Foundation 1 of 8
Understand your money
Know what you earn, what you spend, and what you own — everything else depends on it.
You can't make good decisions about money you can't see clearly. That's the whole job of this foundation: turning a vague sense of "how things are going" into a few honest numbers you can actually act on.
It's not about becoming a spreadsheet person. It's about knowing three things well enough: what comes in, what goes out, and what you're left with once you add it all up.
How to build your first budget
Start with income: list what actually lands in your account each month, after tax. Then list fixed costs — rent or mortgage, bills, subscriptions, anything that's roughly the same every month. Add irregular costs like car tax or Christmas, divided by twelve so they show up as a monthly figure instead of a nasty surprise. Whatever's left is your day-to-day spending money.
The number that matters is what's left after all of that. If it's positive, that's what you have available to save, invest, or spend without guilt. If it's negative, you've just found the most useful piece of information you'll get all year — and foundation 2 is about what to do with it.
Don't aim for perfect on the first try. A rough budget you actually use beats a precise one you abandon after a week. Revisit it monthly and it gets more accurate on its own.
Where does my money actually go?
Most people underestimate their own discretionary spending by a significant margin — not through dishonesty, just because small purchases don't stick in memory the way a big one does.
The fastest way to find out for real: pull up the last two or three months of bank and card statements and categorise everything. Most banking apps already do a rough version of this automatically — it's a good starting point, but worth checking the categories actually make sense rather than trusting them blindly.
Pay particular attention to recurring subscriptions. They're the easiest spending to forget entirely, because the decision to pay was made once, months or years ago, and never revisited.
What is net worth and why does it matter?
Read the full article — 6 min →Your income tells you what you earn. Your net worth — what you own minus what you owe — tells you what you've actually built with it. It's the one number that captures saving, debt repayment, and investing all in the same place.
Ready to put this into practice?
Simple spreadsheets that turn this thinking into a plan you actually follow.
See the toolkit — from £5