After a decade in finance and banking, the one thing I kept seeing was people who are earning decent money but still felt completely lost when it came to their own finances.
Not because they weren't smart, but because nobody had ever walked them through the basics in a way that actually made sense.
So that's exactly what this video is a complete financial glow up.
Everything you need to go from feeling overwhelmed by money to actually feeling in control of it.
Let's dive in.
Number one, how to build a budget.
First, you need a budget.
I know, I know, that word makes a lot of people switch off immediately.
It sounds restrictive, it sounds boring, like you're signing up to never have fun again.
But here's the thing.
Only 59% of Americans feel confident enough to even create one.
And I'd argue that's not because budgeting is hard, it's because nobody ever showed them actually how to do it properly.
So that's exactly what we're going to do right now in this part of the video because, without a budget, saving just becomes something you hope happens at the end of the month, instead of something that actually happens.
So if you're wondering where to start, I'll walk you through this step by step.
The first thing you want to do is make a note of your income.
You need to know exactly how much money you're working with each month.
You could do this in your notes app or on paper, whatever works best for you to keep things simple and show you how I'll do it.
I'll put the numbers into my intentional spending tracker, as I will do most of the work and the heavy lifting for us.
If you want to use the same one, you can find all the details in the description below.
It also comes with a step-by-step workbook to get you from wherever you are right now to having your own financial plan.
So diving in exactly how you approach.
This will depend on whether you're an employee or self-employed.
If you are an employee and you have a salary, don't just take the annual figure and divide it by 12, because that's probably not what hits your bank account.
Instead, put the amount that you make after taxes in here instead.
There's also space to add other forms of income, such as side hustles, dividends income, any rental income that you have.
So, for example, if your job pays you 2350 a month after tax and you earn another 250 from freelancing work or your side income, Your total monthly income is therefore 2600.
So that's the number that you're working with.
Now, before we move on to the next column, let me quickly talk about retirement savings.
If you're saving for retirement through a workplace pension or an employer sponsored plan, your contributions will usually be deducted before your pay hits your bank account.
So if you're not sure how much you're actually paying into it, have a look at your payslip and you should be able to see your retirement contributions on there.
Then I want you to add those contributions back into your income in the first column.
And I know that's not part of your take home pay, but by doing it this way you'll actually get a more accurate overview of your money right now.
And then you'll find it easier to make plans for the future.
So we'll categorize that amount later on properly.
So if you're self-employed, there's something else you need to keep in mind, because your money won't have been taxed yet.
So before you add your income to the spreadsheet, I want you to minus your estimated tax first.
So I'm a self-employed myself.
And so I know how tempting it can be to think of all the money that enters your bank account as yours, and then figure out the tax stuff later on.
But this actually makes things harder because you end up budgeting based on fake numbers and money that isn't actually going to be yours.
Now, once you've got your income sorted, the next step is to download your bank and credit card statements and get everything in one place.
Then you want to go through your spending line by line.
In fact, if your bank already categorizes your spending automatically for you, even better.
You can take those numbers directly and put it into these categories, or you could go through your bank statements line by line.
And this is where I want to introduce you to a framework that completely changed how I think about money.
I want you to think about your spending in three buckets.
And honestly, once you see your money this way, you can't unsee it.
We'll start by picking out your fundamentals.
By that I mean your rent or mortgage payments groceries, car payments, bills basically all the things you'd need to cover if you lost your income.
Next, I want you to add the expenses that aren't technically essential, but they're necessary for you to have fun.
You might include clothes like not your day to day clothes or not clothes that you absolutely need for anything that you spend on above and beyond the essentials.
Eating out holidays into this column.
Things like social plans, a gym membership, streaming services too.
Then we want to turn our attention to the future you bucket.
This is where you'll put all the expenses that will get you closer to achieving your goals, such as emergency fund contributions, extra debt payments, those retirement contributions that I mentioned earlier.
This is all the money for your future self that you will genuinely be very thankful for.
It all falls under the future you category.
Most people haven't actually looked at the spending this way, but once you do it, it becomes very, very obvious where the leaks are and where you actually have room to make changes.
Now, if you're wondering how much should go into each of these buckets, that's exactly what we're going to cover next.
And leading us to the second part of this video, and that is 50, 30, 20.
You might have heard of this one before, but if not, it's a simple framework that suggests 50 of your take home pay should be going towards the fundamental bucket.
Around 30% on fun and 20% on future you.
Now, if you've just looked at your numbers and your fundamentals are taking up 60, 70 or even 80 of your budget, just take a breath, because that doesn't mean you're borrowing money.
