Making a Yearly Budget


Keeping track of how you spend your money is important. It helps you save for things that you want and for retirement. There are many ways to do it, including spreadsheets and applications, but if you do it by only watching your bank account, you will not be very successful. This post provides an easy-to-use spreadsheet where you can make your yearly budget plan.

Background

I have written a four-part post in why Managing Expenses and Cash Flow is important and have included a spreadsheet that helps you do this. It is very customizable, but it does need you to make a commitment, as it requires a monthly plan and then tracking against the plan.

When designing the spreadsheet, I considered including a simplified yearly budget without any tracking so that an overview can be easily provided. I thought having two objectives would be confusing, so I deferred the work to this post.

I believe it is better to have a plan that to waiting for a problem to happen and then trying to respond. Even if the plan is not very accurate, it is a start.

The spreadsheet will also be useful to people who have a good handle on their income and expenses gained over the years and no longer feel the need to track them in detail. Specifically, seniors may find this spreadsheet a good overview so they can plan the extras that they can spend.

Spreadsheet Format

To work with the spreadsheet, click on Download Spreadsheet and then open it. It has five areas: Income, Expenses, Changes to Savings, Extras and Future Extras. You can add and delete lines in each of these areas without affecting the formulas. The totals provide you with a summary of what you have left at the end of each area and the end of the year.

You can also record the month and day when income and expenses are available or due to help you manage them.

Using the Spreadsheet

The results are only as good as the completeness and accuracy of the numbers you enter. However, do not let this turn you off from making a budget as I recommend an iterative approach.

1) First, just enter what you know to get some entries and values and then look at the totals. The objective is to make sure the total shown in Total Leftover or Overspent near the bottom of the spreadsheet is not negative.

2) Then refine the data using paystubs and fixed expense receipts to ensure that you are using accurate values. You may have to guess at the more variable expenses (referred to here as Normal Expenses) such as food, car gas, etc. This will close the gap between income and expenses. If you have more income than expenses, you can plan to save some of it, or spend it on extras. If you have more expenses than income, you should see what expenses you can reduce or make sure that you have all of your income recorded.

3) Finally, wait a few days to let your plan percolate in your mind and then take another look to see if anything is missing or if you have more details on any of the entries.

4) You should then be able to plan for saving or spending on Extras, if you have an excess or prioritizing and removing any expenses if you have a deficit.

This spreadsheet does not provide a way to track your expenses each month, but if you do not want to use the cash flow spreadsheet, you can always add monthly columns starting in column J.

To insert any new item, just select the complete line where you want to insert and select Rows from the Insert menu. You may select the row that is grey to place a new row at the bottom of the section.

To delete any item, select the complete row and select Delete from the Edit menu. Do not delete the grey row.

Income

 

Making a Yearly Budget Income The income area has a section for entering Fixed Income such as salary. If you are working, you may enter the full amount of the salary or just the take-home pay. If the former, make sure you enter the deductions as expenses. Also enter any federal child payments, etc. If you are retired, enter the Canada Pension Plan and Old Age Security payments.

Enter everything that you regularly receive. To make it easy to use the payments directly, enter them into the Amount and then the number of times that you receive them. The total will appear in the Yearly column.

The Investment Income Actually Received section is for interest, dividends (if you have not entered them in the Fixed area) and other investments. If you are retired, this will include Registered Retirement Income Fund payments. You can use the Account cells to record where the payment is coming from. Enter the Yearly amount only.

The subtotal for each section and the total income for the year will be updated each time you enter a value.

Expenses

 

Making a Yearly Budget ExpensesThere are 3 sections for entering Expenses. The Fixed Expenses section is for items that you need to pay regularly such as mortgage, taxes, heat, lights, etc. These are typically non-discretionary usually represent the majority of expenses for a year.

The Normal Expenses section is for variable and expenses such as food, car gas, medical, etc. Enter as few or as many items as you want.

The third section is for Income Tax Instalments. Also use it for a tax refund (enter a negative value) or taxes due in April, if you have a history of either getting a refund or having to pay.

The subtotal for each section and the total expenses for the year will be updated each time you enter a value.

Also shown is the Total Income less Total Expenses for the year. If this is negative, you should examine the expenses you entered and reduce a few of them or remove some entirely.

Savings and Extras

Making a Yearly Budget SavingsExtrasThe purpose of the budget is to see if you have any money that you can save for things you want that are not fixed or normal expenses. If this is the case, you can enter the amount you want to save in the Add to Savings area.

If you have more expenses than income, you will have Take from Savings to make up the deficit.

Whichever you do, the Change in Savings for the Year will be updated, as will the Available for Spending on Extras. If the later is positive, you might want to enter items in the Extras area. Watch the total for the Total Leftover or Overspent. If it is still positive, include more into the Add to Savings. If negative, remove some extras, reduce the Add to Savings or reduce some expenses. The objective is to make sure that this total is not negative, and if positive to identify where you will save it.

Everyone has a wish list and there is a place to put them in the Future Extras. Include the year you expect to have enough money to buy them. If at any time you have extra money and you have met your savings goal, you can copy and paste them up into the Extras section.