Make extra cash by having a budget

Sorting your budget is an important step in taking you and your family forward to financial freedom. It isn’t as exciting as other ways of “making money”, but it is by far the easiest way

you can do it, and I hope is within grasp of all of us. Even more important is that budgeting 

helps you understand the very nature of money, your money. It helps you understand where 

your money flows to and crucially where you may be able to make interventions to help more 

of your money flow into those useful places where it can work for you – savings and 

investments. It is here you can put your money to work, to make even more money! 

Budgeting helps prompt you to evaluate where you are spending too much, and where you 

are spending too little. The principles you learn through budgeting will stay with your forever. 

So start now! 

The three outcomes we are aiming for from budgeting are as follows:
1) An understanding of your money flow. 
2) Identification of interventions that reduce unnecessary expenditure.
3) Redirection of more money to savings and investments.

We all want to make more money (even those of us that say we don’t want or care about 

money, really do!). But when we come across more money, if we do not understand money 

flow of follow a budget, we will sure as anything haemorrhage that additional money as 

quickly as we came across it. Budgeting teaches us to understand two very simple principles: 

income; and expenditure. These are the very basics of financial knowledge and without 

knowing them inside out, and how they apply to your situation, you will fail on your journey to 

wealth and financial freedom.

We all have an income of some sort – the money coming in. All of us have outgoings – the 

money going out. But can we all say exactly where and how much of each we have? Where 

is your income going? What is the difference between your income and outgoings? Could it 

be better? If these are questions you cannot answer now, you should be establishing or 

reviewing your budget to find out. I have been budgeting for years, and yet even in my own 

annual budget review, I still identify improvements that could be made. Maybe a mortgage 

has reduced in cost, freeing up additional cash forgotten about through the year. Maybe a 

new child has come into the family, and the additional cost there has eaten up a chunk of 

your income that is perhaps larger than you thought. Maybe you didn’t realise you spend 

£200 a week on your food shop, which is £100 more per week than you wished you had 

spent, or £5200 extra per year! Budgeting helps you identify these trends, these areas for 

intervention, to give you a very important baseline from day zero on your journey to wealth: 

a money flow that goes minimally to costs or liabilities and maximally to assets (savings and 

investments). More on assets and liabilities later, but for now concentrate of establishing your 

budget and review it yearly (at least, to ensure you are not falling into bad habits. We all do!).

I have generated the following tool to help you establish your budget. Essentially it aims to 

capture your yearly income and outgoings, so you can see your money flow. Try it for yourself,

 and please be honest. There is no use in fiddling the numbers at this stage – remember you 

are starting your journey here with the rest of us. Things will improve no matter how the 

budget looks right now! When you have completed your budget, grab a cup of tea and look at 

the numbers. Study them. What are they telling you? Are you ending the year with a net 

income, or are you in the red? Either way there will be room for improvement. Remember we 

are wanting to reduce our outgoings to maximise our ability to save and invest in other money

 making assets. This is the wonderful cycle of making money – the more you can save, the 

more you can invest, and the more money you can make which you can then reinvest, etc!

Right so you have studied your budget. Let’s look at specifics that often come up in budgets. 

How much money goes on clothes, on food, on gyms, on your phone bill? How much goes 

into savings? This is where your opportunity to make money begins. Do you need to spend 

£150 per week on food – what about £125 instead, would that work, could you cope? It is £25

a week yes, but that is £1300 per year. Redirecting the flow of that £1300 from costs and 

towards investments, such as a simple bank account earning 5% interest would earn you an 

additional £65 a year! If you can skim a further £25 off your weekly food shop, that saves your

£2600 per year and at 5% earns you £130! This is easy money, and even during the recent 

period of abysmal bank account interest rates a 5% rate was available up to about a month 

ago. Keep going with this “red teaming” of your budget – really attack it, dig into the detail, in 

fact get someone else to look at it, and note those moments where they say “how much?”, as 

these are the hints as to areas where you likely can improve. Your mortgage, can you switch 

and save? I recently switched from a 3% fixed deal to a 1.3% fixed deal, saving me £200 per 

month, or £2400 per year, or £12000 across the 5 year fixed mortgage period. That pays for 

my new car in 5 years time.  Do you really need to upgrade your iphone to the latest version 

and pay £30 or £40 per month on your contract? Keep your older version, and go sim only for

£5 per month! Redirect the flow of that £25 per month, or £300 per year, into savings and 

investments, and make your money work for you! You might surprise yourself as to how much 

you could save.

When you have worked out where and what you could save, make it happen. Don’t reach for 

the moon just yet though, implement realistic changes. Don’t set yourself up to fail, but do 

take action. There are numerous websites that can help you find better deals on your various 

contracts etc, and numerous websites to help you find good saving accounts for your saved 

cash. Try and perhaps save 10% of your expenditure and redirect that to savings. You have to

get your house in order before you take on the World of making money!

One final point. Where you do reduce your expenditure, actively move that saved money 

monthly into a separate account. Don’t leave it in your main account because you will spend 

it! Then you can watch your pot of savings grow and start thinking about other exciting ways 

to put that money to work for you.

Next time I will be reviewing one of the most important books I have, and I hope you, will ever 

read, on the subject of wealth.

Enjoy the budget planner, and please do leave comments below.