Goal: The goal of this guide is to help you get started with or refine your personal finance tracking by providing you templates and workflows that might help you get financial transparency into your personal finances. You may end up using the same workflow that I use here, or you may end up borrowing a few ideas from this guide. Regardless, I hope this helps you achieve whatever financial goals you have!
Please note that this guide is not meant to be a comprehensive personal finance guide but rather a supplement to materials out there on the internet. It will focus on walking you through my templates and workflows because I couldn’t find anything out there that I liked and since I built it, it’s obviously much better (kidding, not kidding).
Table of Contents
To start: Make a copy of my finance template from this link to your Google drive
- Setting up your budget
- Monthly Budget Sheet
- Yearly Sheet
- Setting up your budget tracking software
- Monthly Budget Performance Sheet
- Updating workflow – How often and when to update numbers
- Financial independence checklist
1. Monthly Budget Sheet
Goal: This sheet will give you full transparency into where your money goes each month. If you need to change any financial goals, you’ll be doing your number tweaking primarily in this doc to figure out how you can achieve your goal.
Start with monthly budget sheet
- We will start by inputting some initial numbers, which will give you transparency into what your monthly goals look like.
- Fill out your monthly income on B2.
- If you’re not salaried, put in an expected income. If you have highly variable income, you might want to put in a monthly average (total annual income / 12), given you’re not living paycheck to paycheck.
- B9 – Fill out your 401k contribution %
- If you have employee matching, just put in your portion of the payment, and add the employee contribution calculation in B10 or tweak the formula based on whatever your contribution is. If there’s matching, make sure you adjust the “monthly cost” of your retirement to your portion of the cost, not what’s matched (since you’re not paying for it) in the itemized section below.
- If you don’t have any % or don’t have a 401k, you can skip this and fill out B10 and input whatever you put into your IRA.
- B10 – If you didn’t fill out B9, put in manual value here. If your number reads over $18500 for 2017, you should manually enter in $18500 in this cell. You should also adjust your savings rate to (18500 / 12) / B2 if you want to evenly distribute your 401k.
- Fill out the entire bottom itemized portion. Descriptions of each category are located in column D in the pivot table under notes.
- Feel free to create your own sections. Just use data validation and if the pivot table on the top right needs more rows, just insert more rows.
- Eyeball all the numbers in the section below to make sure nothing looks significantly off. This is especially true if you added new categories. You might be missing sums in the pivot table.
Understanding your numbers
- The first thing you should check is cell B6 to see if it’s negative or positive. If this number is negative, you are losing money every single month, and you should fix that.
- The next thing you should check is your variable expense. If you have no idea where to even begin, take a look at the ‘setting up budget tracking software’ to get a possible estimate so you can set your goal.
- Alternatively, you can try to calculate everything from complete scratch. For example, think about your transportation. How much should you be spending on transportation every month? What about your food? How often do you eat out / month, and how much do you normally spend? What about shopping or bar?
- This variable spending section is very tricky, and you’ll be terrible at both setting and hitting your goals the first few months, but you’ll quickly figure out a happy goal for where you want the numbers to be.
- Next, go through all your fixed cost items. Do you see anything you feel like you’re paying for here? This is an excellent opportunity for you to go through everything line by line and really evaluate if you need this. The more you cancel, the more money you have for savings or other things.
- Another way to help fill out this sheet is to think about retirement first. Go to the next step of this guide, and figure out a number that makes your retirement or investment numbers look healthy. Then, you can figure out how to allocate the remaining funds. Perhaps you want to save for a new car or think about marriage, so you have to save a certain amount each month.
- You can also install a budget software like Mint or YNAB and look at what your spending looks like historically, and try to set a variable budget goal from there.
- One of your goals should be to figure out to minimize B5, your true expense. Are you sure you’re absolutely spending money where it needs to go? Is this preventing you from hitting your retirement or saving goals?
2. Yearly Sheet
Goal: The purpose of this sheet is to help you do long run retirement planning or any other investment goals you have.
Filling out the yearly sheet
- Change your age to your age for each year
- Put in how much $ you had in your 401k or any other retirement accounts at the end of last year on the row that corresponds to your age in column V.
- Change the next year’s “current goal” formula by changing the principal to the number you just entered.
- Then, for this year’s column V, everything should autopopulate below. If not, make sure you the formula didn’t break.
