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How to Build a Budget Spreadsheet in Five Steps

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How to Build a Budget Spreadsheet in Five Steps

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You can create a budget spreadsheet using software such as Excel or Google Sheets. Budgeting with a spreadsheet is an affordable way to manage your money and makes it easier to track your spending.

There are plenty of free budgeting apps, but if you want a cost-effective way to manage your money that doesn't require you to pay a subscription or hand over your personal financial data, a budget spreadsheet may be the answer.

Depending on your skill level with spreadsheet software, there may be a learning curve. But with the right setup and formulas in place, you'll be able to have total control over your budget and the features you want to include.

Step 1: Choose your software

Excel and Google Sheets are the most common spreadsheet programs, but you may also use Numbers if you're on a MacBook. The main difference between these options is Google Sheets is primarily online, so you can use it wherever you go – on any device.

If you're worried about someone accessing your spreadsheet online, Excel and Numbers can help you avoid that by keeping the file strictly on your hard drive.

Step 2: Choose your budgeting method

There are a variety of ways you can manage your budget, and you can make it as simple or complex as you want.

  • Envelope budgeting – with this approach, you use envelopes to represent each of your budget categories and place cash in each, based on your spending goals. If an envelope runs out of money, you don't add more unless it's from another envelope. You can do this with cash in physical envelopes or use a digital approach serving the same purpose.
  • 50/30/20 method – this simple budgeting method dictates 50% of your income go toward necessary expenses, 30% toward discretionary spending and 20% toward financial goals – such as saving and debt payoff. You can adjust the ratio to fit your budgeting goals.
  • Zero-based budgeting system – this more complex approach to budgeting involves assigning a purpose to every single dollar you earn. The goal is to have your expenses, including saving and other financial goals, equal your income every month.
  • Pay-yourself-first budget – this method prioritizes saving, investing and debt payoff goals. After that, you don't really need to worry too much about where your money is going if your bills are paid, and you don't spend more than you earn.

Step 3: Use a template or create your own spreadsheet

If you don't have a lot of experience with spreadsheet software, you can save yourself some time by searching for budget templates online. Templates will generally need to be customized to fit your individual needs.

Alternatively, you can create your own budget spreadsheet from scratch. Research formulas you can use to make calculations for you and help the process go smoothly. Ideally, you can set it up so when you enter a transaction it'll automatically update your budget to show you how much you've spent in each category, and how much you have left to spend.

Step 4: Enter your income, budget goals and expenses

You'll likely want to have at least two sheets in your budget. In one, lay out your income and your budget goals, broken down into separate spending categories. Include all your income sources and note some months may not have the same income as others. As a result, you'll need to update your budget monthly, potentially using different sheets within the same spreadsheet.

Common categories include a rent or mortgage payment, insurance payments, groceries, entertainment, utilities, savings, investments and more. You decide how few or many categories you want to track. Set a monthly spending goal for each category.

On a separate worksheet, detail your transactions as they occur. You'll want to use the columns to note the merchant, transaction amount and spending category. Then, using the formulas you set up in the first sheet, you can set it up to automatically update your spending for each category every time you add a new transaction.

With a third sheet, you could also create your own reports, such as spending reports, net worth reports and more. These will all require various formulas to track the data you want.

Step 5: Maintain and stick to your budget

Creating a budget is one thing but sticking with it over the course of several months and even years can be challenging. One of the downsides of using a budget spreadsheet is it requires a lot of manual data entry. Even if you're using formulas to update your budget as you go, you'll need to enter each transaction you make individually, and the labor involved can make it easy to lose motivation.

To better stick to your budget, continue to focus on the benefits. Also, consider updating your spreadsheet once a week instead of every day to potentially save some time.

If you find a budget spreadsheet is just too much work, consider some budgeting apps to help cut down on the amount of time you spend updating your budget.

What if you can't stick to your budget?

If you're having trouble staying true to your budgeting goals, some changes may be needed. Cooking at home instead of eating out, limiting credit card use and driving less are all steps you could take to reduce your expenses.

You may also want to look for opportunities to increase your income and reduce your fixed expenses, such as canceling streaming services or switching to a cheaper insurance provider.

It can also help to work on improving your credit to make it easier to save money on interest when you borrow. Monitor your credit in addition to your budget to track your progress and address issues as they arise.