The Learn How To Budget course gives you everything you need to KNOW and everything you need to DO to master the most fundamental of all financial skills – setting up and sticking to a monthly budget.
After just four weeks of preparation (which you can take at your own pace) you will know exactly how to budget, how to overcome some hurdles, and will be off and running on your way to financial success.
The fact is you will never be rich unless you consistently spend less than you earn (unless you win the lottery or inherit from a long lost aunt). Are you ready to commit to your own future? This course will arm you with all the tools and techniques to do so.
In this short video, i introduce the Learn How To Budget course, explain its structure, and cover what you will learn in each module.
If you have given up the time and money to complete this course, then you probably have some idea as to why having a budget is an essential life skill. it's more than just a nice-to-have, it's a pre-requisite for financial success.
Let's not put too fine a point on it - if you don't spend less than you earn each month, you will always have less money than you would like to have. Unless you win the lottery of course!
Watch the video below to learn the three benefits of setting and sticking to a budget.
When starting out with a budget, you are vulnerable to things going wrong. One unexpected bill can derail your fledgling budgeting efforts, leaving you frustrated and downhearted, ready to give up. The answer to this is to put a buffer between you and this kind of unexpected financial hassle - a starter emergency fund.
Do anything you can (legal) to scrape together enough of a buffer to cope with all but the largest bills. Watch the short video for some ideas as to how you might do this.
Any job needs the right tools. Fortunately, you don't need loads of expensive equipment, computers and calculators to set and stick to a budget.
Watch the video for details of what you WILL need, plus there are some links underneath the video which might be of use.
Right. Time to get working! I have just one task for you this week, and that is to write down everything you spend for one week.
Yes, EVERYTHING! Well, actually there are a couple of things you can ignore - watch the video for details
There's a simple rule of thumb for the order in which people should ideally be paid:
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:
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?
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:
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 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.
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
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:
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.
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.
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?
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...
I am a practising financial planner with 20 years experience working with folks who have worked and saved hard to build up their wealth. Since my days of financial illiteracy as a student, I have made my own mistakes and learned how to manage my own affairs and simplify them to make them work easily.
Combining my personal and professional experience in how money works, I have learned how to distil complex financial subjects into what you need to KNOW and what you need to DO.
For the last five years I have been teaching personal finance on my website MeaningfulMoney, and my weekly podcast is downloaded thousands of times each week.