Personal Budget Spreadsheet Instruction Manual
Your household budget is very connected to your personal balance sheet. Your household personal budget tells you how you are doing paycheck to paycheck.It is like quizzes. You can ace one and bomb on another one and you expect one every couple of weeks or each month. Your balance sheet is the report card. It adds up all the totals and lets you know if you have passed or failed personal finances. Like most courses you must do well on the quizzes to do well on the big exams which all reflects in your report card. For your household finances to perform well you must do a good job at managing your household spending. To do that you need to know the answer to some basic questions such as: What is a household budget? How do I fill out a household budget? What does a household budget tell me? What should I have for budgetary goals?
You can download, fill in and print this Excel 2003 document or download, print and fill in this budget speadsheet. It opens in another window so that you can look and fill it in and still have access to the coaching on this page.
What is a household budget?
One of the many first laws of money is that you need to know where your money is coming from and where your money is going to. You budget is the tool that you use to track this. For your household budget you track the income coming into your house and where it is spent. In our toolbox you can track this by filling out a bi weekly or a monthly household budget spreadsheet. Most folks get paid on one of those two timetables so choose the one that matches the timetable of your income most closely. The budget spreadsheet should reflect an average of monthly income and bills in each category to give you a picture of your annual finances.
How do I fill out a household budget?
The first thing you will note about a household budget is that there are far fewer entries on the income side compared to the spending side. This is a very simple tool. You fill in the blanks and then all you need to be able to do is add and subtract. That is as complicated as the math gets. On the left side you fill in your income from various sources.
For Salary enter the amount you make from your salary or your wages. If you are paid monthly or twice monthly choose the monthly budget after you have filled out the spreadsheet. If you get paid bi-weekly you can budget your monthly expenses around the 2 paychecks you get every month and then once every 6 months you have a free payday...a third payday in a month twice per year.
For Bonuses you can enter commissions, tips or bonuses into your budget.
If you have interest income from savings or bonds enter this here.
If you have income from rentals or other revenue producing property enter this here.
If you are wise enough to own stock in blue chip companies enter the dividend income here.
For those of us who have reached the golden years we can enter income in the pensions block.
The court judgment block is for things like alimony, child support or income from other court judgments.
Now comes the challenging part. The list is too long for me to go through this item by item. Download this spreadsheet Budget Spreadsheet which will open in a new window. This window may be left open as the coaching and instruction. There are 35 possible spending entries for a mature budget. By that I mean a budget for someone supporting a household, paying all of the bills, saving, investing and planning for retirement. The list is too long for you to go through this item by item very often. However, you should do this thoroughly at least once...very thoroughly. By thoroughly I mean you will have to take out your income statements and all of your bills and know the amount of cash that they draw from your income each and every month. You do not want to fudge these numbers. A budget works when you are dead honest with yourself about your projected income and your spending. You need to know where your money is coming from and going to...especially you need to know the elusive where your money is going to. Then you need to review this comprehensive spreadsheet every year or two or when there are major shifts in your income whether positive or negative. To stay in touch on a simpler basis we have provided the smaller and more generalized Monthly Budget and Bi-Weekly budget. Once you have become familiar with your finances you can do a quick monthly or bi monthly budget review and plan with these tools without wandering into financial neurosis or obsession.
What does a household budget tell me?
The next step is to do just what it says on the spreadsheet. Add up the total of the Income and subtract the total of the Spending. The final number will either be positive or negative. Zero will be an anomaly. If the number is positive this is very positive. It means that you make more money than you spend.This is called positive cash flow. Positive cash flow over a long period of time is financially very powerful. The more positive that your cash flow is means that you have more options to improve both your cash flow and your balance sheet over time. If the number is negative this means you have a problem. You have negative cash flow. The more negative that your cash flow is means that you have less options to improve both your cash flow and your balance sheet over time. As positive cash flow compounds itself, negative cash flow compounds your budget into an ever deepening financial chasm.
What should I have for budgetary goals?
There is one budgetary goal that you can have. That is to have positive cash flow. If you have negative cash flow you need to make changes ASAP!!!!!!! There is immediacy in the urgency to address the problem of negative cash flow. How do you get back to positive cash flow? There are 3 routes.
- First is that you can make more income. This can be a problem because it can cost more to make more money than you actually make after expenses. The lifestyle of working 2 jobs or both people in a relationship working more converts into a lifestyle that actually costs more. You have to dine out more, buy clothes, have childcare, hire housecleaning and other use other drags on your net income. The strain can tear relationships apart and you can end up in an expensive divorce. This rarely works especially over the long term. I know because I tried it and I know it did not work for me.
- Solution 2 is to cut spending. I think the term is lifestyle downsizing. You have to be like the big corporations in the news and cut costs. You need to sort through the 35 items on the expenses side of your household budget and reduce them. You can either modify or renegotiate deals and contracts on loans and insurance. You can cut optional expenses such as the clothing budget. Even things like cable become optional in tough times. You can save on food by prudent shopping and by preparing and cooking your meals at home. Address credit card debt. For other debts there are other solutions. Always remember that when you are cutting expenses you are saving your "after tax income". This is a much more efficient way to improve your cash flow. For every dollar you take off of expenses it is a dollar and a half that you do not have to earn.
- Solution 3 is the combo. You can make more income but make sure it is net income, that is, you need to make more money than it costs to make it. If you make $300 a month extra by doing some little thing locally with little or no cost can be better than having a job that you need a new car, new clothes and to eat meals on the run. In the latter case you may make $2000 per month but after taxes, and all the expenses listed previously you may only be netting $500 per month for all that effort. By doing less you may actually be gaining almost as much. The other upside is that you now have time to do the research and then negotiate better deals with the places where you are spending money. So slow down and make the money that you have already earned work harder to give you the things that you really want at the best value.
|Rental or Property||Health Insurance|
|Dividends||Auto Loan Payments|
|Pensions||Credit Card Payment(s)|
|Court judgments||Other Loan Payments|
...allow a 10% fudge factor
|Rainy day Savings|
|MINUS TOTAL EXPENSES:|
|SURPLUS if positive|
|or SHORTFALL if negative|
Download this spreadsheet Budget Spreadsheet
Here are some relevant chapters from the book Think Your Money that may help coach you on how to think about budgeting.
You need to think about the income side of your budget. There are many ways to make money.
People who do best with their personal finances understand and properly manage the spending side of their budget.
Once you control spending you can start saving.
Questions? Financial Therapist Contact Ask us - We will reply and if it is a really good one we will publish it and its answer in our weekly blog entry. If a lot of folks have the same question we will build an FAQ url or urls on the site.
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