It might just mean that that rule, the 50-30-20 rule, is showing its age, because that rule became popular around 20 years ago when the gap between the average income and the cost of living was a lot wider than it is today.
Rent was lower, energy bills were lower and your money went further.
So if 50% of your target feels completely out of reach right now, that's not a personal failing.
It's just the reality for a lot of people.
A split like 65-20-15, which is one that I often mention, or even 70-20-10, might make a lot more sense for where you are right now.
So, instead of treating the 50-30-20 as a rule you have to follow, treat it as a starting point, something to work towards over time.
What it's really useful for, in fact, is spotting imbalances.
If almost all of your income is going on your fundamentals, that tells you there's very limited room right now for longer term goals.
And that is important to know.
If your fund spending is higher than you realize.
That's useful too, because now you can go through each item and work out what's actually worth it to you and what isn't.
And I just want to be clear.
I'm not saying cut everything that you enjoy, but if your expenses are high, you will probably need to make some changes.
Even small ones add up.
Canceling a couple of subscriptions.
You forgot you had being a bit more intentional about impulse purchases, that money can go straight into the future.
You bucket instead.
If you want more ideas on what to cut back.
I've got a video right here that is unsexy habits talks about all the ways that I use to save money.
Completely unsexy habits, but they're super simple.
And I'm going back to the future, your view bucket.
Here's the thing.
Once people get to this point, the question i hear most is okay, but where do i start?
Because it can feel like you hit your mid-20s and suddenly you're expected to have an emergency fund, be paying off your debt, saving for a house, investing for retirement all at the same time, And if you're starting from scratch or working with a tight income, that is genuinely overwhelming.
So let's instead talk about exactly what to prioritize and in what order.
First up, basic emergency fund.
So the first thing I'd suggest prioritizing is building a basic emergency fund.
And I want to explain why.
Because a lot of people just skip this step and go straight to the other goals.
And it almost always comes back to bite them.
Think about it this way without any emergency savings, you're basically one unexpected bill away from derailing everything.
A car repair, a medical expense, a broken boiler Any of those things which could easily cost between 500 to 1000 could wipe out whatever progress you've made and potentially even push you into debt.
And if you had to put it on a credit card, you're now paying interest on top of everything else.
So an emergency fund is basically a financial circuit breaker.
It stops one bad week from turning into six months of setbacks.
Now, if you're not sure how much to aim for at this stage, you might be tempted to set yourself a really big, ambitious goal straight away.
I don't know something like 10 000 or six months of expenses or a year's salary.
And whilst those are great targets eventually starting, there is actually one of the most common reasons people give up before they've even got going.
The goal feels so far away that it stops feeling real.
So instead, start with one month of your expenses.
And I mean your core fundamental expenses, not your full spending.
For most people, that one number is enough to take the edge off and cover the majority of short-term surprises.
It's close enough to feel achievable.
And once you hit it, the momentum you get from that is really, really powerful.
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Now, here's something that also surprises a lot of people.
And honestly, it surprised me too when I first came across it.
Depending on your situation, it might actually make more sense to tackle your debt before you focus on building that emergency fund.
I know that sounds counterintuitive, but if you think about it, if you've got high interest debt, that balance is growing every single month, whether you're paying attention to it or not.
So while you're slowly saving towards your first month of expenses, your debt could be getting bigger in the background and costing you more than you're saving.
So in that case, putting that money towards your debt first means you're reducing the interest piling up and freeing up more of your income faster.
And once the debt is cleared, then you can build your emergency fund without that drag slowing you down.
Which should you do first?
That depends on your debt.
And that's exactly what we're going to cover next.
Moving on to part four, which is paying off debt.
If you followed along with the spending tracker earlier, you already have your minimum monthly payments written down.
But now I want you to go one step further.
Note down your total outstanding balance and the interest rate on each debt as well.
I know that can feel really uncomfortable.
A lot of people avoid doing this because seeing the full picture all at once feels overwhelming.
It's easier just to pay the minimum each month and try not to think about the rest.
I get it.
But here's the thing, the number doesn't get smaller by ignoring it, it gets bigger.
So, as uncomfortable as it is, getting it all down in front of you is genuinely one of the most useful things you can do.
Because once you can see everything clearly, you can actually make a plan, and that's when it stops feeling scary and starts feeling manageable.
So how do you actually pay off?
There are two main strategies and which one works best really depends on your personality.
The first is called the avalanche method.
This is where you put any extra money towards the debt with the highest interest rate first, whilst paying the minimum on everything else.
