip into your emergency fund, here's how you do it

• Treat it as if you have borrowed from yourself, and pay yourself back urgently, and with interest.
• Stop the debt snowball and revert to minimum payments on al you outstanding debt.
• Throw everything you can at your emergency fund until it is topped up again

When the fund is back up to its sensible level, you can revert to normal and being paying down the debt again.

Here are your tasks for this week:

• If in debt, get planning your own debt snowball!
• Look ahead for your annual bills, including Christmas, big birthdays, weddings. Can you begin putting money aside for these now?

Setting and sticking to a monthly budget is itself a goal, and a worthy one. But once mastered, a budget becomes a vehicle to achieve other financial goals.

Having goals, and articulating and writing them down is a key step in achieving them.

After that it is a case of directing funds each month towards the goal.

You'll want to set short, medium and long term goals, e.g.

• Short - pay off your first store card; save for a holiday
• Medium - build up a full emergency fund, get to the point where you're living on last month's income
• Long - pay off the mortgage, pay for daughter's wedding, retire at age 60

Having goals, gives budgeting MEANING. Without goals, you budgeting is a good discipline, but won't feel constructive. Without budgeting, your goals will never be met.

All this talk of goals setting is looking into the future, and that's all well and good, but it is important to celebrate wins as you go along.

• If you pay off a store card - celebrate that win
• If you become debt-free - celebrate that win
• If you get six months of net income saved up in a bank account as an emergency fund - CELEBRATE!

Obviously, celebrations should done within budget - don't mess up all your hard work in one big blow-out! When you hit your targets, plan in your celebration that month. It might be anything from having a Chinese take away to taking a weekend break, or getting yourself a little something you've been holding off from getting. But make sure you plan for it.

If you don't, you won't enjoy the purchase half as much.

You'll find that budgeting becomes its own reward, as you see your finances become more secure.

Back in the second week of lessons I dealt briefly with how a couple might want to think about working together on a budget.

A key benefit of having a partner in budgeting is the holding each other to account. You might think that sounds more like a curse than a blessing, but if you are both working together for your mutual financial security, there will (hopefully) always be times when one partner is stronger than the other.

If you're on your own, it is still possible to get the accountability aspect which WILL help towards your budgeting success. How?

• Find like-minded people. Tell them about this course and join it together ;-)
• If you don't want to do that, maybe ask a family member to check in with you now and again and ask how things are going
• Join the LHTB Private Facebook group. Only MU members can join, and only by invitation from me. No-one on Facebook will know you have joined, or see anything you say in the group. Plus, I'm there!

Together we're stronger!

Well done! You've made it to the end of the course, but this is, of course, only the beginning.

What I have taught you over the past four weeks of lessons is all you need to know to win, financially over the long term.

But that long term can be a killer. It can take time, sometimes a long time, to see the outright fruit of all your hard work. Like anything which takes time, it can be easy to go off track and then fade away.

A key part of staying on track is to remember why you are doing this in the first place...