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Setting A Budget

Now comes the part where the real planning commences.

How To Create a Budget

Open the Budget Template spreadsheet (Budget Template), save it onto your computer, and update the title and column headers to reflect the months and years that currently apply for the financial year you choose. Move the expenses tracked from the previous month into the current month column. Rename the spreadsheet to be your working version and save it in a safe location with a meaningful file name. If you do not like the format I have supplied then feel free to change it later. You may even use one spreadsheet and expand it over time, or move to dedicated software instead - whatever suits you. For the meantime I would suggest staying with this spreadsheet until you get a firm grip of the concepts presented. Typically I have a spreadsheet for each financial year but you may also wish to change this.

What Are The Contents of A Budget?

Notice the rows, they are broken into income and expense sections and have a summary row under each group. There’s a profit and loss summary at the bottom. Play around in one column to see how it and the fields work. I have added some sample figures and details as an example. Feel free to change or remove these, but be careful not to delete formulas.

Add Your Income

Enter the income for the period, and this should be normal wages – show additional or ad-hoc income separately. It’s important to set a budget on standard wages as this is dependable income. Additional income is ad-hoc and may or may not be paid to you, or the payment amount varies. Budgeting on a fixed baseline is far safer than trying to account with uncertain income (See Don't Count On Bonuses).

Add You Tracked Expenses

Fill in each expense category (from Track Your Spending) noting the sample row descriptions I’ve already entered. Change or delete rows as you require. Also feel free to change the row headings to suit, you may pay rent, or have a mortgage, or both. If you receive rent from tenants then I suggest you place this in income, not expenses, as rent YOU pay is an expense and rent THEY pay is income for you. You may also record an investment property's income and expenses elsewhere and only record the profit on that property as income here. There is no real right or wrong with respect to how you structure your budget, as long as it is accurate.

Looking At The Profit or Loss

When you have entered everything, look at the bottom row to the profit or loss for that month. If you are running a loss then some trimming is required, but wait and read on – more needs to be factored into monthly expenses.

Note: If you add or remove rows do a spot check to ensure the totals still tally. If they don’t then you may have to update the formulas.