budgeting Archives — Beating Broke

How to Create a Zero-Based Budget in Excel

April 27, 2020 By MelissaB Leave a Comment

Whether you feel like your finances are a mess and you don’t know where the money goes every month, or you want a better handle on your spending and saving records, I highly recommend keeping a monthly budget. I know, I know, people always complain that they don’t want to keep a budget, or that their finances are too complicated for a budget. The simple truth is, once you learn how to create a zero-based budget in Excel, keeping a budget is quite easy. And if you’re short on cash, that’s all the more reason why you should keep a budget.

Why Keep a Budget?

A budget can be helpful at the beginning of the month to act as a map. This map tells you how much you have to spend and save and helps direct how you use your money.

At the end of the month, when you fill in what you spent, the budget serves as a financial journal, so to speak. I find it very helpful at the end of the year to see how much I spent on groceries, miscellaneous, etc. That helps me make next year’s budget. Also, if my savings is smaller than I would like, looking over past expenditures helps me see what was the cause.

Why Use Excel?

There are so many budgeting software programs out there. Why not use one of them? Well, you certainly can, but I’ve discovered that most of them charge a monthly or yearly fee. I don’t know about you, but I find it irritating to pay $5 to $8 a month just to have a platform for maintaining my budget. However, after you initially buy Excel, it’s completely free! And, once you learn how to use Excel, it’s easy to use.

Sure, you could keep your budget on paper, and I did that when my husband and I were first married. However, as finances get more complicated, a paper budget is harder to maintain. It’s also harder to evaluate your spending at the end of the year because you can’t organize it by categories and expenditures.

What Is a Zero-Based Budget?

A zero-based budget simply means that each paycheck, you plan expenditures that are equally to your income. So, if you create your budget, and you discover you have an extra $200, you don’t just leave it sitting there. (Most people will slowly pitter away that money during the month.) Instead, you earmark that extra money for something. Maybe it goes to your emergency fund. Maybe it goes to debt repayment. The point is, you give that money a job so you don’t spend it because you see it as “extra.”

How to Create a Zero-Based Budget in Excel

Creating a zero-based budget in Excel is fairly easy and quick.

Create Categories First

When you start your budget, you’ll want to have several categories. These categories will run vertically down your Excel column.

Categories to Add to The Budget

The first column should have several major categories:

Income
Fixed Expenses
Variable Expenses
Debt

These categories represent your income and all expenses for the month.

Fixed expenses will be those expenses that are the same month after month. Think rent or mortgage, cable & internet, etc.

Variable expenses will be those expenses that vary every month such as gas, groceries, spending, utilities, etc.

Debt will obviously include all of your debt such as credit card payments, student loan payments, car payments, etc.

By now your Excel spreadsheet should contain two columns. The first should be the broad categories of income, debt, fixed expenses and variable expenses.

The next column should contain the names of all of those particular expenses.

Get Ready to Record Data

After that, you should have two new category headings, each in their own column—Budgeted and Actual.

At the beginning of the month (or pay period), you will put in the budgeted amount you plan to use for each category.

As you incur expenses, you will put the actual spending under the “Actual” column heading.

Customize to Your Choosing

At this point, you can customize how you would like. Some people focus on the aesthetics and make each column a different color.

Some people budget for the entire month, while other people budget for each paycheck in the month, whether that be four or five for a weekly paycheck or two paychecks for a bimonthly payment. You decide what works best for you.

Keep in mind, if you look in Excel, you don’t need to create such a simplified budget. Excel has plenty of budget templates already designed for you such as this:

What If You Don’t Know How to Use Excel?

What if you’re convinced you need a budget, but you are intimidated because you don’t know how to use Excel? No worries.

There are plenty of free online tutorials that can teach you how to use Excel. If you’re a visual person, check out YouTube tutorials. If you prefer online websites that explain how to use Excel, there are plenty of those, too.

For the most part, learning how to create a zero-based budget in Excel only requires the most remedial Excel knowledge.

The only tricky part is that in some places in your budget, you will likely want to add a calculation formula. For instance, if you have a category for “Emergency Fund” and at the end of the month you want the $400 you saved this month to be combined with the $600 you saved last month, you’ll need a calculation formula. Again, this is easy to learn in less than two minutes through a video like the one below:

Final Thoughts

Learning how to create a zero-based budget in Excel will be worth your time! Once you have the budget set up, you can create a plan for your spending and also track how you spent your money at the end of the month. When you have a clear view of how you’re spending your money, you’ll be able to have more control of your money. As a result, your financial situation should improve.

Living on a Tight Budget: Should Groceries Be the First Place You Cut?

January 8, 2019 By MelissaB Leave a Comment

If you’re like me, the last few years, you may have felt that you’re simply treading water when it comes to income and expenses. It seems every time our income goes up, our expenses go up, and I’m not talking about lifestyle inflation but rather insurance premiums and deductibles, etc.

