The first step towards taking control of your money is to set up a budget. In this post I will show you exactly how to budget and give you the tips and tricks you will need to make your very own budget spreadsheet.
Budgeting is the key to saving money. It’s the tool that keeps you honest in your money saving endeavours; it clearly outlines how much you spend versus how much you earn and quickly helps you keep track of your personal finances with an aim to improve them.
Quite simply, if you are spending money faster than you can earn it; you have a problem. Your budget spreadsheet can help you identify this quickly.
Before you start your personal budget
While there are many budgeting tools available, I find the best method of budgeting is done via Microsoft Excel (or spreadsheets in general). Budgets contain a plethora of your private information and I prefer that this resides on my own computer, not some 3rd party budget app.
Further, in this article, I go into the pros and cons of different budgeting tools to help you better choose which is right for you.
Be clear on why you need a budget
It may sound obvious, though the secret to any successful budget is outlining your problem statements up front. Think through the events that made you realise you needed to start a budget to help you clearly articulate what it is you are aiming to do with your budget.
For me, it was the realization that money is made unnecessarily complicated by an array of products and services that aimed to ‘simplify’ my finances. I realized that simplicity was actually just outlining my fixed expenses, my variable expenses (or less frequent) along with how much money we earned as a family.
So to summarise; I started a budget spreadsheet to gain a clear understanding of where my money was going. I was tired of living payday to payday and decided that without a clear plan (in written form), I was not able to regain control of my money. I also hoped to identify areas of spending I could reduce to further achieve my money saving goals.
Now let’s get into the details.
How to start a budget
A good budget will outline the following:
- Your earnings
- Your outgoing expenses
- Your current debts
- Your financial goals
Each of the above facets is interdependent; as in, you must understand (and research) each item in full to make a budget plan that is effective.
This is how much money you make. Often referred to as ‘incoming money’ – your earnings should outline every known source of income you have, not just your regular pay cheque.
For example, your earnings should list any investment income you make (rental properties, share dividends, term deposits and the like) along with other infrequent sources of income (whether it be money you make from a small business or perhaps some other side hustle). Be sure to account for every dollar you intend to make; this will give you a broader view of the money you have to work with.
Your outgoing expenses
This is how much money you spend. Spending refers to incidental purchases (day to day) along with fixed expenses that regularly cost you money (for instance, a monthly mortgage repayment or recurring charge for say Netflix).
Listing your expenses, whether they are fixed or variable, quickly helps you establish whether you have enough money coming in to cover these.
Fixed (or recurring) expenses are easily tracked, as they are often a set amount on a regular date.
Variable expenses are slightly harder to track and may require you to set yourself a daily or weekly budget limit to help cover these. For instance, some days you may buy a coffee – other days you may not. Instead of trying to track these mini variable expenses, you might be better off stating ‘I have $50 per week for variable expenses’ and work towards sticking to this number.
Tracking your expenses is the most important part of any budget spreadsheet.
Here are some tips to accurately gather your existing expenses to document in your budget:
- Analyze your current direct debits
- Analyze your credit card statement for spending patterns by categories
- Analyze how much physical cash you withdraw and spend – try to not use cash ongoing
- Look to have all fixed expenses debited out of a single account for better tracking
Following these tips will help you document all of your expenses for your budget spreadsheet. It will also help you identify spending patterns and behaviours that could be better managed to save money. I refer to these spending patterns and behaviours as ‘opportunities to save’ – others call them ‘spending leaks’.
Your current debts
This is how much money you owe. To ensure your budget is effective, you need to know where it is you owe money and the rate at which it’s costing you (interest). One of the most popular reasons for people to start a budget is to find creative ways to further pay off debt.
As you start to list your debts, consider;
- Do you have a credit card debt?
- Do you have a mortgage?
- Do you have a personal loan?
- Do you have a car loan?
- Do you have an investment loan?
- Do you owe money to someone?
Taking the time to list each of your debts will give you mental clarity on how much you owe and the rate of interest associated with each debt (which is particularly useful in prioritizing which debts to pay off first).
All too often people put their heads in the sand (known as the ‘Emu Method’) when it comes to growing debts. If you list your debts in your budget spreadsheet, you can methodically keep track of your progress to repay them in full.
Your financial goals
This is what you want to achieve and by when. A wise person once said “Without a clear plan, you plan to fail” – this could not be truer when it comes to creating a budget.
Listing your budgeting goals will keep you motivated. If your budget spreadsheet tracks your goals clearly, you are constantly reminded of why it is you are budgeting in the first place. Saving money without a goal is fine, though a well-defined goal can go a long way towards keeping the motivation extra high.
Questions to ask yourself when writing goals:
- Are you saving for a holiday?
- Are you starting a budget to pay off your debts faster?
- Are you saving for your children’s education?
- Are you saving for a house deposit?
- What are your short-term goals?
- What are your medium-term goals?
- What are your long-term financial goals?
- Are you saving for retirement?
Whatever the reason, be clear when writing your budget goals. List the goal, the due date and implement a plan to start attacking your goal – step by step. Remember that a budget spreadsheet is there to help you achieve your end goals, so be sure to list them.
Committing to your budget
One of the hardest things to do is stick to your budget. People often find a burst of inspiration to create a budget spreadsheet, only to never look at it again.
To create a successful budget, you must keep it current and actively refer to it. Your budget spreadsheet should be your North Star (in that it shines brightest, you look at it often and it is a single source of dependable truth).
To keep your budget spreadsheet current, review and update it at least once a week. This means checking in on your spending and always updating your fixed expenses as they increase or decrease. The moment you cancel say a Netflix subscription, update your budget spreadsheet. The moment your insurance premium increase, update your budget spreadsheet.
