Working with Your Excel Budgeting Spreadsheet

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Last week we made our spreadsheet a bit more robust by adding in a Checking account and Savings account rows.  If you need to review, you can find the post here.

This week, I will explain how to use this spreadsheet on an ongoing basis as your expense tracking tool in addition to being a budgeting and projecting tool.

Let’s start with the most fool-proof way of sticking to your budget and meeting your projections. Each month, in our example, remove $300 (the incidentals) from your checking account.  You can do this all at once at the beginning of the month or split it up.  Maybe $150 on the 1st and $150 on the 15th.  This all depends on your comfort level with managing your spending.  Here’s the kicker:  DO NOT TAKE ANY ADDITIONAL MONEY OUT OF YOUR ACCOUNT.  Period.  Of course, occasionally there are emergencies such as a blown tire or a medical bill but, if it’s not an emergency, don’t do it!

This money is yours for the month.  Use it however you please remembering that you will need to buy gas and groceries out of this money at some point. If you do not use all of the money in the month, decide what is best for you.  Would you rather hold it as your spending money just in case, save for a larger treat, or put it in your savings account.

If you are trying to build credit but can’t get approved, consider opening a secure credit card where you deposit your money into the account and you can only use how much you have.  With this option, you can have an automatic transfer that takes the money out of your checking account for you and deposits it to the secure account.

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Tracking your expenses is more than entering in about what you think your expenses will be for the month.  While this is a great tool for predicting, it only acts as a placeholder when it comes to utilization of your spreadsheet.

My suggestion for tracking your expenses is to color code your cells.  For all income and expenses where the amounts change each time they occur, I change the text to Blue.  For all of the expenses with set amounts, I keep the text Black.

As I get my bills and paychecks, I add the correct amount over the blue estimated amount and change the color to black.  This shows me that I have already accounted for the item and helps me track where I’m at in the spreadsheet so I don’t have to look up to the months each time.  Once the month is complete, there should be no blue words left.

1. Take the incidentals money out of your checking account.
2. Update your spreadsheet with every new income or expense.

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How to Use Excel to Project Your Savings – Part 2

This is Part 2 of the ‘How to Use Excel to Project Your Savings’ series.  If you have not viewed the first post, you can find it here.

Now that we know how much is possible to save, let’s talk about how to stay on track with savings, starting with a bank account.

I’d recommend getting a checking account to serve as a place to hold enough money to pay all of your bills for one month.  Having a checking account with enough money in it for one month’s worth of bills will allow you to use auto-pay on many of your bills if you desire.  This will free up a lot of your time and as we all know, time is money.   While creating your checking account, I’d suggest creating a savings account that way each month you can transfer money from your checking account to your savings account.

Once your accounts are up and running, decide how much needs to be in the checking account for you to safely pay all of your bills without over-drafting.   I recommend always steering on the high side.

In our example, the total Expenses are $1050.  Keeping the checking account end of the month balance at $1500 should be more than enough to cover all automatic payments.

Now, let’s get this on the books.

I start by changing my ‘Monthly Total’ color to black for ease of navigation, add a row below, then change my ‘Accumulated Totals’ row’s name to ‘Checking Account’.  Notice that in April, we will be at our target of $1500 in our checking account.  This means we will need to begin transferring to the savings account.

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I create two additional rows below ‘Checking Account’ and title them ‘Transfer to Savings’ and ‘Savings Account’.

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In my checking account row, I will determine how much needs to be transferred to remain at $1500.  To do this, I will subtract $1500 from the checking account.  Because the first three months are not at $1500, there would be a negative amount.  You can either delete the negative amounts or use the IF function as I did.  =IF(B18>1500,B18-1500,0).  Note that our numbers are growing exponentially.  This is because originally we had accumulated all of our savings into our checking account.  We will adjust this after we add our savings account functions.

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For the savings account, we want to add the amount we are transferring into the savings account to the previous savings account total.  =C19+B21  This equation begins in February because January does not have a previous amount to add the transfer to.  For January, just copy the ‘Transfer to Savings’ amount.

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Next, I add a row for the checking account balance after the transfer.  For this, I will subtract the amount transferred from the checking account.  =B18-B19  As decided earlier, the checking account should always have $1500 in it after the transfer to the savings account.  Because this is now the end of the month total, I change the title of the row to ‘Checking Account’ and I change the row that had been called ‘Checking Account’ to ‘Checking before transfer’.  This is all just preference and can be changed as desired.

