How to Budget in Excel – How I saved 70% of Income

by Aug 22, 2020Personal Finance2 comments

Budget in excel

Creating a simple budget in excel helped to cut my spending and ensured I don’t spend more than I earned. In fact, I saved more than 70% percentage of our household income because of a solid budget plan.

Creating and sticking to a budget plan, helps you work towards your financial goals.

Your goal can be to save for a house deposit, getting out of debt or achieve financial independence.

A budget plan helps you to keep track of your spending habits and identify the opportunities to save money.

Here, I explain how to budget your household income in excel and analyse your expenses against your income to save more money.

Step 1: Organise Your Bills and Bank Statement

Even before your start to create your budget in excel, gather all your monthly bills and bank statement to keep it handy.

Below is a list of what would be required to gather and it is not an all inclusive list.

  • Credit card bills
  • Food bills
  • Utilities bills
  • Insurance bills
  • Transportation bills
  • Housing bills (rent/mortgage etc.)
  • Childcare cost if any
  • Holiday & personal care cost
  • Income from any other source you may have.

Step 2: How to Budget in Excel – Jot Down Your Income

Budget in Excel
  • List your household’s monthly income.
  • Projected Income is income you expect in a month.
  • Actual Income is an exact income, your household earned in a month.

In the excel, the first block of the table is the list of your household’s monthly. Your household may have income from more than one person.

You will have to list your projected income, take home pay after tax & pension detection in the first row (Income 1) and other person’s (let’s say your spouse) projected income in Income 2.

The third row is the extra tax savings or income such as Tax-Free Childcare. For every £8 you pay into this account, the government will pay in £2 to use to pay your provider.

If you have any other source of income such as property rent, passive income from shares and stocks, or any other form of income, then input those values in both projected and actual income columns.

The projected and actual income columns are useful especially when your household vary every month. In general, the projected and actual income would be same when you are employed as your taxes are deducted by employer.

Specifically, your additional source of income such as dividends from shares and bonds may vary every month. In that case, you can enter the projected income at the beginning and actual at the end of the month to calculate your savings against actual income.

Once you enter all your income details, the total projected and actual income is automatically calculated by the excel tool.

Step 3: How to Budget in Excel – Estimate Your Expenses

Next step is to list your monthly expenses and categorise these spending. Below is extensive list of an usual household expenses.

  • Savings & Investment
  • Housing
  • Insurance
  • Food
  • Transportation
  • Entertainment & Holiday
  • Personal care & gifts
  • Debt

Savings & Investment

Do not be surprised that savings and investments are listed as expense.

To achieve your financial goals, you should always pay yourself first before spending from income.

“Do not save what is left after spending, but spend what is left after saving.”

Warren buffet

I am huge believer of Warren Buffet’s financial philosophy. I pay myself first, that is, I allocate more than 50% of our household income towards savings & investment.

The goal here is to ensure that sufficient income is first saved or invested before monthly expenses or disposable spending are made.

List your Savings and Investment expense in first block of the excel table in expense monthly. The total savings is auto calculated in the excel tool.

Again, the projected cost and actual cost, the money you allocate towards savings may vary and the difference is auto calculated by excel.

This way you can analyse your variations in savings each month and identify opportunities to increase your savings.

Below example is my total savings & investment each month.

Budgeting tips
  • Pay Yourself First (Savings) is money you have allocate for you as savings.
  • Emergency Fund is a safety cash for unexpected expenses such as illness or loss of job.
  • Investment – Money invested such as stocks and bonds.
  • Others – Any other savings or investment you may have.

Housing

Jot down your housing expenses and its projected cost and actual cost in the below table in excel.

Budget bills
  • This shows an usual list of housing expenses of an household
  • You can add more by changing the label of ‘Other’ expenses.

Above is example of my household housing expenses.

Insurance

You may not have all the below listed the insurance and you can make cost as zero if you don’t one or another. For example, I do not pay for health insurance, so I kept this cost as zero.

budget help
  • This is an extensive list of insurance of an household.
  • You can add more by changing the label of ‘Other’ expenses.

How to Budget in Excel: Food

Here is where you have huge opportunities to save money. You can cook once for twice, so you can not only use same ingredients for two meals per day but also save money on energy (Gas & Electricity) consumption.

You can also reduce the take away and eating out to save money in a month. If you over spend than projected cost, the difference column shows the value in negative and highlights in Red.

This clearly shows opportunities for you to reduce the spending and save more money.

For example, I spent £120 eating out, which is £20 higher than my projected cost for eating out. The difference of is £20 highlighted in Red.

I can look for opportunities to reduce this cost in the next month.

Read this blog to find ideas to save money

Food bill, Grocery on a budget
  • List of food bills.
  • You can add more by changing other expenses.

Transportation

This is the cost for transport for personal and work commutation. Again, a great opportunity to save money, buy used car rather than new car. This reduces your car payment and increase your savings.

In below example of my transportation expenses, the car payment is zero because I bought an used car at a cheap deal. I also paid full on cash rather taking a loan or paying by credit card.

Saving money tips
  • List of transportation expenses.
  • You can add more by changing other expenses.

