Two years ago, I started tracking my finances. I was fresh out of college and interested in building an investment portfolio. It started out as a list on a yellow note pad, It went month-to-month, and was broken down into a few categories.
The most important category that I had on there was "Alcohol", because that one could slip away while living in a college town. One of the categories that surprised me was how many tips I pulled in from work, and how easily I could piss them away. Two years later, I like to think that I'm getting better.
What started out as a yellow notepad, has become an excel spreadsheet with five different sections, a budget, thirty-three line items, and a six-month time frame.
Over the last two years I have made small tweeks, and bigger changes to the file. Periodically, I've downloaded finance apps on my phone, glanced at some personal budgets set up through my bank account, and never stuck with them. Regardless of the finance app, I always returned to my excel spreadsheet.
My financial tracker has been tailored to me specifically. I built that file and know how it works. I set the numbers, categories, and calculations that I want.
How else was setting my own categories be beneficial to capturing financial data? When I look at how some software breaks down finances, it will group payments from one place (like Ralph's, a grocery store) into a grocery section, but really many of the things I bought at Ralph's could actually not be groceries.
Another benefit—that some might not consider a benefit and actually look at as a negative—is I have to go back and enter all my purchases. I am my own accountant, and have to look at my spending again. I relive impulsive or frustrating buys. Bad spending may seem passive, or may be ignored, if merely tracked by a financial institution and quickly blocked into one spending category. With mine, I got back through receipts, compare months, and feel the full weight about how one night, or one pair of shoes, can change my total spending for the month.
LET ME BE VERY CLEAR, I understand that financial apps are awesome and can pretty much do all the calculations, categories, and budgeting that I’ve talked about.
However, coming from someone who has created, customized, and updated their own budget these are the benefits I have been getting;
- Feeling of independency, and control
- Constructive negative reinforcement with entering own data points
- Extreme degree of personalization
- Ability to easily set my own parameters within in each category
It was simple to set-up. The part that takes the most time is thinking of the design. After I get the layout figured out, the formulas are simple.
Here's a complete list of the formulas that I used for this spreadsheet;
- SUM
- AVG
- DIV
That's it!
I use the CONDITIONAL FORMATTING option as well to track my spending in relation to my monthly budget.
I didn't always have a budget. I didn't pick out the numbers that I am currently using until after a year of tracking my financials so I could better forecast my numbers in the future. The conditional formatting numbers were chosen based on the average of my expenses over different six-month periods. I am obviously going to be over some months and under others, but it's a good gauge.
Below is a picture of the spreadsheet.
It's broken down into a few categories;
- Fixed Expenses
- Variable Expenses
- Investments
- Income
- Personal Statistics.
My fixed expenses are rent, subscriptions, internet, utilities, insurances, and student debt payments (or any kind of debt). This is fairly straight forward.
Variable expenses include groceries, gas, wearables (clothes), social spending (drinking, eating out with friends), and books.
Investments are straightforward. Where am I savings money. Is it a Roth IRA, Personal Savings, or other investment. What's cool is that I can track my savings for a certain item or expense just by adding a new line.
Based on the nature of my business my income will vary month to month, so it's important to track those changes to guess how much money I might have in different months.
I do not keep very many personal statistics. On the right side of each category I track totals, and occasionally averages. At the bottom, a very important statistic to me is Income-to-Spending. Very simple to get;
[Total Income - (Total FE + Total VE)] = Income to Spending
The second number is my savings percentage.
Total Investments/Total Income = Savings %
At the very bottom I put a net. The net combines my income, expenses, and investments. This is a way for me to gauge my efficiency that month. Did I lose money? Could I have invested more money? Do I hit all my numbers and now have extra cash to do with it what I please. Bonus money can be a terrible fallacy when looking at finances, but wow does it feel good. It's also important to have some sort of incentive in line for achieving financial goals.
I still use the other platforms to remember total price of bills and Wealthfront to check in on investments. At the baseline for improvement I would suggest tracking your spending. If I were to go a step further I would suggest creating your own budget on excel, or just having a predicted vs. actual for one month.