- Investment (Non retirement)
- Repeat #2
Understanding the numbers
- How the heck do you know what retirement numbers to aim for? It’s a balance of what you think you will need + how much is a realistic goal you could set by end of the year. The truth is, I can’t tell you how much you’ll need for retirement since so many factors go into that number. My guess is that if you’re reading this, you probably will end up living in some expensive part of the world and want a comfortable lifestyle with spending money, so even aiming for 1-1.5 million dollars might work for an average person. Note, your future spouse will also have a retirement account, too! If these numbers freak you out, you can always marry rich. Just kidding, that’s terrible advice.
- Play around with your retirement numbers in ‘Monthly Budget’ sheet to arrive at a happy medium on what you save for retirement + investment vs how much you have to spend month to month.
- Benchmark – This is a completely optional column, but it’s nice to see how you’re tracking against progress. My recommendation? Start the balance at the same year as when you start saving and then put in a fixed amount you’re putting in every year currently. If you get a raise and make more down the line or get better returns on your numbers, you can see how you’re doing against your initial goal.
- For investment accounts, this is completely optional; however, chances are, you’re saving for something down the line such as weddings, ring fund, down payment, dream car, etc. This is a great way to track how much you’re saving against that progress down the line.
- e.g. Do you want 50k saved by a certain amount? See what you need to tweak in your monthly budget to achieve 50k saved by the year you’re aiming for.
- We’ll get to the rest of the numbers later during the update workflow.
How are the retirement returns calculated?
- It’s a slightly conservative estimate. We assume 5% return on the principal if you put a majority of your money into index funds, and then we add the additional balance you put into this year. Yes, this underestimates the #s since you will earn return as you put in the money for the current year. If this bothers you, you can adjust the formula.
3. Budget Tracking Software
Goal: Now that you’ve set up your aggregate numbers, you need a way to track your monthly spending at an itemized level. There are a few ways you can approach this, but the two things you have to think about are 1) what software to use or 2) to what extent to track everything.
Software: There are lots of software out there, but there are two that I recommend.
- Mint (Free) – Mint is a really easy to use budgeting software. It’s very simple to use, which also is a con for people who really like to customize their software.
- YNAB (Paid) – YNAB is a very comprehensive software that is more than just a budgeting software, thus the price.
What to track:
- Tracking just the variable cost – If you look at your monthly budget spreadsheet I had you fill out, you’ll see that most of the items are fixed. The purpose of the budgeting software is to help you keep track of all your itemized spending so you stick to your budget, which means tracking the variable cost is essential; however, some people like to track everything, and there are benefits to the latter.
- Tracking every itemized list – If you want to keep track of all your items because you have OCD or have control issues like me (just kidding), you’ll make a category for all items in your budget list. You’ll end up meeting your goals 100% every month since they’re fixed cost. In terms of practical benefit of doing this, you can see how your fixed cost changes over time, which might be something you want in the long run.
Setting up the format:
Since this will be very different for everyone, I will keep it fairly simple.
- Connect all your financial data (bank account, CCs, venmo, etc) so you can import everything
- Create a category for all the cost that you want to track. For example, if you follow the template and want to track just variable cost, you’ll create a budget for food, transportation, and shopping. Assign the dollar you want to spend against each of those.
- For now, just categorize this month’s spending into the budget. If you want to do historic, be my guest. You should do this for at least the past few months if you have no idea what your spending habits look like.
- Based on a specific cadence (I recommend twice a month), go through EVERY SINGLE LINE ITEM and put them into the right category. Every single dollar you spend should be reflected through here, whether you take out $20 dollars at an ATM or venmo $5 for boba to your friends. I recommend twice a month because there are lots of transaction even in a two-week period, and it acts as a check in for how you’re doing. I personally prefer doing budgeting on the 1st and 15th of every month. We’ll cover how often to check your finance under ‘Updating Workflow’ section later.
4. Monthly Budget Performance
Goal: This sheet is to track how well you are doing each month against your planned goals. Yes, this can be done in your software, but it forces you to write down how well you did against your spend and provides data that you can track as your budget changes. This section is not a must have, but it’s nice to see how well you’re performing each month, and you can see if you improve over time.
Data: Once you figure out your variable budget, under ‘goal spend’ (G – I), put in your goals. How to update each number can be found in the next section under ‘updating workflow’.
