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Lyd Explains: A Personal Budget

A personal budget is a method to track your current and future income, spending, payment of bills and savings. For me a budget really comes in handy when I am planning an abnormal expense (ex. trip, car inspection repairs). It also helps me know how much "spending" money I have without stressing about if I have covered my bills and saved responsibly. Using it over time will give you the most benefit because you will learn your spending habits and saving ability.

The mindset of my budget is to plan for what bills are due over the coming months, coordinate those bills to my pay schedule to see how much money I will have available for spending many months in advance. In this post I will lay out what is needed to build a personal budget with my budget template (via link at the end of this post). A common challenge of having a budget is continuing to use it over months and years. I do not use mine to manage more detail than I need so it takes me only 10 minutes a pay to keep up. Gather the materials listed and follow the steps below to make your own in about 20 minutes with my template! If you want to do it on paper read all of the instructions before starting to understand the placement of the budget parts.

- A method to track expenses/pays/savings in rows - Use my google sheets/excel template! but you can do exactly the same with paper using a regular notebook.
- 3 bank accounts at the same bank - I use this to separate my "bills" expenses ("bills" account) and savings ("savings" account) from my "everyday" expenses ("spend" account). This helps me keep a very clean line between what I can and cannot touch. Having the accounts at the same bank allows you to easily transfer money between them but keep them separate. You do not need multiple accounts for a successful budget, but for me this is the key to my budget discipline. Once my spend account is empty then I know my "fun" money is gone. I don't mind letting my "spend" account get low because I know my bills and savings are separate and accounted for.
     Note: Some accounts have fees associated with them depending on how you use them. I've included a link at the end of this post with some helpful tips on picking a bank account provider.
- List of bills - This will be a list of utilities, rent, credit card bills, car payments, student loans or anything with a "due date". Add to this your saving goals for each pay period or month, just as if it was a bill to pay. I like to set the "due date" of the savings to the time of the month where so many bills are not due to space out my expenses over my 2 pays in the month.
- The timing pattern of your pay - I am paid every 2 weeks on Friday so my budget is based on this rule.
    Note: If you are paid more or less frequently than every 2 weeks, my recommendation is to still plan your budget based on how frequently you are paid, unless you are paid in irregular amounts. If you are paid in irregular amounts then review an average of your pay per month that you can rely on. Then create a "fake pay" date that you know you will have earned a certain amount of money by to pay your bills.

Out of the 3 bank accounts, I only "budget" in my "Bills" account. In the bills account I track each of the bills being paid with a line "entry" (row) to then calculate the estimated remaining balance. My savings are "paid" (transferred) to the savings account. The amount left is transferred into the "spend" account. I like moving the remaining money from the "bills" account into the "spend" account so that I know that any money in that spend account can be spent without impacting any bills being paid or savings. I do not do any tracking in my spend or savings accounts as it took to much time to maintain, with entering each transaction. Your bank statement will do this for you.

Steps to Create Your Budget:
To start open the Budget Template. On the "Monthly Bills" tab we will create a list your monthly bills, due day and their amounts. This is shown on the template for an example. Enter the day of the month the bill is due in column A, and the current year in cell C2, the date the bill to be paid will be automatically created in column C. Enter the amounts to be paid in column D. The name of the bill goes within column B.

Bills Listing on tab "Monthly Bills" in template
Now that the bill list is created, copy the last 3 columns of the list starting at the 3rd row down (this  is the cells seen above in green) and paste them (as values) onto the tab "Bills Account" under the red rows (example in the photo below). Do this for each of the next 5 upcoming months by changing the month in cell C2 before copying each monthly list of bills and pasting it under the prior months bills list.

Bills listing on the "Bills Account" tab
Once all of the bills are listed for the next 6 months it is time to input the pay timing, also called pay periods. The paid period managing rows are seen in red. The cells in these red rows hold formulas to calculate the total amount of bills to be paid each pay period (seen in bright yellow) and the estimated amount of money you should have left, the remaining balance (seen in bright green). The amount you estimate to be paid is entered into the cell above the remaining balance (seen as 1,627.44 in the example below).

2 red pay period managing rows 
Based on the date of your pay add 2 blank rows between the rows of bills where your pay date falls between the dates of the bills due. Example, if you are paid on Jan 1st and Jan 15th, enter 2 blank rows before bills due on the 1st and another 2 blank rows before bills due on the 15th.

Copy the 2 red rows, within column A to E, into each of the blank 2 rows inserted between bills. This will bring the formulas (seen in bright yellow and green) needed to calculate how much money in bills you need to pay per pay period and how much money you will have left based on your wage/pay. Adjust the formula in the cell in bright yellow to include the cells of the amounts of bills due after that pay (calculating cells in column C). Now how much you will have left after you pay your bills is seen in the bright green cell.

Now your bills are separated by pay period! An example is shown below and is also in the template.

Now you are ready to start paying your bills! Lets focus on the photo below. Columns F, G and H are used to track the date when the bills are paid, the paid amount and the remaining balance in your "bills" account. When you are paid enter the amount and date in the red row called "Pay" in columns F and G. As you pay each bill enter the amount, as a negative, into row G and the date paid in column F. Column H has a formula that subtracts the paid bill from the prior account balance to create the current balance. Copy this formula in column H down the column as bills are paid to calculate the current balance of the "bills" account. I like to highlight cells in column F yellow to show if bills haven't been paid yet.

Full budget showing completed payments
Before or while you are paying you bills for that period you can move your estimated remaining balance (cell in bright green) to your spend account. To do this, input the remaining balance amount, as a negative, into the "Bills due" red row into column G (seen as cell G3 above). This will remove the amount transferred to your "spend" account from your remaining balance totals in column H.

As you work thorough the months, add 3 months in the same pattern every 3 months. This will set your budget 6 to 3 months out into the future at a time.This ensures that at a minimum you will have 3 future months to review. More months can be done in advance if desired.

Some Special Cases and Tips:
- In row 8, the example above I have shown how I record automatic payments. I highlighted the cell without the date as a reminder that the bill has not been paid yet even though I put the amount in column G so the amount can be accounted for in the remaining balance column H.
- In row 19 there is a bill entry for "Save for Next Pay", I create this so that I can calculate an amount to set aside use to pay bills next period. When doing this action be sure to include that amount cell in the calculation in column D for the total needed for that month. Also update the formula in green for the following month, adding that amount, so that the addition is accounted for in the next months calculations.
- When using credit cards to pay bills I add up the amount of bills charged each month and pay that amount on the credit card like any other bill. My only caution is to watch the balance on the credit card closely and increase/decrease the amount you pay on the credit card as needed to leave a healthy level of credit on the credit card. I earn a lot of rewards by using a credit card to pay some bills but I am very aware maintaining the total on the credit card to a minimum.

No one likes talking about money, I get it, it's a weird topic that makes a lot of people uncomfortable.  Don't let this awkward shadow monster stop you from being aware of your finances. Pull that monster out of the corner and let it help you keep you finances in line and use it to plan for some larger purchases or goals for the future! Check out the links below for posts that I used in my budget research. Thanks for reading and Happy Budgeting!!

 Click here to Download my Budget Template via Google Docs

I've includes some links below that are very helpful to be on my Budget journey:
General Tips on using Excel Note: Google "Sheets" and Excel are 95% the same - Google Sheets is free with a Google account vs Excel you will need to pay for.
Nerd Wallet - Tips on picking a bank account
Additional Budgeting Tips