Wednesday, June 3, 2015

Our Budget: The How


It is time for me to share our budgeting process with you. If you missed Part 1 of this series- on the actual breakdown of our budget, here is it. 

Budget Overview

First things first - the numbers below are not our actual budget - this is completely made up for example purposes. I am not trying to tell the world how much money we make a month. I am all about full disclosure, but some things are none of your business. :)

Our budgeting system is completely spreadsheet based. I use the Sheets function in Google Drive (free - you  just need to have a gmail account), but this would also work on Excel, Mac Sheets, etc. I like Drive because I can access it from one of the ten devices I use in a week and it syncs up automatically. 

Now this is going to get a little long and windy, but I promise this is a super simple system if you just stick with me. Setting the system up took a few months to get things exactly how I wanted them, but now I spend a few minutes a day updating my expenses and the rest runs itself. If you want to follow along, I have created an example template that goes with this post and you can update to personally fit your budget. Click here to access it. 

Each month (or whatever earning/spending interval you would want to choose) gets a separate spreadsheet which is composed of three tabs: income, budget, and expenses.

Three Tabs

I am going to break down each tab one by one and by the end of this post it should all make sense.

1. Income

Income Tab

This tab is the easiest and the most self explanatory. The only thing I like to point out here is that we use our income from the month before, this way we know exactly how much we have to work with. Also, everything that goes into our household budget goes into here - rental income, cash from side hustles, etc. The only thing that doesn’t go here is birthday money/gifts, which I am sure Dan is super grateful for. 

You can have as many rows as you want, but the most important line is the Total, because it is used in the formulas in the budget tab. 

2. Expenses 

Expenses Tab

The expenses tab is where you track every single penny you spend.

It is composed of a few different columns: 

  • Type: What account it came from. Unfortunately, Dan and I have quite a few accounts that we work with. This helps me know which account was used: our credit card, our checking account from Bank A or Bank B, cash, etc. 
  • Date
  • Description: I usually just put what my statement has as a description, but I also use this tab to track details - like a check # or receipt information if it is something that is needed later for tax purposes. 
  • Amount
  • Label: this is the most important tab and what helps all the calculations at the end. You can only use a label for a budget category you have on the budget page. Also, the typing of the label has to be consistent. For example, if the label in the budget tab is “Groceries” you can’t type in “Grocery” and expect the calculation to work. Keep going and hopefully this will make sense.

I update this tab every morning by logging into our credit card and checking account online. I don’t think this necessarily needs to be updated daily, but at least weekly, or else you will forget what you bought at Target. When Dan and I first started using this system, we would save all of our receipts and write their category on them, until I realized it was much easier for me to log-in every day and text him if I had a question.  

Another thing to point out here is that you can break down charges at one place into different categories, like I did above with Target - in this example, some money was spent on toiletries and some was spent on the dollar bin. 

3. Budget

Budget Tab

This is where the magic happens. Here is an explanation of the different columns:

  • Percentage: this calculates the percentage of your income budgeted for a certain category. I didn’t have this at first, but added it and thought it was helpful when setting my budget and looking at the big picture of things. 
  • Expenses: your categories - you can add or take away as fits your life
  • Budget: these are the numbers you set at the beginning of each month. You type them in and change them as needed, although I recommend sticking to what you set or else things can get a little hairy.
  • Actual spent: this column takes the amount spent in the Expenses tab and adds it up for each category using sumif statements. This is why it is so important to have the correct wording in the label column in the Expenses tab.Sumif groceries
  • Difference: subtracts your budget from what you have already spent, i.e., what you have left to spend. 

A few notes:

  • This system works for our family because I am the primary person in charge of the finances. Dan contributes to our budget by agreeing with the categories at the beginning of each month and then asking how much we have to spend on something as the month progresses. So, I am the only one who contributes to the spreadsheet. To speak in FPU language, I am the nerd and he is the free spirit. However, if you have two people who would contribute, you can use Google Drive and share the document and allow both people to manipulate it. 
  • If you think about it, this isn’t much different from a cash envelope system, except the “envelopes” are in the cloud instead of cluttering up my kitchen counter and getting lost underneath the seat of my car. 
  • You will noticed there is a “Yearly Expenses” label. This takes a little more explanation and its own blog post, but if you have questions before then please let me know.
  • I created a mock budget sheet, which can be accessed here, if you want to give it a try. If you are intimated by the formula entering, I would be happy to help you, just shoot me an email. 

OK, I think that is enough really exciting information for today. I will be back tomorrow with regularly scheduled cute baby pictures. <3

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