‘Budget’ is a scary word for many. Most people realise the importance of having a budget for their personal finances but still don’t maintain one. ‘Budget’ is the first step towards achieving your financial goals. Its importance cannot be overstated - hence I have decided to write about ‘Budgets’ before I move into other financial subjects.

In simple terms personal budget spreadsheet is an income expense statement of your personal finances. It records all your incomings and outgoings.

We all have financial goals. Reaching our financial goals requires the practice of certain amount of discipline from our side. We need to keep track of what we are spending. We need to make sure that we are not spending more than we are earning. Without a budget we are kind of lost. “It’s all there in my mind” is not a good enough answer - a budget is essential to keep track of how we are performing financially and to keep us accountable.

The first step towards creating your own budget worksheet is to track your spending for a few months. I think three months is an appropriate time frame. You have to keep this whole tracking process simple otherwise you will lose interest at the end of week two. If you have the money to invest in a professional package like Quicken or Money then go ahead and do that. Bear in mind that it’s not enough to buy them, you do have to spend some time to learn how it works. If you don’t want to invest in a professional package, no problem, you can start tracking your income and expenses on a spreadsheet. Here are the steps to creating your own budget spreadsheet:

First Step

The first step is to create categories. Categories, as the name suggests, is used to categorise expenses. We should not create too many categories…Too many categories defeats the whole purpose.

One category can have many sub-categories. Here are some of the most common categories and sub-categories: (you can tweak this and add more or remove some but please don’t have a huge list of categories).

Second Step

Now start budgeting…Record the month you are doing it for, then record your income for that month and start entering your expenses. If you are paying by cash for something then keep your receipts together. If you are using credit card for most of your expenses then you can refer to your online credit card statement to keep track of your expenses. I rarely pay cash for my expenses.

I use my credit card wherever possible. And this makes my job easy…I grab the online credit card statement and on it I have most of my expenses.

Have a section to the right (as shown below) which adds up the category totals. There are two columns in there - one for previous month and for current month. For the previous month’s totals simply copy from your previous month’s worksheet.

At a glance you can tell how much you are spending. Do this tracking once a week…

So see, this is an extremely simply workbook and easy to maintain. Do this for three months.

Third Step

At the end of three months you will have a clear idea of how much you roughly spend in each of the categories. Now you are ready to take the next step. Add two more columns to the category totals section - one is goals and the other is how much you are over or under your goals. So at the beginning of every month set goals for each category and try to stay within your goal limits.

If the process of maintaining a budget is very hard to follow then the chances of you not maintaining a personal budget are very high. So keep it simple. I use a simple budget worksheet to track my household expenses. The bottom line is to go with whatever works for you. If you prefer a specifically designed budget software then use that. The aim is to maintain a budget - what you use to do so is up to you.

Do you use a budget spreadsheet or do you use something else? Share your thoughts…

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Topics: Financial Planning |

One Response to “3 Simple Steps To Creating Your Own Personal Budget Spreadsheet”

1. EasyBudgeting Says:
   May 28th, 2008 at 10:47 am

   If you’re struggling with budgeting and need some help setting up a 12 month budget planner, try http://www.easy-budgeting.com.

   EasyBudgeting provides users with a simple, straightforward and easy to use budget planner created using intelligent formulas and time saving functionality.

   If you want help with getting back in control of your finances, visit http://www.easy-budeting.com.

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