Categories

Today we will tackle another facet of the budgeting process: breaking down those expenses further.

You should already have an idea of where your expenses go, all you need to do is actually name those categories and set a budget. There are a few categories that should be the same for everyone (i.e. rent/mortgage, groceries, etc), but you will undoubtedly have to make up some categories of your own.

I have created a simply template that you are more than welcome to use, however feel free to make any changes (or simply create your own). Again, there are a million budget templates out there, this is just one--however I like this one because it is very simple to use and maintain (plus if you use Google Docs you can access it anytime/anywhere via the web).

You can view it online here (courtesy of Google Docs)

Or download an .xls version here (for use with Microsoft Excel)

(If you do not have Microsoft Office, you can download a 60-day free trial here.)

Once you have the spreadsheet open, you should see this (on Google Docs, Excel/other versions may be different):

As you can see the "Budget Sheet" has quite a bit of information on it.

Starting with the left column you have your budget categories (mortgage/rent, water/sewer, etc).

The next column, labeled "Budget" is where you would enter your actual budget for the month--what you plan on spending. (Why a month you ask? You could do a week/biweekly budget or even a quarterly budget; but a month seems to be a happy medium.)

The "Spent" column is tied to the next sheet (Entry Sheet) and will reflect your actual expenses.

Our next column, "Difference", is simply the "Budget" column less the "Spent" column.

The next three columns are calculated percentages:

The first shows what percent each category is of your total budget (i.e. on this example the Rent/Mortgage of $650 is 26% of the total budget of $2,500)

The next column compares what you have spent to what you budgeted, which shows how much of your budget you have already spent as a percentage.

The third column compares how much you have spent in a particular category, with how much you have spent overall. This is helpful because you can compare it to the first percentage to see how close you are on your budget. (i.e. Is your Groceries category really 8% of your expenses?)

The final column is a visual reminder; when you exceed your budget in a particular category by more than ten (dollars, euros, renminbis, rupees, coconuts) it will display STOP.

Take some time to change the categories if you need to; change the colors, put a rainbow background--ok, not really. But do change the first column (Categories) to suit your particular needs and reflect what you learned from the expenses vs. income exercise you have already performed...and change the colors to make it more visually appealing to you, black, white, and shades of gray? Boring...

A word of caution: don't overwhelm yourself with a ton of categories, this template allows up to twenty as is, and that is a good place to start. You may find in the future that you need more (or fewer) categories; but I would stress the importance of keeping it simply to start with.

Stay tuned...