If I asked you right now if you knew where your money is going, could you answer me?
Stop for a second…
I don’t mean a vague or rough guess.
I mean, do you actually, fully understand where your hard earned cash is ending up week to week?
I thought I did; I was wrong.
So, so wrong.
It was only when I created a budget planner that I fully realized exactly where my money was ending up.
If you don’t track your outgoings on a budget planner week to week I’ll hazard a guess you can’t be totally confident in your answer.
Here’s the thing:
[ctt tweet=”Whether you’re in debt or not, you really do need to understand where your money is going!” coverup=”Hr4AL”]
And the best way is by creating a budget planner.
A budget planner details your income and expenses to provide you with an accurate picture of the money you have left over each period.
Budget planners are easy to put together and this post is going to explain how you do just that.
But first, I’ll cut to the chase.
I can save you the time in creating your own. You see, I’ve already made a budget planner template in Google Documents and it works like a dream for me. And, I’m going to share it with you.
If you want a copy, sign up to my mailing list in the box below and I’ll send you a link to my online weekly budget spreadsheet.
Once you’ve done that keep reading.
If you want to create your own budget plan, this is going to tell you how. If you’re using mine, this post is going to take you through how a budget planner is set out. So you’re going to learn something regardless.
Let’s get stuck in:
Create your own budget planner
Creating your own budget planner is straight-forward. If you’re uncomfortable using spreadsheet software then you can make one with pen and paper. Using spreadsheets makes it easier to calculate and recalculate your figures, however. I highly recommend trying to get to grips with them.
The spreadsheet I provide if you sign up to my mailing list is ready to go. You’ll just have to enter your own figures and change the categories to suit you.
Budget planner time-frames
A budget planner normally lists your income and expenses on a monthly basis.
But, I prefer to break my budget planner down into weekly columns.
- I find it easier to update a smaller number of transactions each week as opposed to a larger amount each month.
- It’s far more motivating to track progress weekly and I find it is easier to correct my course if I’ve had a bad week of spending.
- It’s also more satisfying to see the good progress each week. Whether you’re making good progress or making bad progress and having to take corrective action, both outcomes will spur you on toward reaching your financial goals.
Here’s a tip: Organise your finances as you live your life
Aside from the benefits in tracking weekly, I also find it easier to organize my money by living week to week.
I have a weekly grocery and travel budget, I pay rent weekly. I pay most of my bills fortnightly and I get paid fortnightly also. For fortnightly expenses and income, it is easy to input figures on alternate weeks.
If you receive income monthly, or you pay the majority of your bills, monthly you may prefer to create a monthly budget planner.
My budget planner template is set out weekly but can be easily changed if you need to.
How is a budget planner laid out?
A budget planner should contain rows and columns. In the case of my budget template, the first column is the label for each category. The following columns represent each week. The the last column contains subtotals for each row.
A budget planner generally contains two major sections for income and expenses.
Each row contains a different category of each income and expense.
The top section contains all your income.
If you have many sources of income you are best to create rows for each source.
My budget template contains line items for each source of income.
The benefit to doing this is you can get a more accurate picture of where your income is coming from each week. The subtotal to the far right of each row details and essential view of income from that source each year.
For example, if you have two jobs you would place income from each job into a new line. If you sell any personal items on eBay you may want to place these on a third line labeled “Personal Items Sold”.
You may sell around $100 of second-hand goods from your home every 3-6 weeks. The subtotal column at the end of the row will inform you that you’re making $1,200 each year.
Underlining the income section is a sum total of income for each week, with a grand total for the year on the far right.
Below the income section is your expenses.
I generally create a large number of categories in the expenses section of my budget plan template to be able to track effectively. Categories would include some of the following:
- Groceries – to cover food and personal items
- Cleaning – which may include laundry and cleaning products
- Bank Fees
It is important to note that the categories in an expense section are not limited to these. You can, and should, create a relevant category for each grouping of expenses that are logical to you.
Be specific enough with your categories that you can understand where your money is going, but try to limit the number to keep it simple. It’s a bit of a balancing act.
If you need to, break down categories to track spending on specific items that may need scrutiny.
For example, I could see that I was spending more than I thought on coffee and lunches at work. I had placed these under food, but I wanted to track how much I was actually spending on these items. So, I created a specific category for “coffee” and one for “lunches”.
Expenses that I placed in the lunches column were only for when I purchased a lunch at work. If made lunch at home the items would come under my groceries budget.
By doing this I was able to see exactly how much I was spending on coffee. This was incredibly useful. I realized I was spending about $1200 a year on coffee just by grabbing a cup on the way to work each day!
