Budgeting apps make it easy to set spending goals and track your income and expenses, but many of them charge subscription fees and require you to hand over some of your private data.
If you're looking for a cost-effective way to manage your money that also allows you to customize your budget based on your needs, a budget spreadsheet may be the way to go. While it can take some time to get it set up, you'll be able to have total control over your budget and the features you want to include.
1. Choose Your Software and Template
Excel and Google Sheets are the most commonly used spreadsheet programs, but if you have a MacBook, you can also use the Numbers app.
Google Sheets is primarily online, allowing you to access your budget anywhere, but if you want maximum security, Excel and Numbers can keep the file strictly on your hard drive. They can also offer online access if you set up your spreadsheet in Microsoft OneDrive or Apple iCloud.
If you're creating your first budget or you're unfamiliar with spreadsheet formulas, you can search for budget templates to help you get started. Just keep in mind that you may need to make some tweaks to customize any template to your needs. If you're a seasoned budgeter and know what you want, you can just create your own.
2. Calculate Your Income
Create a list of all of your income sources and include each of them on your budget spreadsheet.
If you earn a fixed income, such as a salary or retirement distributions, you won't have to update your income each month. But if your income is dependent on how many hours you work or if you're self-employed, you may need to estimate your income each month based on what you expect to earn or what your average income has been over the past few months.
3. Categorize Your Expenses
Your budget is made up of both fixed and variable expenses. Common fixed expenses include:
- Rent and mortgage payments
- Other debt payments
- Savings and investments
- Insurance premiums
- Phone, internet and subscriptions
- Child care costs
Because these costs don't change each month, you don't need to set goals for them. Variable expenses, on the other hand, can change from month to month. Common variable expenses include:
- Dining out
Each month, you'll want to review your income and fixed expenses, then set spending goals for each of your variable expenses based on what you have left over.
4. Decide How Often to Update Your Budget
Because expenses can change from month to month, you'll likely want to set your spending goals on a monthly basis. But you'll also want to consider how often you want to update your transactions and evaluate your budgeting process.
If you have a lot of expenses, for instance, it could make sense to spend a few minutes each day to add them to your budget spreadsheet. If you don't want that level of oversight, however, you could decide to update your transactions once a week.
You may also consider reviewing your overall budget strategy quarterly, semi-annually or annually to ensure that it's still in line with your financial needs and goals.
5. Enter Your Numbers
Once you have all the information you need and the timing set, you can start inputting numbers into your spreadsheet.
In one worksheet, you can lay out your income and your budget goals, broken down into separate spending categories. In a separate worksheet, you can detail your transactions as they occur. You'll want to use the columns to note the merchant, transaction amount and spending category.
Then, you can use formulas in the first worksheet to automatically update your spending for each category every time you add a new transaction. If you're unfamiliar with spreadsheet formulas, many budget templates include them for your convenience.
If you want even more details about your financial situation, you can create a third worksheet with various reports, including spending trends and your current net worth.
6. Maintain and Stick to Your Budget
Creating a budget is one thing, but sticking with it over the course of several months and even years can be challenging.
One of the downsides of using a budget spreadsheet is that it requires a lot of manual data entry. Even if you're using formulas to update your budget as you go, you'll need to enter each transaction you make individually, and the amount of labor involved can make it easy to lose motivation.
To avoid getting overwhelmed or discouraged, remind yourself regularly why you want to better manage your money in this way and focus on the benefits. Continue to evaluate your approach to make sure it's realistic and doable. If you find that a budget spreadsheet is just too much work, consider some budgeting apps to help cut down on the amount of time you spend updating your budget.
What if You Can't Stick to Your Budget?
If you're having trouble staying true to your budgeting goals, some behavioral changes may be needed. For example, cooking at home instead of eating out, stopping credit card use and driving less are all steps you could take to reduce your expenses.
You may also want to look for opportunities to increase your income and reduce your fixed expenses, which may involve things like canceling streaming services or switching to a cheaper insurance provider.
It can also help to work on improving your credit to make it easier to save money on interest when you borrow. Monitor your credit in addition to your budget to track your progress and address issues as they arise.
Whatever you do, the important thing is that you take a deep look at your spending and try to find a budgeting method that works for you.