Over time you will become confident you are adhering to your budget. As your confidence grows, you will likely only need to refer to your budget each time you get paid.
For example, my budget spreadsheet tells me exactly how much money I need to place in my mortgage offset account to cover fixed expenses that are withdrawn via direct debit. Each month when I get paid, I quickly refer to my budget to ensure I transfer the correct sums of money to their respective accounts.
Should you use a budget spreadsheet, budgeting app or a good old pen and paper budget?
So far we have covered the critical components that make up a good budget. Now we must consider how to best document and track your budget; whether it be via a budget spreadsheet, a budgeting app (on your phone) or good old pen, paper and ruler.
Here are the pros and cons of each budgeting method:
- The highest level of detail, tracking and forecasting.
- Does not store your personal information online.
- More accurate (as you have to manually enter your expenses)
- Allows you to use both ‘simple’ and ‘advanced’ expense tracking.
- Enables you to see beautiful graphs for motivation.
- Your Budget Spreadsheet can still be stored online via Google Docs (if you so desire).
- Requires Microsoft Excel or Spreadsheet software (though most people have this).
- Not as easily edited on the go (via your phone).
- Requires you to manually enter your expenses.
Budgeting apps (on your phone)
- Convenient (on your mobile device)
- Potentially automated (can read your bank statements).
- Always accessible by phone in your pocket.
- Your personal data is stored online, making it open to hacks.
- Some budget apps request access to your bank accounts (bad idea).
- Difficult to update and manage on small screens.
- Often categorizes expenses incorrectly.
Pen and paper budget
- None. This method of budgeting is not ideal.
- Not a smart way to track expenses.
- Does not update calculations and totals automatically.
- Easily lost.
My view? Use a budget spreadsheet. It’s safer, more detailed and can still easily be accessed from your phone if you so wish.
How to create a personal budget spreadsheet
Now that you know what makes a good personal budget, let’s look at the options you have for starting a budget spreadsheet.
Option 1: Start a budget spreadsheet from scratch (build your own budget template)
This will require you to be extremely proficient in Microsoft Excel. You will need to use both basic and advanced formulas to ensure you have an interconnected budget that assesses your expenses, earnings and goals to formulate a concise view of your budget.
If you intend to build your own budget template, start by simply creating a list of expenses, their frequency (when they are due) and aim to create a total calculation on a monthly (or fortnightly basis). This is an easy way to start assessing your total monthly expenses.
Option 2: Download a free budget template
In the early days, I downloaded a vast array of free budget spreadsheets. I was often disappointed and found excel budget planners that were either mediocre or completely not cutting it. They were often designed by bloggers in America, resulting in very US-centric budget categories and very little relevance to Australian’s budgeting needs.
I believe “you get what you pay for”.
Option 3: Download a pre-built Budget Spreadsheet (made by us at Savings Guide)
After nearly 10 years of people emailing me for tips and tricks on starting a budget spreadsheet, I opted to create my own.
I wanted to make the best budget spreadsheet in Australia, so I engaged a financial modelling company who are quite simply outstanding at creating engaging and interactive spreadsheets.
It cost me quite a lot of money to engage this company. I think I spent around 2 months and $7,000 of their time to get it just right, though I was more than happy with the output. I finally had my ideal budget spreadsheet that would address the needs of Savings Guide’s 15,000+ newsletter subscribers.
The budget does everything I ever wanted it to, including;
- My spreadsheet tracks income from multiple sources, at varying frequencies
- My spreadsheet tracks every last little expense
- My spreadsheet offers ‘simple’ and ‘advanced’ budget options (be as quick or detailed as you want)
- My spreadsheet has unlimited expense categories and suggests ones you are likely to have
- My spreadsheet comes with 3x bonus tools to estimate your savings, figure out how much you need to save and create schedules
- My spreadsheet creates beautiful graphs that motivate me
- My spreadsheet helps me forecast my spending and identify ways to reduce it
- And much more
As you can see, I built the budget spreadsheet of my dreams. I amalgamated all of the things I wanted, along with all of the things you (the readers) wanted to create something that adds value and hopefully helps you make budgeting easy.
I truly believe this spreadsheet will motivate you to save more money. I personally use it to track my expenses but also implement what I call a ‘continuous improvement’ strategy to shift money wherever possible onto my mortgage, with an aim of paying my home loan off 10 years early.
How do you get the Savings Guide Budget Spreadsheet?
You can download it instantly via the website we set up at https://www.budgetspreadsheet.com.au
Why pay for our Budget Spreadsheet?
I believe this budget spreadsheet is going to truly help you.
I spent a lot of time, money and energy producing something to SOLVE peoples financial problems and make budgeting fun, easy and motivating. I’ve also been in your shoes previously; downloading free budget template after another, only to forget about it and move on. Not only will you see the difference with this budget template I’ve created – I believe you will be less likely to just discard it and move on because you’ve paid a small sum for it.
The once off fee is $34.99 (Australian Dollars) though we do from time to time offer $5 off. Check the website for more details. This gets you an instant download to get started right away.
Downloading this Budget Spreadsheet will save you time and be your holy grail for driving forward ways to save money, ways to pay off debt and most importantly – feel in control of your money again.
So to summarise, a budget will give you a master plan for your money
Not having a master plan for your money is like building a house without architectural drawings. The builder won’t know what to do and you will end up with a dodgy house. Having a budget spreadsheet means you have a master plan – it outlines your debts, spending, plans, next steps and more. It’s a master plan that you can always refer back to in order to keep your money going forwards even when your situation changes.
For me, there is nothing more satisfying then identifying areas in my life to improve. It’s even better when the improvement areas reap me a saving, that puts cash back in my pocket.