Like many people, I try to cut corners to make our money stretch as far as I can. I’ve certainly had times a few years ago when I bought the cheapest groceries that I could find by using coupons and sales, even though the food was processed and not that good for my body.

I rationalized that I was being frugal, and, I’ll admit it, I was proud of myself. Never mind that we were eating casseroles that we didn’t really like made with processed foods or that the leftovers often went to waste because we didn’t want to eat the meal again. Never mind that both my husband and I had cholesterol well over 200 even though we were in our thirties.

Change in Eating Habits

However, over the last few years, my opinions on grocery shopping, the foods we eat, and how to save money have changed. I still like to save money (and I still need to in order to make our budget stretch), but now I do it differently, and I feed my family differently. A few years ago, I went Paleo. I dropped a lot of weight, and my cholesterol level settled around 155, even though I was a few years older. True, our grocery budget went up, but not by as much as I expected. I learned ways to buy healthy food at a reasonable price.

Where Else Can You Cut Besides Groceries?

Should you Cut groceries first? — Where would you cut first?

Sometimes, especially when money is tight, groceries seem like an easy place to cut. Convenience foods bought with coupons can be had for a steal. Take a look around Pinterest, and you’ll find many posts of bloggers touting how little they spend for groceries.

But is this a good thing? I know groceries are typically one of the largest monthly expenses for a family, but should this automatically be the place we look first to reduce our budget? After all, there is great truth in the adage, “Pay your farmer now, or pay the doctor later. In fact, “Americans spend nearly 20% of their income on healthcare costs, while on average spending 10% of their income on food. . .Considering the age-old adage, ‘an ounce of prevention is worth a pound of cure’ may be the first step to attempt to reduce healthcare spending—and the key place to start is food consumption. If you start to consider your diet a form of preventative health care, you might start rethinking your daily meals” (University of New Hampshire).

Take a look at your budget. If you don’t automatically slash your grocery budget, where else can you cut expenses?

If you don’t short change your body healthy foods, you’ll save thousands on health care later on. Meanwhile, why not consider dropping your smartphone and getting a “dumb” phone? (Yes, I still have a flip phone for emergencies that we bought 10 years ago.) Can you drive your current vehicle a little longer so you don’t need to have a new car loan? Can you drop cable? Do you have subscriptions you’re paying for but you don’t use? Likely, there are several lifestyle choices you can make to cut your expenses without compromising the quality of food you can buy and eat.

Do you cut other expenses so you can continue to buy quality foods, or do you prefer to slash your grocery budget?

Why you Should only use Three Categories for Your Expenses Budget

February 6, 2017 By C. Osvaldo Gomez 13 Comments

I teach an entrepreneurship and financial literacy elective to 8^th graders. I have learned that when it comes to the topic of family or personal budgets, simplicity works best. I’ve seen all sorts of budget templates online, most of them unnecessarily complex. While adding multiple categories can provide layers of detail to a household budget, it can hide or at minimum endorse, certain expenses. I teach them to simplify their expenses budget.

For the expense side, you only really need three categories: 1) Fixed costs 2) Variable costs and 3) Non-necessities. When you add categories like, Transportation, Loans, Entertainment, Utilities, Daily Living, Housing, and so on, the budget sheet takes on a life of its own. I get it, personalizing your family budget by adding columns, headings, and colors can be a ton of fun. Not! Sure, you may have been using the same budget template now for a decade and it works for you.

As the saying goes, “if it ain’t broke, don’t fix it.” I too had been using the same budget template for several years.

As you can see from the picture, I had several categories and the Excel spread sheet allowed me to sort any way I needed. I’ve seen templates with a similar style, a long laundry list of fixed and variable cost items all under an “expense” column. While this may work, it’s not going to help (as much) when it comes to making a push to save more money. After teaching my students using an example, balanced budget from PwC’s Earn Your Future Curriculum, I decided to adopt this style for my family, but not just because it’s simpler.

You don’t teach the skill of budgeting for the sake of your students knowing “how” to do it. You teach the skill so that they know “why” they’re doing it. So after the basics, I tell my students that the ultimate goal of a budget is to identify opportunities to cut spending. “Wasting money is stupid,” I say to them. “Plus the more money you save, the more you’ll have available to buy assets.” Yes, they know what assets are by this point.

The PwC template makes it easy for me to provide my students with an easy to grasp savings strategy. I ask, “If you were going to cut back your monthly expenses, where would you look to do so first?” This template is so intuitive. Of course the response is, “Non-necessities.” This is why I love this budget style so much. You are forced to differentiate your variable expenses. More importantly, you are showing yourself the map to future potential savings.

Budgeting doesn’t have to be a chore. And a budget should be a visual that doesn’t take an accounting degree to make sense of. If an 8^th grader can’t take one look at your budget and tell you where to slash, perhaps you’re making it too hard?

According to a 2013 Gallup pole, only 1 in 3 Americans prepare a “detailed” household budget. Maybe it’s because Americans dislike being detailed? What are your thoughts on household budgeting? Please share your comments below.