Lesson 1 of 10 · 7 min read
Where your money goes
You can't do anything with money you can't see. So first, find out where it ends up.
Three piles, not twenty
Most budgeting advice collapses because it's too fine-grained: split your spending across eighteen categories and you'll keep it up for three weeks. Three piles is enough to steer by. Fixed costs are what leaves no matter what: rent or mortgage, energy, insurance, subscriptions, transport. Daily is groceries, eating out, clothes, everything that's small each time and isn't small each month. And what's left over is the only number that really matters, because that's what can be saved or invested.
The number you're looking for
Take last month's income, subtract your fixed costs, subtract what you spent on daily things, and look at what remains. For most people it comes out lower than they thought, and for some it's negative without them knowing. That's no reason for shame — it's the first usable information you have: you now know how big the dial is that you can turn. Do this across three months rather than one, because a month with a holiday or a dentist bill in it isn't a month.
In practice
Someone on €2,400 net with €1,450 of fixed costs and €650 of daily spending keeps €300. That's not a bad number. But it's a different conversation from someone who thought they were keeping €800.
Fixed costs are where the money is
Cutting back on coffee earns you a few tenners a year and costs you a little pleasure every single day. Going through your energy contract, your insurance and your subscriptions once costs you a Saturday morning and often saves hundreds of euros a year, every year, without you having to give up anything afterwards. That's the difference between a saving you have to sustain and one that keeps running by itself. Always start with the second kind.
Stocky says
Put one Saturday morning in your calendar for your fixed costs. What you win there, you never have to win again.
Pay yourself first
The order determines the outcome. People who save whatever is left at the end of the month almost never save, because spending tends to grow to exactly the size of what's available. People who automatically move an amount aside the day after payday notice within two months that the rest adjusts. This isn't willpower, it's a standing transfer you set up once, and it's probably the most underrated action in this entire chapter.
Remember this
- Three categories is enough: fixed costs, daily spending, and what's left.
- Measure across three months — one month is coincidence.
- Fixed costs pay more than daily thrift, and only need doing once.
- An automatic transfer the day after payday beats willpower.
There is a quiz for this lesson
3 questions that check whether it stuck. They live in the app, because a quiz nobody grades teaches nothing.
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