In one of my previous articles, I went over all the benefits of personal budgeting. With discipline and persistence, it can bring an immense level of prosperity.
The moral of that article is that having a personal budget is very beneficial for anyone. It’s a quality that all wealthy people master and a quality worth putting time into.
At the end of that article, I gave you all a free budget spreadsheet, monthly template. One that I personally like to use, but a lot more general.
I’ve recently helped some friends create a budget for themselves and they have told me how much it’s helped them to have this tool in use. A budget may seem simple but, really, it can be very challenging to maintain. I also gave the very same template to these friends.
They’ve told me how much it has helped them to keep a budget. They also told me that they’re experiencing the positive impacts of budgeting.
However, I realized that I needed to explain to them how to use the template and how to budget properly. This made me realize that a lot of you guys would probably need that help as well.
So, I decided to make this article to not only provide an automated-ish template but also provide you with instructions on how to use it properly.
I say “automated-ish” because I’ve placed all the formulas for you but you still need to manually enter your transactions.
On a side note, I personally prefer to do it manually but I’ll get into the reasoning behind that later in this article.
By the end of this article, you will fully understand how to properly use this template. You will also understand how to maximize its use to reap the benefits of budgeting.
How To Use a Budget
Budgets are very simple, you calculate your expected income, expenses, reimbursements, and any activity that you expect your money to perform for a specific time-frame. Throughout this time frame, your actual income, expenses, reimbursements, and any other activity are submitted to the budget. This time-frame is usually a month.
Certain people who have may require more or less time than a month. However, the usual frame tends to be a month. It’s the time-frame I use and it’s the template I provided for you all.
I like to separate budgets into four sections:
- In-person expenses (grocery store, bar, arcade, event, etc)
- Automatic Withdrawals (subscriptions, memberships, etc)
- Income (salary, dividends, interest, reimbursements)
- Savings (emergency fund, short-term savings, long-term savings, potential investments)
I separate my money into these sections to facilitate the process of entering my transactions into the budget.
How to apply these 4 sections to your budget
There are many ways in which you can submit transactions into your budget. You can choose to do it:
- at the time of each transaction
- at the end of each day
- once a week
- once a month
When it comes to in-person transactions (ie: going to the grocery store), I like to enter my transactions at the time of their occurrence. I do this so that I can feel the psychological factor of “losing money” as if I were using cash. I don’t like cash so, statistically speaking, I’m more likely to overspend when compared to someone who uses cash.
By submitting each transaction at the time of its occurrence, I can experience the same level of “loss” as someone who uses cash.
I’m aware that sometimes you can’t pull your phone out and submit a transaction at the time of its occurrence. However, in such cases, I simply make it a goal to submit the transaction at the end of each day.
So, how do you do this with automatic withdrawals (ie: gym membership, car payment, subscriptions)?
This is how I did it:
- I figured out when each withdrawal is due by checking my bank account regularly or simply checking the prior 3 months if they’re available.
- Once I figure out when the due dates are, I set a reminder on my phone for the day of each withdrawal.
- On the day of each withdrawal, I verify my bank account to ensure that the withdrawal was appropriately made. Sometimes people discover that whoever is making withdrawals from their bank account has been doing so incorrectly. Maybe they’re overcharging you or charging earlier every month, this is your chance to fix that.
- Once you verify the transaction in your bank account, you submit it to your budget.
When it comes to money coming in (income), simply calculate what you expect to receive for the month based on the salary you earn. If your income fluctuates month to month, calculate the average you made throughout the past 6 to 12 months.
If you’re starting a new line of work, simply submit what you expect to earn for the given time.
Then, whenever you receive your income, submit it to your budget on the day it occurs. You will be able to see whether your actual income, met, exceeded, or underperformed your expectations for the month.
Throughout this entire process, keep one thing in mind, your income must ALWAYS be greater than your expenses.
You might be thinking “obviously”, but statistics prove that this consept is something that the majority of America struggles to grasp.
Do NOT exceed your income with your expenses, even if you have a credit card. This is going to mean, cutting out those “treat yourself” expenses that are not essential to your life.
Then, ensure that you have enough left over for savings. If you don’t currently have at least $1,000 in an emergency fund, get to it with these savings.
