This Is How You Can Use Simple Tools and Spreadsheet to Plan Your Monthly Budget
Budgeting is an intelligent way of monitoring the inflows and outflows of income and expenses. It provides more control over the finances and helps to plan accordingly to achieve the goals. In this article, we will discuss how to make a monthly budget.
Calculate Your Total Monthly Income
Net income is the amount of money in hand after payroll deductions, through which you can pay personal expenses, and bills and save for later. The first step is to accumulate all regular sources of net income so that you have an idea about the capacity to spend and save.
Track Your Actual Spending
The best way to identify the total spending is to record the actual regular expenses like rent, mortgage, and grocery spending for one to two months. This will give an accurate figure to include in the budget. The spending amount should also include the part on annual payments like property taxes, car insurance payments, vacation costs, etc. It should also involve some portion of unpredictable expenditures like doctor’s visits or car repairs.
Set Your Financial Goals
Budgets are ideal for setting both short-term and long-term goals. Short-term goals are meant to be achieved in three years, while long-term goals can take decades, such as a retirement plan, or funding child education.
Also, through budgeting, you can analyze the spaces to cut down your spending, for instance through the budget you realized your expenditure on online shopping, hence from the upcoming month, you’ll reduce your shopping limit, which will ultimately take you closer to achieving your goals.
Plan Your Budget
It is recommended to first set aside income for savings, they may be either for buying a car or for emergency funds. As Warren Buffet said, we should not save money after spending, rather, we should spend money after savings.
There is also a well-known 50-30-20 rule, where you put 50% of the income for needs, 30% for wants, and 20% for saving. This rule proved to be very useful to many people in achieving their financial goals.
The idea of the budget is to minimize over expenditures and get closer to achieving financial goals.
Monitor Your Spending and Define Your Budget
Budgets are the documents that are needed to be changed according to changes in circumstances, for instance, one budget cannot be valid for the next 5 years. It is important to analyze the budget once or twice in the year to make required changes and judge how far you have come to achieve your financial goals.
Make a Budget Using Spreadsheets
In today’s world, it is very easy to build, maintain and analyze the budget, thanks to the latest applications and digital spreadsheets available in hand. Further, in this article, we will tell you how to use the spreadsheet to make the budget.
Use a Software Application
There are multiple software applications for budgeting that are free to use. Microsoft Excel is the pioneer of spreadsheets and it is by default installed on many devices but if you are not comfortable then a few other free options are Google Sheets and Apple Numbers software for iOs and MacOs. There is more variety of spreadsheets available over the internet.
Select a Template
Most spreadsheets now have a specific template for the personal budget, with all the categories, formulas, and designs included, you can take the advantage of such predefined templates which are designed by experts. Or to have a more specific template, you can look up multiple options available on the internet and download it. Some spreadsheets also offer users the opportunity to design their own templates to use.
Enter Your Numbers
Once you decide on your template, you can open it up and fill in all required information like salary, monthly expenses, and savings in the designated places.
Check the Results
After punching all the numbers in the spreadsheet, it will do all the accounting itself and will produce a graphical or linear result of the budget, representing the cash flows in actions.
Budgeting is extremely important to keep personal finance in control, avoid unnecessary spending, and monitor progress toward financial goals. The availability of a digital spreadsheet in hand makes budgeting easier for the user to record all relevant data and gauge performance toward the targets.
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