When I was little I remember my dad sitting in front of his desk, writing “notes” in a little notebook and besides several bank receipts. Only when I was a teenager I understood the scope of that gesture that he constantly repeated once a month: that notebook contained notes about our family budget and expenses.
I thought this routine was pretty normal but over time, speaking with my friends and relatives, I realized that the majority of them didn’t have a personal budget and/or the control of their expenses.
Why do you need a personal budget?
A personal budget is the best way to know how and where you spend your money. It helps you to avoid useless expenses or to forecast some of them (ex car payment, mortgage etc..) but also to reallocate money in case of unexpected expenditures.
Nowadays there are many budget tools (Mint, Money Manager, Level Money, GnuCash etc..) you can use to keep track of your income and expenditures but if it’s the fist time you deal with a budget I suggest you to use the Microsoft Office’s template: personal budget template. Once you’ve learned how to plan your budget you can upgrade your standards with a good software. 🙂
This template is divided into 4 sheets:
This sheet represents a picture of a person’s financial situation. As you can see from the screenshot below there is the amount of saved money, income, expenses and finally the cash balance. Income and expenses are also represented as column chart and as percentage.
Monthly Income Sheet
It is a summary of all the money you earn per month: salary, restaurant tickets, profit from investments, inheritance etc..
Monthly Expenses Sheet
This sheet is divided in categories based on the most common expenses that a person has to cope with. You can of course add (i.e. holidays) or remove the categories as you prefer or even create category groups. For example, you can use the generic label Car and create subcategories like car insurance, car installment, maintenance and fuel. You can use the same logic for your house/apartment, you create the main category and you put inside groceries, rent, utilities, furniture etc..
In order to get a precise picture on how much money you spend and where, remember to put every single expenses, both the little and the big ones.
Monthly Savings Sheet
In this sheet you’ll find the amount of money from your salary, or in general from your income, that you didn’t spend and that can be saved for unexpected expenses (like broken pipes, broken dishwasher etc..) or for future investments.
I suggest you to add two more sheets that will definitely help you manage your money: a recurrent transactions sheet and a budget setup sheet.
The first one is useful to keep track of recurring expenses (like rent, car installment, assurances, gym membership etc..) the peculiarities of this category is that all the expenses are recurrent and have the same amount every month. So it’s not going to be a surprise for you that a certain amount of money will constantly “disappear” from your wallet. 😉
The second one, a budget setup sheet, is a sheet where you write the amount of your income and the expenses categories, besides each one you will put the maximum amount of money you want to spend in a certain period of time (per month, every three months, six-month or annual). Check this sheet periodically as you’ll do for the others, you will soon realize if you should cut some expenses (because you spend too much or because you don’t need to buy something) in order to save more money.
Those are the basic tips I’ve learned looking at my father but more over when I started working and I wanted to take care of my first wages. Of course money shouldn’t be the first thought when you get out of bed, but as a sentence in Forbes Magazine said:
“Always remember, money is not everything in life but make sure you earn sufficient before you think of such nonsense”. 😉