Worse still, I was spending more on lunches.
By cutting both out I was able to save a large amount of money and use it to pay off debt much faster.
My budget also helped me identify that I was spending a large amount on bank fees. So, I closed down accounts I didn’t need and switched other accounts to ones with no charges.
These are prime examples of how a budget planner can expose unnecessary expenses. These small, unseen expenses add up over the course of the year. It also helps you cut unnecessary spending to help reach financial goals.
Again, at the base of the expenses column is a row containing totals for each week with a subtotal for the year.
Budget surplus or deficit
Generally, a budget then subtracts your expenses from your income to show a surplus (money left over) or deficit (an overspend).
In the screenshot above you can see that the third week has encountered a large expense. This shows up in red in the weekly difference total.
In the balance row, at the bottom of the spreadsheet screenshot, you can see there’s a negative balance. This is your forewarning that you need to find some extra income, make some savings to compensate or arrange a temporary overdraft for the 4 weeks you’ll be in the red.
How my budget planner template differs
My budget planner works slightly different. It still provides these details but it works more like a cash flow budget.
The top row of my budget planner contains a row called “balance”. In the first week that you start your budget you will add the balance of your bank account.
I strongly recommend trying to limit your transactions to one account. Doing so makes tracking your expenditure incredibly easy.
Once you have entered your starting balance, each week you enter your income and expenditure will give you a final balance on the last row which is then carried up to the starting balance for the next week.
So each row will look something like this:
- Opening Balance
- Closing Balance
Estimates vs Actual Figures
You’ll start out by populating each cell with an estimated figure. So for example, I may decide I want to limit my grocery spending to $100 a week. This is my budget amount. Each week contains $100 until the end of the year which gives me an overview of how much I’m spending and how my finances will look if I stick to my budget.
As each week comes around I’ll add up my grocery spending and enter the final amount into the relevant week. Some week’s you’ll spend more, others less. I tend to change my cell color to red if I go over budget, just as a notification to myself that I was bad that week.
The big advantage behind this is that you can enter in weekly figures and tweak your numbers to see what the impacts will be throughout the year. To see this in action try tweaking some of your figures by small amounts to see how balances are affected.
If you start going over budget too often, and you’re spending more than you earn you’ll see a budget deficit in your “difference” row. The benefit being that you’ll see the impact on your opening and closing balances into the future if you continue the trend and you can adjust your habits, or organize an overdraft if it’s a short-term problem.
If taking out an overdraft would incur fees, which is likely, then being organised by maintaining your budget planner each week could save you a lot of money because you’ll see it coming. You’ll also be informed how much you might need to generate in income to avoid needing an overdraft, or how much you would need to cut your costs to save the money you need.
A more typical budget plan
Included in my budget planner is a second sheet that contains a typical budget sheet that itemises your expenses. You can use this sheet as a quick and high level overview of your expenses. I generally find that my expenses fall into one of three payment cycles:
I generally find that my expenses fall into one of four payment cycles:
In this spreadsheet I provide a row for each of my expenses. I then have a column for each of the payment periods and include my figures in the relevant cell. See the screenshot below:
The annual column is either a standard figure or it calculates the yearly value from the previous columns. This annual figure drives the breakdown of figures to the right.
Have you ever wanted to know how much you spend on a weekly basis? You’ll generally need this if you fill out a statement of financial means form to obtain credit or when applying for relief from a debt. You may also just be curious how much you spend on outgoings each week when there’s such a mix of weekly, fortnightly and monthly payments.
The figures on the right show you how much you spend in each row on the weekly, fortnightly and monthly basis as well as grand totals for each period. For example, the weekly figure is simply the annual figure /52.
I find these figures incredibly helpful and this sheet is very simple to complete.
Combining the two budget plans
If you want to take it to the next level you can combine the annual figures from each expense row you create in your first spreadsheet. I don’t have this connected up in my spreadsheet but it’s not too hard to do (ask in the comments if you are keen to learn).
As you enter in your weekly (real) figures (as opposed to your forecasted figures) your overview sheet will update to give you an average of your expenses in each category by week, fortnight, and month.
I personally would find this really useful.
A budget planner is super simple to set up. I’ve made it even easier by offering you a copy of mine, just drop your email address into the form in the post and follow the emails. To reap the benefits of a budget you should try to limit the number of bank accounts you use, ideally to one, categorize your expenditure to suit what you want to track and commit to updating it on a weekly basis. Budgets can quickly help you understand exactly where your money is going and help you figure out where it should be going and when.
If you have any questions or need any help with the free budget spreadsheet I’ve offered, please feel free to drop me a question in the comments. I’m here to help.