Create a Personal Budget in 4 Easy Steps

In the world of personal finance, the prospect of managing your money might seem like a daunting task. But what if I told you it can be quick, easy, and doesn’t require an advanced degree in spreadsheet know-how? Enter the realm of spreadsheet-based budgeting – a game-changer in financial management that puts you in the driver’s seat. No need for expertise; all you need is a computer and a willingness to take control of your financial journey. This article unveils a straightforward process to create a personal budget in four easy steps that align with your goals and lifestyle.

Forget the complexity – we’re talking about simplicity, efficiency, and financial empowerment. Whether you’re a spreadsheet novice or have some familiarity, these steps are designed to demystify the budgeting process. Join us as we guide you through the practical journey of crafting a personalized budget, providing you with the tools to navigate your financial landscape with confidence. Let’s turn the idea of budgeting from a daunting chore into an empowering skill that propels you towards financial success!

Using a carefully designed spreadsheet-based budget makes it very quick and easy to manage your finances.

The steps outlined below assume you have a computer capable of running a spreadsheet and you are somewhat familiar with how to use spreadsheets. You don’t need to be an expert in spreadsheets to carry out these steps. Many spreadsheet templates can be used from the spreadsheet application to greatly simplify the process!

Step 1: Find a personal budget template

Microsoft Excel and Google Sheets are popular spreadsheet applications. They also have many personal budget templates available to use. Microsoft Excel requires a subscription and can be used on a PC or laptop, or on any device if accessed online via a modern browser. Google Sheets requires a Google account and is a cloud-based browser application.

Once you have chosen a spreadsheet, the next step is to choose a budget template. Templates should contain pre-filled information to help prompt you with the most common expenses to get you started.

There are many different designs, so browse through them and choose one that looks suitable for your needs. The budget templates below show some examples.

Step 2: Fill in the budget data

Open your chosen personal budget template to start filling in the data. Then follow the steps below, which show you how to create a personal budget and determine your cash flow.

1. Access your previous month’s transactions from your bank.
2. Open your budget template and save it under a different filename (e.g. add the date to the end of the filename) to avoid writing over the template. This will allow you to start over if you need to.
3. Fill in the income section, which is usually the easiest to complete. Your income comprises the amount(s) deposited into your bank account after taxes.
4. Fill in the expenses sections. The actual costs are based on your monthly transactions. Note that some expenses will be weekly, quarterly, or annual. If you have weekly expenses, multiply them by 4.3 (there are approximately 4.3 weeks in a month) to obtain the monthly expense. Likewise, you will need to divide quarterly expenses by 3 and annual expenses by 12 to convert to monthly values.
5. If you are creating a budget for the first time, fill in the projected/planned costs. These will be the same as the actual costs.
6. When you have finished entering the expenses, check whether there are any other expenses to add to the list and fill in the details. Remember to enter the same value for both projected and actual costs for the first time.
7. The budget should have a section that calculates the cash flow, or total income minus total expenses. It will be either positive or negative.

Step 3: Check the numbers for errors or omissions

Once you have created a personal budget, check it over once more for any mistakes. Do the numbers make sense?

A common mistake is calculating weekly, quarterly, or annual expenses to monthly amounts. Or it could be a simple typo with an income or expense.

Step 4: Periodically review your personal budget

Review your budget periodically – for example, every month or every quarter, depending on how often your finances change. It is often easier to review at the end of the month or quarter, but reviewing it can be done at any time.

You should also review your budget when financial curveballs come your way that are outside of your control. For example, when interest rates rise, or when inflation increases.

Try not to review and update the budget too often or it may become time-consuming or difficult to stick to. When reviewing, perform the following steps to compare projected with actual spending:

1. Access the transactions for the current month from your bank.
2. Check the projected costs in the budget with the actual costs in the transaction listing. Update the actual costs if they are different.
3. If the actual costs are significantly different from the projected, determine the reason. You may have spent more than expected, or paid for an unplanned expense during the month.
4. Check the cash flow and repeat the steps above if it is negative.

How to deal with negative cash flows

If your cash flow is negative, review your expenses to determine the ones that can be reduced. Look at reducing discretionary spending first. Update the projected cost column for the reduced expenses – an estimate is fine at this stage.

Then look at reducing needs expenses. It is worth checking if you can reduce some expenses in your “needs” list, even if it is more challenging. Update the projected cost column for any needs expenses that can be reduced.

If your cash flow is still negative after reducing as many expenses as you feel comfortable with, it may be due to debt repayments. Look at ways to manage your debts and pay them off.

You can also check the books listed below if you need further inspiration.

Congratulations! Your budget is now complete. Save it for future review and periodic updates. Set a reminder each month or quarter to check your budget to make sure you can stick to it and make adjustments as necessary.

More resources on creating and managing budgets

The following books provide more detailed information on the topics covered in this article. Feel free to browse through this list and support the site by making a purchase at one of our affiliate partners. Please read our affiliate links disclosure for more information. Note: The links below will open in a new browser tab or window.

Remember to choose your preferred format (paperback, hard cover, digital etc.) before making a purchase!

• The One-Page Financial Plan: A Simple Way To Be Smart About Your Money by Carl Richards Link*
• Budgeting: How to Make a Budget and Manage Your Money and Personal Finances Like a Pro by Jenny Holmquist Link*
• The Barefoot Investor: The Only Money Guide You’ll Ever Need by Scott Pape Link*
• Featured books on creating and sticking to a budget Link*

(*) This site contains affiliate links to products. We may receive a commission for purchases made through these links at no extra cost to you. Please read our affiliate links disclosure for more information.