Building a Personal Finance Budget and Tracker

 In a previous post, we talked about what a good Financial Tracker should do. This is all about how to start building one.

Begin with planned numbers

As mentioned, the best Financial Trackers have two versions of the numbers, the planned and the actuals. This is in the previous post, but basically, planned numbers can help keep you on track because you can judge if you are over or under budget.

1. Start with the reliable movements

As this is the easiest, identify your consistent sources of income and expenses. For example, put in your take-home salary, and put in any loan payments or monthly rent, tuition fees you are paying, and insurance. Most utilities will also be fairly consistent, so Basta sa Bahay suggests taking the average and putting a buffer. We expect that these budget or planned numbers to be fairly accurate to actuals.

2. Aim for completion by looking at these categories and your history

After this, start to complete your budgeted expenses by studying your expenses along the common categories:

  • Housing (don’t forget association dues and property taxes)
  • Transportation (consider car payments, registrations gas, maintenance, parking, tolls and spending on commutes)
  • Food (think in terms of the number of people and the number of meals taken)
  • Utilities (water, electricity, and the maintenance of your household)

Basta sa Bahay suggests that you complete your budget across a period of time (a month or more), adding expense item budgets as you experience them. You’ll also want to look at historical spending if you keep receipts. If you have a credit card, look back on your statements.

3. Allocate for other categories

These two categories may fall more on the unnecessary, but one of the biggest mistakes is not giving a budget for these. Realistically, you will end up spending of them, so the budget represents an agreement with yourself as to how much you will allow.

  • Personal Spending (includes clothing and home décor)
  • Recreation and entertainment (includes tickets and streaming services, sports and other hobbies, and video games)

4. Place goals on your income

After this, you compute income after living expenses: the obvious income minus expenses.  It’s essential that you decide at this point what to do with what’s left. This can be big item expenses that you’re saving up for, or even better, investments. It’s only at this point that you can really determine how much you want to put.

Plan and strategize

Now that you have numbers, you have to help yourself stick to these budgets. We suggest an IFTTT approach, which is basically to setup automatic actions when you get your income or when you’re at a specific day of the month. For example, anything that should go to a goal should go to a specific bank account or stash (like Tonik’s). Timing is also key, so set a day of the month to pay specific utilities and to do groceries. This means that groceries should be bought in consistent quantities, so you’re guided that for example, you’re buying for 1 or 2 months.

Moving forward: the actuals

Finally, you have to commit to recording your expenses. As in the previous post, you aren’t going to override your planned/ budget numbers but will have them side by side. Set up sum-by functions on your worksheet and drag them across all the periods so calculations are automatic. Basta sa Bahay suggests you do recording regularly before closing your books, this makes it easier so you aren’t overwhelmed with a big stack of receipts. It also allows you to have a running available balance (that’s budget – actuals spent so far), so you know how much leg room you have for the remaining days. Also commit to your reporting periods: you have to complete all your recording by certain dates. Finally, study your numbers upon closing. It’s really a simple question of whether you are over or under budget, but take action after. We will all have months when we go over, but you have to commit to remediation during the next period.

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