Budget. Wait! What budget?

As promised- today's "wealth" blog is on budgeting. I know, it's your most favorite topic, right? (big BIG sigh).

Most of us find ourselves **thinking** we have a budget, when really, all we have is a knowledge of our bottom line in our checking account. We know we have enough money to cover the bills that are sitting on our kitchen counter, but we have no idea how much money will be left in our account at the end of the month.

For the Goodnight household, I know EXACTLY how much money will be left in our account at the end of each month, heck- I could tell you within a couple of dollars how much we should have on December 31st.

Creating a budget isn't all so bad if you have the handy dandy Excel program on your computer. I adore Excel- I use it for practically everything! It adds for me, it color codes for me, it is wonderful! By the way, my accountant LOVES my Excel use too! I just burn my annual banking information for her and BOOM, she has every single transaction- deposits, debits, the WORKS! She knows my color coding system (which you'll be introduced to) and she knows that everything is to the penny. My taxes are done pronto and my refund check is mailed out before tax season truly begins!

Now, how to budget....

First, please take a look at a screen shot of our budget for this month. This page is used every single month and starts clean on the 20th of the month (that's when our check and visa ledger is mailed to us from the bank). I like to start the month clean after I've balanced all of my transactions to my ledgers (checking and visa). Don't let this screen shot overwhelm you, and don't analyze my numbers (I changed them a bit so that you couldn't judge the money we make and/or how much our mortgage is!)

Here's how to set your own up:

1) Open excel and create your budget sheet by....

     a) Making five columns- transaction (where/what the money went to), date, type (remember, you're listing your visa transactions too so that it's not a "scare" when that visa bill comes in), deposit column (so that it's easy to see that money coming in!), and the transaction amount (remember to put a negative symbol in front of the debits!)

    b) The first line needs to be your original balance from your last checking statement- for us, this was $500.00 (not really, but for the sake of this example)

    c) The following lines needs to list your transactions as they occur

    d) Then, at the bottom of your transaction list, use the handy dandy "SUM" button in excel to add up all of your transactions in that column. For us, the balance to date in our account (for this example) is $418.21. Now, keep in mind that this includes ALL Visa purchases since the 20th. So, if I look at my online banking, I actually have more than 418.21. I have 418.21 PLUS all of my Visa transaction amounts. But, since I don't want "Visa Shock" I take out these transactions as they occur.

2) Create a separate section at the bottom of your spread sheet for your monthly bills.

    a) You can see that we have 10 bills that occur on a monthly basis- whether we like them or not! I like to color code these bills so they're easily found at the end of the year. The lime green is anything medical and/or tax deductible. The yellow is insurance, purple is our satellite bill, etc. I like colors- this isn't necessary, but it's easier for me to find my transactions!

    b) In the next column over, list the amount of these bills per month. I have my bills set up on a budgeted plan through the provider so that my bill is the exact same every month. If you do not have this set up, use an average...or your best estimate. And, this doesn't mean just bills that are paid from your checking account- if you'll notice, I pay a lot of these bills with my Visa...I gotta get them points!!! Use the handy "sum" button again to see the sum off all your bills in the month. Ours is $4,367.06.

   c) In the 3rd column over, list these amounts AGAIN. Why? Because as you pay these bills, you'll remove their amounts from this column (I put **'s). Use the "sum" button again to see the current amount of bills you have LEFT to pay for the month. We have $1,785.65 left to pay.

3) Now, my favorite part. The "INCOME INFO"!

    a) Put the dates of your pay date. Ours is weekly- yours may be bi-weekly...monthly...etc.

    b) In the next column over, put the amounts that you'll receive on these dates.

    c) I also have a line for "Insurance" income because I get a stipend for this amount. So, if you have any additional, non-payroll income, place a separate line for that.

    d) Then, have a line for "INCOME BALANCE"- use the handy "sum" button and choose to add the lines for your income. Once you've been paid, put **'s in that slot...the Income Balance is what you're still owed from your employer.

    e) Then, have a line for "CURRENT BALANCE" and in this slot type in "=" and choose the slot with your current checking account total. For us, this is $418.21. As this amount changes, it will automatically update if you use the "=" button.

   f) Finally, have a "Amount Remaining POST Bills"- in this slot type in "=" and then choose the "Income Balance" + "Current Balance" - "Bill Balance". So our formula for this slot is "=6716.32+418.21-1785.65". This totals $5,348.88 meaning on the 20th of November, we should have that much money left in our checking account. Of course, this isn't true...because of all the extra expenditures we'll have that are not "bills"- so, I like to look at this number as being the amount of money I can spend without going in the hole! I like to think about taking 1-2k out of that and putting into a savings account each month....thus my mentality is...I can spend 3,348.88 this month and still be good to go!

Phew, a LOT of information, right?

It's confusing to set up at first, but once you get it going, you won't be able to live without this spreadsheet.

If you need help with setting up a sheet for yourself (or if you simply find these directions far too confusing), let me know by commenting your e-mail address. I'll be more than happy to set one up for you that is blank and you can download it and fill in the appropriate information for yourself.

I use this same exact system for my job as a CFO....yes, it's a bit more detailed (well, A LOT more detailed) but it works. The president of our organization loves it...he loves being able to see how much money we have/need by December 31st (I run it on an annualized basis).

Happy bill paying, happy spending, and most of all- HAPPY BUDGETING!

Erica