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Now that our accounts are set up, we return to the accumulated savings that has caused our numbers to be incorrect.  Previously, we had added the ‘Monthly Total’ to the monthly total from the previous month to create our total savings.  Because we are no longer adding these totals together, we need to create a new equation starting from our first transfer into our savings account.

To get the correct amount in the checking account prior to the monthly transfer, we will add the ‘Checking Account’ total from the previous month to the ‘Monthly Total’ for the current month and fill across. =F16+E20

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When we fill across, now we will notice that in the ‘December’ column, we show $1500 in the checking account, and $3900 in the savings account, totaling $5400 as we determined in Part 1.

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How to Use Excel to Project Your Savings – Part 1

Today I will be showing you “How to Use Excel to Project Your Savings- Part 1”.

For this example, we will begin our projections in January and end in December.  We will assume that income is received twice per month and that expenses include ‘Rent’, ‘Water’, ‘Electricity’, ‘Phone’, ‘Internet’, and ‘Incidentals’ which could be groceries, gas, entertainment, etc.

Let’s start by opening a new document in Microsoft Excel.  We will begin by entering our projection period.

In cell B1, type ‘January’.  By hovering to the bottom right corner of the cell, you will be able to click and drag the cell to the right until you reach M1.  Excel will automatically fill the series through December.

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Next, much like an income statement, we will note our ‘Income’ and ‘Expenses’.   In Cell A2, type ‘Income’ then hit ‘Enter’ to go down a line.  Enter both paychecks on separate lines and then total the income below.  Expenses are entered using the same process.

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I like to add some formatting at this point so I can navigate easily.  Click the square to the left of the ‘A’ Column and above the ‘1’ Row to highlight all cells then click between the ‘A’ and ‘B’ column to adjust the cells to fit the text.   Next, I bold the headers by highlighting the rows and using CTRL B.  Now we have the basic structure for our projections.

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Let’s assume that each paycheck received is $750 and enter this into both cells B3 and B4.  In B5 we will use the sum function to add the two rows paychecks together.  I like to type ‘=sum(‘ and then highlight the cells I want to sum, but there are many options.  Notice that the total income for January is in bold.  Because I have my spreadsheet set to accounting, my numbers came up with dollar signs.  If yours do not, highlight the entire spreadsheet again then click the dollar sign under Home: Number.

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Now enter in the expenses and sum the total.  We will assume the following:

Rent: $500; Water $50; Electricity $75; Phone $75; Internet $50; Incidentals $300.

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I summed all of my expenses prior to adding in the incidental amount to ensure that I didn’t have a negative balance in my example.  It is not necessary to wait to enter this amount.

Now that we have all of January’s Income and Expenses into our spreadsheet, we will determine how much money is left after all of the expenses have been paid.  For the example, let’s assume all additional funds will be saved.

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Type ‘Savings’ in cell A16 then tab to B16.  In A17, we want to subtract our expenses from our income.  There are many ways to do this, but my preference is to type the equals sign, then click on the total income, type the minus sign, click on the total expenses, then hit ‘Enter’.  This shows us that the total savings for the month is $450.

To take this a step further, we will keep a running total of the expenses throughout the year.  I labeled my running total ‘Accumulated Expenses’ then called the cell above by typing = then clicking on cell A16.

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Next, we will fill our numbers to the right and let Excel do the work for us.  To do this, highlight cells B3:B17; all cells with an amount.  Like we did with the months, hover towards the bottom right corner of the cell the click and drag all the way to the M column.   If needed, highlight all and expand the cells.

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You will notice that our ‘Accumulated Savings’ column remained $450 through the entire spreadsheet.  This is because we only called our savings total and not any totals from previous months.  To update this line, we will begin in February, C17, and add February’s savings amount to the amount saved in January.  ‘=C16+B17’.  Now fill the equation from C17 to M17.

I like to add colors to all of my spreadsheets to keep them easy to read at a glance but this is not necessary.  Now that the projection is complete, a simple glance at the month’s accumulated savings will show how much money is available and allow for planning of large purchases or more saving.  Who doesn’t like watching those numbers grow!?

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