The second personal finance skill: A basic budget

First of all, let me acknowledge that there are, conservatively, twelve million budget templates available on the internet. Human society really doesn’t need any more.

That said, let me offer you another budget template. Then, let me explain.

Previously, I talked about how important it is to track your spending, and mentioned that I like to update my budget regularly with the information I track. Today, I’m going to talk more about that process.

Together with tracking your spending, budgeting is the most basic personal finance skill you need to have. For those of you who do yoga, budgeting and tracking are like the down dog and savasana of personal finance – if you don’ t have them in your arsenal, you got problems.

A budget is basically a dream made solid (poetic right?); it’s a plan for your ideal money behavior. In a budget, you fill in your best guess for what you’re going to earn – which is usually a good guess unless you’re a freelancer – and what you’d like to spend on different categories of things. In the budget template I provided, this is the first column.

Then, you track your shiz, and fill it into the second column. At the end of the month, you compare the two columns, and either experience an annoying, smug sense of accomplishment at how well you stuck to your budget or (more likely) a creeping sense of despair at how far you strayed (pictured right).

Once again, the idea of all this isn’t actually to make you feel bad about yourself. The idea is to get you sensitized to your own spending, and to help you identify areas where you’d like to spend more and areas where you’d like to spend less.

In the spreadsheet I included here, I also have row items for the balances in your savings, checking, and investment accounts. We’ll talk about saving and investing more in days to come, but at this point, I just want to note that you can use those cells to keep track of how your savings and investments are growing, and to account for the money you have left in your checking each month. The last two rows are for you to record the amounts you plan to put into your savings and investment accounts each month.

If you don’t have a savings or investment account, don’t panic. Well, I mean, you kind of should panic, because you need those things, but don’t panic in the sense of worrying about using this spreadsheet. You can just leave those cells blank until you get savings and investment accounts.

Let’s walk through an example of how the spreadsheet will look at various stages in the month.

First day of the month

What I’m thinking: I am so totally going to nail this budgeting thing. Forget it. People will tell tales of my budgeting skills across the seven seas.

What my budget looks like:

As you can see, I’ve filled in my spending and saving goals, as well as my account balances (this isn’t my actual budget, BTW, I spend WAY more on my cats than that IRL).

During the month

What I’m thinking: Well gosh dang darnit (edited for sensitive readers), I’ve totally forgotten to track my spending for the last three days. I can look at my credit card bill to figure some of it out, but all that cash I spent at Big Bob’s Cat Emporium…

What my budget looks like:

I’ve updated some stuff that I’ve spent, but other cells are still waiting for me to tally things up at the end of the month.

The end of the month

What I’m thinking: Argh! Where is all my money? Maybe my mom will lend me $50?! Why aren’t those pottery shards selling?! Stupid lousy no good budget… mumble mumble mumble

 What my budget looks like:

Things did not go according to plan. As always, pet supplies and shoes were my downfall. I didn’t hit my savings and investment goals (which is a VERY BAD THING, and the reason why we’re going to talk very soon about another crucial personal finance skill – paying yourself first).

This is basically how things went for me when I started budgeting – a lot of missed goals and non-ideal behavior. At this point, however, we’re just working on our base skills here, so this is totally fine. Building up savings and tackling debt (which I haven’t even mentioned yet!) will come, but for now, we’re just trying to build good habits.