Do you want to start a budget but don't know where to begin? I will walk you through all the steps you need to get started!
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Before we begin, I will reference thepennytracker spreadsheet that is free to download on this website. It is completely free, and only Excel is needed to get started. This is not your average budget template - Excel experience is recommended. You can download the spreadsheet here.
The main features of thepennytracker spreadsheet are:
100% free
Income and expense tracking
Debt payoff schedule with both "snowball" and "stacking" methods
Amortization table
Financial growth tracking
Monthly and yearly archiving of income, expenses, and savings
Completely unlocked to allow for customizability
If you would like to use something besides thepennytracker spreadsheet, you can still take the principles and tips given here and apply it to your own or other spreadsheets and software.
To get started, you need to follow these 5 easy steps, which I will list below and expound on further in a step-by-step walkthrough of thepennytracker spreadsheet.
Compile all of your accounts: checking, savings, HSA, 401k, brokerage accounts, etc. and how much money you have in each one.
List your sources of income: jobs, side hustles, market dividends, savings interest, etc. and how much you receive monthly from each one.
Decide your savings goals, list how much you already have saved towards each one and how much you would like to save monthly towards each one.
Decide what categories and subcategories you would like to bucket your expenses into. These can be Bills, Food, Entertainment, Charity, etc. List how much you would like to budget for each category.
Start logging your purchases and income.
If you're unsure how much you are going to spend on different categories each month, that's ok, just start with a guess. You can start tracking your expenses and income and at the end of your first full month you will have a much better idea of what your spending looks like, and you can adjust your budget from there.
You will find the spreadsheet already pre-filled with example data to help you learn how to properly set up and use the spreadsheet. You can delete the data as you follow the steps.
Most of the set up is done in the "Income-Savings-Expense Setup" tab, so let's begin there.
Step 1. Accounts
In the Accounts table, list all of your accounts and their corresponding account types. You will need to list any debts such as car loans, mortgages, etc. as well.
You will also need to populate these accounts with their current value, which we will do at a later time. For right now, let's move on to step 2.
Step 2. Income Sources
Next, in the Income table, list all of your sources of income. This can be set up however you like, but examples are shown to help.
In the "Type" column, select "Affects Budget" if that source contributes to your monthly expense budget or savings goals. Otherwise, select "Does Not Affect Budget."
For example, "Market Value Change" shown here is used for my 401K and other investments, but that does not directly affect my monthly budget because I do not rely on that income to pay expenses and do not track it as savings distributions. Most account types will affect the budget, so if you're unsure, go ahead and select that.
Lastly, list your expected income amount for each source in the "Budget" column.
Step 3. Savings Goals
Next, compile a list of all your savings goals - a new car, down payment for a house, new phone, etc. You will also need to list any accounts you labeled as "Retirement" or "Debt" as you will be saving towards those as well.
List how much you are planning to save towards each one each month.
Step 4. Expense Categories and Subcategories
You can list up to 25 different categories in the expense tables ranging from column "R" to "CM." Again, these can be set up however you like, but typical categories are shown. You can have as many subcategories as you like under each category. For example, you might have a "Food" category but "Groceries" and "Restaurants" subcategories to further break out your spending.
You will also notice a "Summary" table in Columns B-C. This shows your budgeted income, expenses plus savings, and the difference of the two, which should equal zero. This is to help make sure you are not budgeting for more than your expected income.
Step 5. Logging Transactions
There are two tabs to log transactions, one for income and expenses and the other for account transfers and savings distributions.
Let's looks at the "Transfers and Distributions" tab first and walk through how to populate our starting account values as mentioned in Step 1.
In this table, you can transfer money from different accounts, make distributions to different savings goals, or transfer money from one savings goal to another.
Let's get started by populating values for the accounts inserted in Step 1. To do this, you will populate the "Date" column, select "Account Transfer" in the "Category" column, select the desired account in the "To Account" column, and insert the current amount in the "Amount" column. Do this for each account. You can check that the accounts were populated by looking at the "Accounts" tab and ensuring the amounts you entered are shown for those accounts.
If you already have money allocated towards any of your savings goals, you can also insert those amounts at this time by using the "Savings Distribution" option under the "Category" column, selecting the savings goal of interest under the "To Fund" column, and choosing the account in which that money is saved in the "To Account" column.
Now that we're finished with the transfers tab, let's take a look at the "Income & Expense Log."
This sheet allows you to manually insert each transaction you make. I have found that manually entering every transaction my family makes is the best and possibly only way to meaningfully understand our finances and where our money is going. Having different categories filled out for me by an app just doesn't give me the same level of detail and information that I find helpful. It also allows me to enter the information exactly as I see fit, without any clutter or confusion. If you really want to get on top of your finances, manually entering transactions is the best way to go.
You can choose to either set up your accounts and insert transactions starting at a certain point in the past in order to get a better idea of your spending habits now or start logging transactions going forward.
When filling the table, the cells under each column will have a drop down list with the information you inserted in the "Income-Savings-Expense Setup" steps, so adjust the tables there if you decide to make changes.
The buttons in the top-right of the sheet are to help fill entries faster by inserting line items for you and other functions. They are fairly self-explanatory but play around with them to learn what each button does.
Another tip, when you are on a cell with a dropdown list, you can hold "Alt" on your keyboard and press the down or up arrow keys to pull up the list and select an option without having to use your mouse. You may be surprised how quickly you can insert all your expenses once you get used to it!
Next Steps
Congrats, you now have everything you need to track your finances! The most important next step is to keep logging your transactions to better understand your spending habits. I find it best to insert them at least weekly, if not more often.
Start exploring the different tabs and read the highlighted "INFO" comments for explanations and tips. You can track your financial timeline in the "Accounts" tab, see your current month's expenses and savings in the "Savings & Expenses" tab, visualize your spending in the "Expense Dashboard," start working on those debts in the "Debt" tab, and more!
I hope you found these resources helpful. I will be posting more articles and video tutorials as time allows. You can get answers to questions on the site forum or leave a message below.
Happy budgeting!
Visit our Youtube channel for more help and tutorials here.
Click here to download thepennytracker spreadsheet.
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