Entertainment & Holiday

Saving for your vacation each month is the best way to spread out the holiday cost throughout the year. This greatly helps to accumulate money for your holiday and avoids spending on credit cards.

For example, as part of my monthly expenses, I always allocate £100 each month to spread out the holiday cost each month throughout the year.

Saving money
  • List of Entertainment & holiday expenses.
  • You can add more by changing other expenses.

Personal Care & Gifts

Childcare, clothes, saloon, gym membership and gifts for family and friends are listed in this category.

My childcare cost is low because my kid is going to school. But, the childcare is usually higher for anyone with kids going to nursery. There are so many ways to reduce the childcare cost. Below are some of the options.

  • Flexible working – You and your spouse may change the way you work to reduce the hours you have to pay for.
  • Childminders – Cost lesser than private nursery.
  • Family and Friends – Grandparent or someone might be willing to help out for free.
  • Community nurseries: May use Sure Start Children’s Centres. This cost less than private nursery and provide other services for free as well.
Childcare cost
  • List of Personal Care & Gifts expenses.
  • You can add more by changing other expenses.

Debt

I do not have any personal loan, student loan, or credit card debt, so I have entered the value as zero. If you have any debt, enter the payment you can make each month.

Pay off debt is the first step to save more money as it saves a lot on the interest you pay on the debt.

Take one step at a time, payoff your debt with higher interest rate first such as credit card.

Then, payoff students loan or personal loan, depends on the rate of interest of each loan, you can choose which one to target first.

Reduce debt
  • List of debts expenses.
  • You can add more by changing other expenses.

How to Budget in Excel: Total Expense

Budget in excel is easy and simple, once you enter all the expenses in each category, excel tool auto calculate the total expenses.

The total expense is calculated for projected cost, actual cost and the difference.

It is great if the total expense of the actual cost is lower than the projected cost and the difference is a positive value.

In any case, your actual expense is higher than the projected expense, the difference would be a negative values and the excel highlights in Red.

It clearly shows there is an opportunity to reduce the expenses and increase your savings.

In below example of my expenses, the actual expense is lower than the projected expense and the difference is a positive value.

This is good but still I can work on reducing actual expenses.

money hacks saving
  • Shows total projected, actual expenses and the difference

Step 4: How to Budget in Excel – Analyse Your Expenses

Establishing up your budget plan, open up the doors to capture the expenses and analyse them to increase your savings.

Budget tips
  • Projected Balance is the total money you expected to have by end of the month.
  • Actual Balance is the total money you really have at the end of month.
  • Difference is the change between Projected Balance and Actual Balance.
  • Pension Contribution is the money you and your employer contribute monthly to your pension account.
  • Total Monthly Savings is the sum of your Savings & Investment, Pension Contribution, and the difference between Projected Balance and Actual Balance.
  • Rate of Savings is the percentage of savings from your household income.

Above is the summary of my budget and savings. I have difference of £50 which is calculated by subtracting Actual Balance from Project Balance.

  • My Projected Balance for the month is £720.88.
  • My Actual Balance for the month is £770.88.
  • Difference is £50.
  • Pension Contribution for the month is £523.
  • Total Monthly Savings for the month is £4393.88.
  • Rate of Savings is more than 70%.

My rate of savings is more than 70%, since, I allocate more than 50% of our household income towards Saving & Investment even before paying my bills.

This shows you a real example of how you can save money by adapting pay yourself first strategy.

You can draw up your budget plan using this excel tool and analyse the Summary of budget and rate of savings.

If the difference is a negative value and rate of saving is low (e.g. less 10%), you need to drill down expenses on each category to identify opportunities to reduce expenses and save money.

The excel also shows the percentage of projected and actual cost pictorially and it helps you to see where the largest expenses are coming from.

You can analyse further to target the category with highest percentage spend first to reduce your expense and increase savings.

how to save money
  • Projected Cost of each category represented in percentage.

How to save money
  • Actual Cost of each category represented in percentage.

Conclusion

You can use this excel to make a monthly budget plan and track where you money is going from your income.

Draw up your budget and sticking to it, will help you avoid over spend than what you earn.

You will need to set yourself some goals for each month. Let’s say, start with a goal to save 10% of income and then, keep increasing your bar to save more money to achieve your financial goals.

You need to revisit your budget each month. This way, you can identify if you are spending too much than projected cost and try to reduce it in the next month.

Being consistent and persistent with this approach is the key to improve your savings to achieve your financial goals.

What other categories would you include in your budget plan?

About Me

My name is Naresh Jayakumar. I am mastering personal finance to effectively manage, save and grow money. I’m on my happy jounery to financial indenpendence.

I blog to share the tricks and hacks of making, managing and saving money to help others achieve Financial Independence in their lives too.

 

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2 Comments

  1. Gentleman's Family Finances

    Comprehensive post – fully detailed and with practical help to get started.
    But childcare vouchers are not pay £8 government pays £2.
    Maybe you are thinking of tax free childcare which is a different scheme and not (To my knowledge) something you can deduct from your salary rather with HMRC HMRC direct

    • Naresh Jayakumar

      Thanks for stopping by! Yes, I was thinking of tax-free childcare account. You are right it is different scheme to childcare vouchers. Made changes in the post:)

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