Once that's cleared, you move on to the next highest and so on.
Mathematically, this is the most efficient approach.
It minimizes the total interest you pay and gets you out of debt faster on paper.
And this is the one that I would recommend for anyone with high interest rate debt.
The second, that's the snowball method.
This is where you focus on the smallest debt, regardless of your interest rate.
Once that's gone, you roll that payment into the next smallest and the next smallest and so on.
It's not the most efficient mathematically, but there's a reason a lot of people swear by it.
And that's because clearing that first debt It gives you a real psychological win.
And that momentum can keep you going when it starts to feel hard.
Neither method is wrong.
If you're someone who's motivated by logic and numbers, the avalanche might work better for you.
If you need to feel progress quickly to stay on track, go with the snowball.
What really matters is that you pick one and you stick to it, because the worst thing you can do with debt is paying it randomly and hope for the best.
One more thing worth mentioning the more you can bring down your expenses in other areas, the faster you'll clear your debt.
So even an extra 50 or 100 a month directed at your highest priority debt makes a real difference over time.
And every time you pay something off, that money doesn't just disappear, it becomes available to put towards your next goal.
Which brings us to the next step, which is building your emergency fund.
Once you're on top of your debts and you've got that 1000 buffer in place, you'll hopefully have more confidence in yourself.
You've already proved to yourself that when you really put your mind to it, you can achieve financial goals that you once might have thought were impossible.
So make the most of this momentum and turn your attention back to your emergency fund, because to really have a money glow up, you'll probably want around three to six months of your basic expenses saved up.
Again, don't forget to use the figures you added to your budget as a guide.
So if you spend 2000 a month on rent bills, groceries and transport to work, you could aim for somewhere between 6000 to 12000 in your emergency fund.
You might want to save more than this if you have children, if your income fluctuates from one month to another, or if money anxiety is something that you struggle with.
No matter how much you decide to aim for, remember that it can take several months or even years to build up an emergency fund.
So once you've got that initial one month of expenses saved and you've paid off any expensive debts.
It's a good idea to make your budget manageable and realistic, otherwise you'll only struggle to stick to it.
So try to see this journey as a marathon, not as a sprint.
And every time you put money into your savings account, remember that you're more financially secure than you were before.
One last thing whilst we're at this point where you keep your emergency fund actually matters more than what most people realize.
You want it somewhere accessible enough that you can get into it in a genuine emergency, but not so accessible that you're tempted to dip into it every time you see something that you want.
In fact, a good rule of thumb is to look for an account that allows penalty-free withdrawals without needing to give notice, ideally a high-yield savings account.
So your money is at least growing a little whilst it sits there.
And one of my favorite tips here is to keep it in a completely different bank account from your main current account.
It's still there when you need it, but you're not staring at the balance every time you check your day-to-day spending.
That small bit of distance makes such a big difference.
And for this specifically, for my emergency fund, I use Plum.
This isn't sponsored, but they're also offering my viewers a bonus if you sign up before a specific date.
You can find the details in the description. below.
Number six, setting other goals.
Once you've got your emergency fund in place and your debt is under control, it's time to move on to the next part of your money.
Glow up.
And that involves thinking about what you actually want your money to do for you long term.
So if you'd like to buy a home, for example, it might make sense to save your deposit in a tax efficient account or one that's designed specifically for first time buyers.
The options available to you, of course, depend on where you live.
For a lot of people, this is where goals like investing start to come into the picture too.
You might decide to increase your retirement contributions or start saving for later life in a different type of tax advantage account.
The right account for you will depend on your situation and where you live.
If you've never invested before and you're sitting there thinking, okay, where do I actually start?
I hear you.
And I don't want to cram everything into this video.
In fact, I have a completely free investing workshop that I'm running this month.
It's 45 minutes long.
It's completely free and tens and thousands of people sign up every time I host it.
People come in feeling completely lost about investing and leave having... actually take an action.
In this workshop, I'll walk you through exactly what to invest in and how to choose, how to accelerate your returns over time, the single biggest mistake new investors make and how to avoid it, and how to work out what you'd actually need to eventually live off your investments entirely.
It's free, practical, it's designed for people who are starting from scratch.
You can sign up completely for free at nisha.me forward slash invest.
That's nisha.me forward slash invest.
I'll also put the link in the description, but do sign up before the doors close.
Thank you so much for watching.
If you enjoyed this video, please share it with someone else who might need it.
And I hope to see you next week, or if not in the workshop that I am running this month.
Bye-bye.
