Welcome to my 6 part series on creating a family budget. You can read the entire series or use the handy links below to navigating to a particular lesson. Thanks for reading Trees Full of Money! If you haven’t already done so, please consider subscribing to my free email newsletter or RSS Feed.
Table of Contents:
- Part 1: Introduction: Why You Need a Budget
- Part 2: Budget Spreadsheet: Download My Free Budget Spreadsheet
- Part 3: Step by Step Instructions for My Budget Spreadsheet
- Part 4: Tips for Reducing Your Monthly Expenses
- Part 5: Tips for Increasing Your Income
- Part 6: The Envelope System of Budgeting
Today I want to take a closer look at how to use the budget spreadsheet I introduced in yesterday’s article. If you haven’t already done so, you can download a copy of the worksheet here.
How to Use My Budget Spreadsheet:
Enter Your Take Home Pay: First enter your expected monthly take home pay in the green box at the top of the sheet. You don’t have to be exact, just enter an approximate amount. If your monthly take home pay is irregular, put down the minimum amount you expect to receive. It’s better to plan on the safe side.
Enter Your “Budget” Amounts: In the first column (see red box above), enter your expected monthly expenses for each category.
Some of these expenses, like your monthly rent or mortgage payment, may change very little each month. Other expenses, like clothing or groceries, may fluctuate by several hundred dollars.
Continue filling in your anticipated monthly expenses for each category in the budget worksheet. Don’t worry about getting the numbers exactly right at this point, the most effective budgets evolve over time. We’ll get into “tweaking” your budget tomorrow!
Since each person’s or family’s situation is different, some of the budget categories will remain blank. You can even rename the categories to personalize the worksheet to your unique situation!
Enter Your Actual Expenses: Once you have entered the budgeted amounts for each category, you’ll need to turn your attention to tracking your actual expenses.
The goal here is to keep track of every dollar you spend throughout the month. Ideally, every dollar you spend should be reflected in one of the categories in the budget sheet under in the “Actual” column.
Do the best you can here, it doesn’t need to be perfect. However, the more accurate you are, the more valuable the information will be. You’ll be able to use this information later on to identify areas were you can but back your spending.
The totals of each section will be automatically totalled in the pink boxes. In the example above, the actual amount of money spent in the “Personal” section was $6 less than what was actually budgeted.
There are two techniques for tracking your actual expenses:
The first method involves keeping each category updated every time you make a corresponding purchase. For example: If you spent $10 on toiletries on the 3rd of the month, and another $12 on toiletries on the 17th of the month, you would need to continually update your “Actual” toiletries expense on the worksheet.
The second method uses the “cash envelope system” made famous by personal finance personality Dave Ramsey. In the envelope systemyou switch to an all cash basis for your everyday purchases (you can still use checks for bills, and utility payments) to prevent overspending by using credit or debit cards.
For example: If you budgeted $200 this month for clothing, you would withdraw $200 from your checking account and place the money in an envelope marked “Clothing”. Use only this money for clothing and when its gone, ITS GONE!
Many people find the envelop system provides the added control measure they need to reduce their spending and stick to their budget.
For the purposes of our budget sheet, you still need to update the “”Actual” amount of money you spent per category item in the worksheet. This will allows the budget sheet to calculate any left over money (or shortfall) you may have at the end of the month.
Extra Features:
Not only does my budget program allow you to create a plan for your money, it also tracks how you are doing. If you stay within your budget it will tell you how much “Extra Money” you have at the end of the month! This is money you can use to invest, save, give, or apply to your debt snowball like my family did!
If you spend more than your actual take home pay, you will get the “Budget Busted” message! In the example above, the budget was blown by $256.
Now that you have a basic idea of how the budget program works, and you’ve filled in your preliminary budget numbers, save the Excel sheet under a different name on your computer. Tomorrow we’ll take a look at some tips for reducing your monthly expenses and hopefully increase the amount of money you have left over at the end of the month!