Understanding the number
- K-O will show you what the difference was between what you budgeted vs what your actual budget was. If it’s red, you went over the budgeted amount. If it’s green, you made it; however, if you’re consistently hitting green, you should consider adjusting your budget numbers to more accurately reflect your spending.
- This section is great for looking back historically and seeing how well you did (or how well you didn’t do) in the past.
5. Updating Workflow
Goal: This page will serve as a reference guide on when to update what numbers. Again, this will outline my recommended way of doing it, but you can choose whatever system works for you.
15th of every month
- Update your budget tracking software, going through every single spend items to ensure they’re categorized appropriately, and see how you’re doing mid-month against your goal
1st of every month
- Update your budget tracking software. All previous month transaction should be categorized and finalized.
- Go to monthly budget performance. Update your actual spend for each category (B – E), then drag and drop every other cell down to fill out the rest. If your goal spend changed, manually update the number in G-J.
- In the ‘monthly aggregate performance,’ manually input income, cash, investment, and end of month balance for any investment or retirement account (F-I, J, M). Drag down to see your return (K, L & N, O). Drag down and see your budget performance (P-R)
- If you run a checking account for storing non-monthly fixed cost, transfer amount as applicable (more details coming!)
1st of every year
- Go to your yearly sheet
- Column C-F can be all filled out from the monthly aggregate performance sheet
- C – Final investment balance
- Amount in Monthly Agg J for December
- D – Total amount you put into investment account that year
- Sum of Jan – Dec of that year in Monthly Agg column H
- E /F – total return in $ and %
- In Monthly Agg, number in December’s column K & L
- C – Final investment balance
- Retype in Column G for that year manually (should be a calculation right now)
- This is to keep your “target” goal to compare to what you achieved. We don’t want this to change in the future
- Change formula in column G for next year’s goal by replacing principal balance (denoted GX e.g. G6) with the actual balance for the year that just passed (CX e.g. C6)
- Repeat #1-4 for retirement
- Reset formulas in ‘Monthly Aggregate Performance’ Sheet Columns K, L, N, O for January of next year
- Column J: =(J51–(J$38+SUM($H$39:H51)))
- After: =(J51–(J$38+SUM($H$39:H51)))
- Bolded number 1 need to be changed to Dec of the year that just passed (starting value)
- The 2nd and 3rd bolded number needs to be changed to January of the new year (new investments)
- Column K: =(J50–(J$38+SUM($H$39:H50)))/(J$38+SUM($H$39:H50))
- After: =(J50–(J$38+SUM($H$39:H50)))/(J$38+SUM($H$39:H50))
- Your numbers will be different, but replace 38 and 38 with Dec of previous year
- 39, 50, 39, 50 will be replaced with the January row value of the new year Jan
- Repeat for N,O
Understanding the numbers
- First thing you should check is how well you hit your budgeting numbers. You should’ve met all your fixed cost, so how well did you hit your variable cost numbers? If you were way off the estimate, do you have to adjust the number? Maybe you need to adjust your spending?
- If you fill out your bank balance (which should take into CC balance and other as well), did it increase or decrease by the ‘actual left’ column in monthly aggregate performance?
- How are your returns doing on investment or retirement accounts?
6. Financial Independence Checklist
Goal: Financial independence is different for everyone, but here are a few guidelines to help you establish those goals. If you can check off everything on this list, you should be proud of yourself! If you aren’t sure what some of these are, I’d check reddit’s personal finance wiki for reference or google them.
- If you have student loans, have a plan to pay it off
- You can either tackle it using snowball method. This method is great for people who don’t need this money in the near time for a large purchase (wedding, house, etc)
- Have a solid grasp of all your loans, interest rates, how long they take to pay off, and how much additional you’re paying from interest, and making sure you pay off the highest interest rate first
- If you have auto loan or mortgage, follow #2
- If you have student loans, have a plan to pay it off
- Credit Card
- Never carry a balance on your credit card, ever
- Know your credit score and make sure everything is accurate using sources such as credit karma. Banks will oftentimes provide free credit reports
- Have a basic understanding of how credit scores work
- Build up an emergency fund
- People suggest this should be 3 months of living expense. This really depends on you
- Have an idea of how well you’re doing towards retirement
- Have an idea of how well you’re doing towards saving for big financial goals
- Understand basics of investing your money