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How to manage your money / debt with free budget spreadsheet template - simple excel worksheet
With the recovery of U.S. economy no where in sight, it is important for all families and individuals to carefully control their finances. Is it ever possible to not worry about your money situation? The answer is yes, but you have to make your own free monthly budget spreadsheet and plan out all aspects of your finances / debt. This hub is all about using existing software like Excel to make your own monthly budget spreadsheet, knowing where money goes and controlling all aspects of your finances with it.
Before spending your money, make a little plan for yourself and your household. This plan should be tailored to your own situation. Here is an example of what I have made for myself. Note, I don't have car payment because I paid cash for a small car. No mortgage payment yet because I want to save for a big down payment. The most important thing is to make sure you are familiar with the software you are using when making a monthly budget spreadsheet. This is the first step to financial / debt freedom.
Debts repayment and emergency savings are priorities that you have to plan for in your monthly budget spreadsheet. Debts have interest which means you are paying more than you borrowed. The priorities for debt repayment depends on the interest rate of the loan. Obviously, the higher the interest rate the more you have to pay back in total sum. It is so important to pay off all high interest rate debt very fast to secure your financial situation. Emergency savings are very important as well. If you have no emergency savings to deal with life's unexpected situations, it will put you in a very risk situation. For example, you might be forced to use your credit card as a temporary solution. That will accumulate into more debt. This is a snowball effect that you want to avoid at all costs. For starters, you have to save around $500 for an emergency fund. That's not too much, but it will take care of a traffic ticket, or car repair or other real emergencies. If possible, it is so important to expand the your emergency savings to about $1000. The easiest way for emergency savings is to take the money out from your paycheck and automatically put it into a savings account that you won't touch. To make it easy on yourself, take a small amount out of your every paycheck. Before you know it, it will accumulate into a significant amount.
Need spending (rent or mortgage, food, gas, utilities and phone bill) – The need spending category is the next priority on the list. You have to learn to distinguish needs from wants. Needs are things that you absolutely need to pay. Things like rent, food, gas, utilities and phone bill are some of the need spending. A huge sale at your favorite department store is not a need spending.
Whatever is left from the first two categories, divide into two equal parts. One is for wants / entertainment. The other part should be put away. It is impossible to try and save every penny into a savings account or IRA. Let's face it, spending money is fun and you really have to find the middle ground. It is important to save for the future but also enjoy some of that money now. After your other necessary payments are all taken care of, it is time to look at the remaining amount. You should spend half and save half. When you are facing old age, there are enough money set aside to help you live comfortably. The money you are putting away should be in a traditional / Roth IRA / savings account.
Keeping track of EVERYTHING is the key. Your Excel or other spreadsheet software has build-in spreadsheet and math capabilities to help you do just that. A lot of people are clueless to where their money goes because they don't keep track of anything. The best way to master your own finances is to keep track and identify where you overspend. There are lots of people making decent livings with their paycheck and still don't have any money saved for the rainy days. All spending must be logged into the spreadsheet program. In that way, you can track where all of your money goes and pinpoint where you spend too much. Once you have identified where the spending loop holes are, it is easier to restrict yourself on that particularly kind of spending.
Plan out big purchases for the benefit of your finances. Sometimes, you will to make a big purchase. These purchases include refrigerator, TV, computer, sofa and etc. Many take out of loan to finance these big purchases. However, taking out a loan is always bad compared to just paying cash for it. You really have to save for that big spending to reach financial freedom. You should save a set amount of money specifically meant for the big purchase.
A commitment to your monthly budget spreadsheet is the most important step to reach financial freedom. All purchases must be logged into the spreadsheet daily to monitor your spending patterns. One spreadsheet should have all the categories mentioned above. At the end of the month, compare your actual spending with the original planned spending. How far did you stray from the plan? If there is significant deviation, the original spending plan should be modified for the future. However, it is very important to keep in mind the top priorities and which things must be paid before putting a large amount of money aside for entertainment. Since your finances change with your living situation and other factors, forecasting is another important thing because you want to plan for changes in the future. As you can see from the example below, I actually didn't spent as much as planned and was able to save more money for that particular month. The key to financial freedom is commitment to your spreadsheet and spending plan. When your actual spending and monthly spending plan pretty much match, you are on your way to a more worry free future.