4.1 - Your First Step to Financial Freedom: Budgeting, Debt Repayment & Emergency Savings
Budgeting, paying off debt and an emergency fund can set a smooth course to escape the money trap
Missed last week? Read it here, or see the full escape map here
TL;DR — The Mission Control of Financial Freedom
✅ Budgeting isn’t about restriction — it’s about control. Tell your money where to go before it disappears.
✅ Good debt helps you grow (e.g. mortgages); bad debt compounds against you (e.g. credit cards, payday loans).
✅ Pay off high-interest debt fast, using the method you’ll actually stick with — snowball, avalanche, or consolidation.
✅ Build an emergency fund (3–6 months) to protect your investments when life throws curveballs.
✅ Spending less helps, but earning more changes the game — don’t just cut, grow your income too.
✅ Watch for lifestyle creep. As your income rises, resist the urge to spend it all.
✅ Your first step to escape isn’t investing — it’s building a solid launchpad: a working budget, zero bad debt, and a cash cushion.
Planning to reach for the moon
In July 1969, Apollo 11 landed on the Moon.
It took 76 hours to get there. But the mission wasn’t cobbled together in days..
It was built in eight years, with 400,000 engineers, scientists, and support staff working toward one goal.1
The precision?
The total flight time from Earth to Moon was planned to be 76 hours.
They landed after 75 hours, 49 minutes.
That’s 99.8% accuracy on a trip of nearly 240,000 miles.
And the landing? It didn’t go according to plan.
The onboard computer started throwing overload alarms - it was processing too much data. Neil Armstrong had to take manual control and steer the Lunar Module away from a field of boulders.
They touched down with 20 seconds of fuel left.
But they still landed.
Because the mission wasn’t built on hope. It was built on margin, redundancy, and a plan that accounted for chaos.
That’s what good financial planning is too.
Budgeting isn’t about restriction - it’s about resilience.
It doesn’t need planning down to the penny, but just enough to give you control when things wobble. It gives you time when life throws errors.
It’s the only reason saving and investing works in the first place.
Let’s start there, and do our first budget plan..
There is more than 1 way to budget
Some people love spreadsheets. Others swear by apps.
Some run the numbers monthly. Others keep it all in their head.
The method doesn’t matter as much as the mindset.
As Pete Matthew puts it in The Meaningful Money Handbook2:
“Having a budget is about showing your money who’s boss. You’re in charge; you get to tell your money how it will be spent.”
That’s it.
At its core, budgeting is telling your money where to go — before it disappears.
The Core Principles of Budgeting
There are plenty of tools and templates out there. Use the one that works for your brain.
But every effective system boils down to three key moves:
1. Know What You Have
Figure out what’s coming in. Your actual monthly income, not the theoretical one.
2. Tell It Where to Go
Cover your priorities first:
Some (not all) of the categories might include:
Housing (mortgage or rent)
Utilities
Debt repayments
Insurance (home, life, medical)
Food and groceries
Transport
Medical expenses
Clothes
Pets
Social life
Saving and Investing (this one matters more than most)
3. Review and Adjust With Intention
Go over your spending monthly.
If you went over in a category — ask why.
Was it necessary? Was it on impulse? Was it a joy to spend?
And if it throws you off course, adjust — but don’t raid your escape fund - Saving and Investing. That’s your rocket fuel. Protect it.
Budgeting Tools (If You Want One)
You don’t need a fancy app or colour-coded spreadsheet to budget well.
But if you’re the kind of person who likes structure or automation, there are plenty of tools to help.
Some popular options in the UK include:
Emma (UK)– A user-friendly app that connects to your bank and tracks spending.
MoneySavingExpert’s Budget Planner (UK) – A free, comprehensive spreadsheet to map out your monthly spend.
YNAB (You Need A Budget) (US) – A powerful tool based on giving every dollar a job (paid, but popular).
You don’t have to use any of these. But if you find budgeting hard to stay consistent with, tools can help turn intention into habit.
Pick one that works for your brain. The best tool is the one you’ll keep using.
Paying Off Debt: Don’t Let Compounding Work Against You
Not all debt is created equal.
Some debt helps you move forward. Some drags you under.
Good Debt
This is debt that helps you acquire an asset — something that grows in value or increases your earning power.
The most common example? A mortgage.
You borrow to buy a home.
Over time, the home (ideally) appreciates.
Your net worth increases as you pay it down.
Good debt works with you, not against you.
It’s often worth budgeting for, and it can be part of your long-term escape plan.
Bad Debt
This is debt that funds spending, not growing.
Credit cards for clothes, gadgets, nights out.
Payday loans.
Store loyalty credit
Borrowing to pay off other borrowing.
Even car loans can fall into this category, especially on depreciating vehicles.
Here’s the danger: bad debt compounds. But in the wrong direction.
The Reverse Buffett Curve
Remember Warren Buffett’s net worth chart — slow at first, then a sudden explosion upward?
Now flip that chart.
Imagine the curve pointing down instead of up.
That’s what bad debt looks like over time.
The interest doesn’t just cost you — it amplifies your losses,
Like gravity, it can drag you back into the orbit of the money trap.
How to Tackle Debt (If You’re Stuck)
There are a few well-known approaches to paying off bad debt:
Snowball Method – Pay off the smallest debts first for quick wins.
