Have you ever wanted to go on a trip or buy something new only to look at your bank account and wonder if you will ever be able to afford it? How about something smaller. Have you ever wondered if you have enough to cover the groceries that are currently in your shopping cart? Managing your money and knowing what your financial profile looks like is key to knowing that there is enough (or not enough) money in the bank, understanding your priorities and reaching your saving goals. More simply, you need to have a budget.
When I say financial profile, I mean the overall picture of your financial situation from income to debt to investments. There are so many programs and apps these days that give you a glimpse into your financial profile and help you budget your money – Clarity and Mint are a couple of the most popular. Unfortunately, many of these automated budgeting apps leave out important pieces of your financial profile. They often don’t consider things like small banks and credit card companies, and your IRA account.
Why is seeing the whole picture so important?
- It will tell you how much money you have in the bank
You can always go to the bank or do a quick check online to see what the balance in your checking account is, but knowing what that balance is in relation to your upcoming expenses and your other accounts is what your true balance is.
- It will tell you where your priorities are
Seeing where most of your spending is going each month will quickly tell you where your priorities are. You might think your priorities are in one place, but the money trail won’t lie. Your priorities are what you’re spending your money on.
- It will help you reach your saving goals
When you realize your true balance and figure out where your priorities are, you can start to shift them to the things that you really want in life. Your dream might be to buy a car or a house, or it might be to take a family vacation. Whatever it is, knowing your financial profile will help you meet those saving goals.
Since seeing the whole picture of your financial profile is so import, I don’t use any of the budgeting tools out there. I created something of my own that lets me see my ENTIRE financial profile. I call it my Budgeting Spreadsheet. If you sign up for my newsletter, I will send you a password that will give you access to my entire resource library of freebies where you can download a copy of the spreadsheet.
What the Budgeting Spreadsheet does
The budgeting spreadsheet that I created takes your monthly expenses, subtracts them from your income and leaves you with a balance of money that you can choose to put toward spending or saving categories each month.
By doing this, you know EXACTLY where your money is going each month and help you realize if there are things that your can easily cut out or reduce. Once you have this, it will help you realize how long it will take you to save up for your dreams.
The spreadsheet is semi-automated which means that it is going to require your attention frequently. Why did I set it up this way? Well, accountability. When you have to manually insert your expenses, you can actually feel where your money is going. It better helps you to stay away from unnecessary spending. Additionally, I have come to realize that it also helps you catch fraudulent charges.
I also set it up this way because I don’t like to use cash, so monitoring your accounts and spreadsheet is important for tracking your monthly spending. If you do prefer to use cash, I have found that the Toshl Finance app is a great way to track it.
I highly recommend trying out the spreadsheet if you would like to keep track of your money and reach your saving goals. What’s the risk anyway? It’s completely FREE! Best of all, you can customize it to your life.
How to Use the Spreadsheet
I have explicit and in depth instructions on how to use my budgeting spreadsheet and how to create a budget here.
As an overview:
- Figure out your take home income
- Go through your last 3 months of credit card statements to figure out what your recurring bills are
- Go through your last 3 months of credit card statements again to categorize your monthly variable spending like groceries, gas, eating out etc…
- Average the variable spending numbers from the 3 months to get a rough estimate of what you spend in each category per month
- Take your income – recurring bills – average variable spending to get how much you have left over to save
- Likely, when you see that number, you will have to trim your expenses in order to save the amount you are looking to save. This post will give you some ideas on expenses to cut to save money.
When making your budget, I would aim to live off of 70% of your take home income, and try to save the other 30%. This will ensure that you are living within your means AND getting to do the extra things you love.
If you can create yourself a budget and actually STICK TO IT! you will find that you will be able to afford anything that you want in life, as long as you are willing to make the short term sacrifices to get there.