To summarize, this is the process:
- Calculate expected income for the month
- Calculate expected expenses for the month
- Calculate expected savings based on income and mandatory expenses (cut out those “wants”)
- On the day of each paycheck, submit the actual income into your budget
- On the occurrence of each expense and saving transaction, submit the actual expense and saving into your budget. Do this in the designated section of the budget until you reach the end of the month.
This is the basic idea of how to submit your income, expenses, and savings into your budget.
Making your own Copy of the Template
Now, let’s get to the actual template.
When you click on my link to the budget template, you’ll realize that you won’t be able to edit it.
This is because I have this template on “View” mode so that nobody can edit it. Otherwise, whatever gets edited will be seeing by everyone on the template.
This is why you must make your own copy of the template. Once you have your copy, you will be able to edit it. No one will be able to see the information within it because it’s only your copy.
To make your copy you simply need to:
If you’re on a desktop:
- Click on “File” on the top left corner of the spreadsheet
- Click on “Make a Copy”
- Name your copy of the template (green)
- Click “OK” (red)
If you’re on mobile
- Download “Google Sheets” from your app store
- Log into your Google account
- Once you’re on this spreadsheet, click the 3 dots on the top right corner
- Click “Share & Export”
- Click “Make a copy”
Wallah! Now you have your very own copy of your budget template. Every month make another copy, either with this link or with the template you’ll already be using. If you choose to use the template that you’ll already be using, keep in mind that you will need to delete the information that will be copied onto your new template.
Submitting info into your budget
Within your budget template, I’ve entered the formulas necessary so that the calculations can be done for you. All you need to do is enter your information. The template will add your numbers for you.
On the “Projected” side, you will enter what you expect to earn, spend, and save:
But you will NOT need to touch this side of the template:
The formulas I’ve entered are in these sections. Submitting information in there will ruin your formulas.
The place where you will be entering your actual transactions will be here:
Enter the date on the left of that and the details of the transaction on the right.
Here’s an example:
I have separated each of these sections in the same order as the main budget section. To make things easier, I color-coded them the same so that you know which section is which.
I have also created a separate template for those who use credit. I keep my credit card and debit card expenses separate BUT I never let their sum exceed my total income. I treat the credit as if it’s part of my income, not an addition to it.
I never exceed 30% of my credit utilization. I always have a total of both, my credit and debit accounts, to be no more than what I expect to spend from my income for the rest of the month.
To use this template, all you need to do is submit the transactions done in credit under the “credit” section here:
And all you need to do with debit card expenses is to list them in the section above the “credit” section.
Here, I summarize the values of each (debit and credit are circled in red).
These numbers, together, should be equal to the total expenses you have for the month (circled in yellow).
The summary of your budget is done for you in the section titled “Budget Summary”. This is simply the conclusion of all your projected and actual income, expenses, and savings.
As said before, all these calculations are done for you, all you need to do is enter what you expect and then enter what actually happens into their designated sections.
Whatever way that you wish to enter your information is up to you. I have found it to be most effective to submit every single transaction at the time of its occurrence.
There have been times when I am not able to do that so I always keep the receipt(s). Then, at the end of the day I’ll pull them out and check my bank account to ensure the numbers are the same. Then I submit the transactions into my budget.
As I said earlier, I find this to be the most effective way of doing it because I feel the psychological pain of “losing” money. If I make this process automatic, I may not feel that psychological pain and may be prone to spending more, as statistics prove.
By doing this, I spend the same as if I had cash. I don’t overspend on my credit card and I end up saving more money.
People tend to prefer the automatic process but I prefer the manual process. Psychologically, it works better.
I hope this tutorial has helped you out with your financial endeavors. Maybe I’ve conviced you to choose a manual budget instead to help you avoid overspending.
If anyone has any questions or if I was not clear enough on some instructions, please comment them below. I’ll answer them and/or adjust this article to make it more clear.
If you have made a copy of your template and would like me to personalize it for your individual needs, please contact me at firstname.lastname@example.org. I know this template is very general and each person has individual expenses so they may not require all the sections listed here, or maybe you need different sections. Either way, let me know and I’ll be happy to help you.