It is good to keep track of your expenses even during good times. With the economy in the gutter, it becomes essential.
You want to know:
- What is your balance (income – expenses)? If this is negative on average, you will go broke sooner or later. If this is the case, you absolutely need to act.
- Where is the money going? Having this information allows you to act effectively to improve your balance sheet.
I use a budget spreadsheet that looks like this: Budget. If you follow the link, it will take you to Google Docs. Use ‘File’ -> ‘Create a copy’ to create your own copy to play with.
The spreadsheet has three sheets: ‘Budget’, ‘Transactions’ and ‘Formulas’.
The only thing ‘Formulas’ is useful for, is changing the start date of your expense tracking, so the averages are correct.
In ‘Transactions’, you report every time you spend or receive money. Each transaction needs a date, a description, a code, and an amount.
The date will make sure the transaction is recorded in the appropriate month column in the ‘Budget’ sheet. The code has to match one of the codes from the ‘Budget’ sheet, and will make the amount appear in the budget row associated with that code.
The ‘Budget’ sheet shows you all transactions broken down by category (code) and summed up to a monthly average, current month and previous month.
The balance row at the bottom will tell you whether you’re in good shape or not.
You can add and remove categories as you like, just make sure the code you choose matches the code you enter in the ‘Transactions’ sheet.