Avalanche Method – Prioritise the highest interest rate for maximum savings.
Debt Consolidation – Combine multiple debts into one manageable payment.
The best method is the one you’ll stick with.
If you need help, UK charities like
offer free, non-judgmental guidance.
If you’re in the USA, you can get help from:
By calling 211 (nationwide) you can get referrals to free local nonprofit credit counseling, legal help, and financial literacy programs.
Emergency Funds
On the Apollo 11 mission, NASA planned for every outcome. Including disaster.
Risk of running out of fuel? Take extra fuel.
Risk of a computer glitch? Build in manual override.
The lander nearly ran out of fuel.
The computer began throwing overload alarms.
Armstrong had to take control manually.
But because there was a plan — and a buffer — the crew made it to the Moon.
Your escape plan needs the same kind of buffer.
That’s your emergency fund.
How much?
The standard wisdom is 3 to 6 months of living expenses.
But that’s just a guideline.
It could be less. It could be more.
What matters is that it gives you breathing room when life goes off-script.
Boiler breaks?
Car needs £900 worth of work?
Emergency dental bill?
You can absorb the hit — without pulling money from your investments.
That’s the real power: your emergency fund protects your escape fund.
Where to Keep It?
A Cash ISA (UK) is a good option — interest is tax-free, and the money is instantly accessible.
But any easily accessible cash savings account will do.
Keeping it in a high interest savings account which is locked for many months won’t help.
Your First Budget Mission
Now let’s put this into action.
Here’s a simple framework to get started:
1. Plan Your Essentials
Grab a notepad, spreadsheet, or budgeting app. Put down:
Monthly income (after tax)
Core outgoings: housing, food, utilities, transport, insurance etc
2. Protect with an Emergency Fund
Look at your expenses and ask:
What’s 3 months of basic living costs?
Can you start putting aside a small chunk toward that each month?
Even £25 a month builds the habit.
3. Power Up: Allocate to Escape
Whatever’s left after the essentials and emergency fund — that’s your potential escape fuel.
Ask yourself:
Can I put aside something toward savings or investments each month? Even £10?
Where would I need to trim to make it £50? £100?
Remember: any amount is infinitely better than nothing.
What matters is not how much you invest — but that you invest.
What If There’s Not Enough?
Don’t panic. You’re not necessarily behind — you’re just now seeing the full picture.
If your current budget leaves very little or no room for savings:
Track everything for 30 days. You may find hidden leaks. Subscriptions you’ve forgotten about, or discretionary purchases that you can do without (for me it’s coffee and premium sausage baps)
Try a “no-spend weekend.” Practice control without pressure.
Earning More > Spending Less
Cutting costs is important — but there’s only so much you can cut.
Earning more has no upper limit.
A pay rise from a promotion or a move, freelance work, or even a side project that brings in an extra £200/month can supercharge your savings in ways cutting lattes never will.
That said, both levers matter.
Spending less frees up space now.
Earning more changes the whole game over time
Earnings go up more than spending
Another reason not to panic if things feel tight now:
Your earnings will likely rise over time. But your essential costs? They may not rise nearly as fast.
That gap between higher earnings and stable spending — if you can hold the line — is pure fuel for your escape.
Use it.
Lifestyle Creep
As your income increases, it’s common for your quality of life to increase too.
Nicer cars, private schools, more frequent upgrades on phones.
You worked hard for your money, and yes, you do deserve to treat yourself, or level up.
But every pound/dollar you spend now, is money not invested that could become potentially many more that you can’t spend in the future, when you might really need it.
Don’t let lifestyle creep swallow it up completely. Instead, redirect that extra income toward buying assets. It’s one of the most powerful moves you can make.
Ideally this should be inline with inflation. A 5% pay rise means 5% more money invested each month.
If you don’t have much to save today, that’s okay.
You might still own the ultimate asset:
🕒 Time.
Time to let your income grow.
Time to compound your efforts.
Time to escape.
Soon: Your Escape Calculator
When the Escape Calculator launches (coming in Part 4), you’ll plug in your budget and savings rate to see:
How long your current path takes
What small changes move the date forward
That’s when you’ll know if you need to adjust — and how.
Recap: Planning Like Apollo 11
The Moon landing didn’t go perfectly — but it succeeded because it was planned for chaos.
Budgeting gives your money direction. It tells it where to go before it disappears.
Good debt helps you move forward. Bad debt holds you down — or worse, pulls you back.
Pay off bad debt with a method that works for you. Don’t let interest compound against you.
Your emergency fund is your override system. It protects your escape fund from the unexpected. 3-6 months of expenses.
Think like an engineer: leave margin, plan for failure, and make sure you can land even when the alarms are going off.
As your income grows - allocate more to buying assets, beware of lifestyle creep
We’re almost ready for lift off and escape. Now it’s time to escape the tax trap — and we’ll do that with the two most powerful tools available: Pensions and tax efficient accounts.
Up Next: Escaping the Tax Trap - The Power of Pensions
https://www.theguardian.com/science/2009/jul/02/apollo-11-back-up-team
Matthew, Pete, The Meaningful Money Handbook, Harriman House, 2018
Disclaimer: This content is for informational and educational purposes only. It does not constitute personal financial advice. Everyone’s situation is different — if in doubt, speak to a qualified, regulated financial adviser.