How to create a budget spreadsheet

Whether you’re struggling to pay off debt, saving for retirement, or you just want to know where your money is going, a budget is a perfect tool to get your financial health on track. That’s why one of the first pieces of advice you’ll often hear is, “create a budget”.

Budgets can have a negative connotation for some people as they feel like it restricts them from living life. This couldn’t be further from the truth.

In fact, a budget gives you insight into where you’re over and underspending so that you can redirect your spending habits to where it matters most. But how can you create one?

Sure, you can do it the old-fashioned way using pen and paper, but it’s not very practical. That’s why this article will be a step-by-step guide on how to create a budget spreadsheet using online tools.

How to create a budget spreadsheet?

Creating a budget spreadsheet involves six simple steps: ‘Choose a program or tool’, ‘Create your categories’, Add your columns and budget period’, Insert formulas to automate parts of your spreadsheet’, ‘Enter your values’, and finally ‘Iterate’.

It can sound like a lot of work, but it’s actually a very simple process and should take you no longer than 10-15 minutes to complete from start to finish. But before we begin explaining each step, let’s consider if you need one in the first place.

Do I need a budget spreadsheet?

A budget spreadsheet is by no means a requirement. However, it can be a key tool in making sound financial decisions. It helps you visualise how much money you have coming in, how much money is going out, and how you can alter your spending habits to achieve your financial goals.

Creating a weekly or monthly budget is particularly helpful for those who are trying to save money and invest in their financial future, as it gives you a roadmap to follow.

Things to consider before creating your budget spreadsheet

Before you start creating your budget spreadsheet, there are a few key things to think about.

What are your financial goals?

Are you looking to save for a house deposit? Are you saving for your retirement? Are you planning your wedding and need to get your finances in order? Whatever the reason is, it can help to know why you are creating a budget in the first place.

This is more of a mental trick than anything, as it will give you a clear goal of why you’re creating a budget and why you should stick with it.

What budget period will you use?

The frequency at which you get paid will help determine your budget period. For instance, a monthly budget period may make sense if you work as an employee and receive a paycheck once a month.

On the other hand, if you’re someone who is solely self-employed and works on different projects per week, it may make sense to have a bi-weekly budget period.

Also, how often do you want to review your finances? Suppose you want to assess your daily spending and earning potential. In that case, it may make sense for you to have a daily or weekly budget period.

Most people tend to have a monthly budget period, and this is what we’ll use in this article.

Now that we know why we’re creating a budget and how often we want to keep track of our progress, we can begin creating our spreadsheet.

Step 1: Choose a program or tool

The first step involves creating a blank spreadsheet. You can choose from many programs and tools, such as Google Sheets, Microsoft Excel, or Numbers. Remember that some options will be free, whereas others you will have to pay for.

Once you have decided on the program you want to use, simply create a blank spreadsheet to begin creating a budget.

Step 2: Create your categories

You’ll now be looking at a blank canvas of cells which can be intimidating. But don’t worry. The first thing to do is create categories of all your income and expenses.

You’ll want to start with your income. To do so, click on cell A3 and write ‘Income’ in bold. Below that cell, you can enter all your sources of income, such as your paycheck, side hustle, investments, etc. To round off your income category, write ‘Total Income’ below your final source of income. It should look something like this:

You can now move on to your monthly expenses. These will typically fall under two main expense categories: fixed and variable expenses.

As the name suggests, fixed expenses are costs that do not change every month. Examples include rent or mortgage, broadband, mobile phone, car insurance, health insurance, gym membership, etc.

Variable expenses are costs that change each month. Examples include food, entertainment, fuel, utility bills, etc.

Whilst the fixed and variable expenses categories will suffice for most people, one optional category you can include is ‘Other Expenses’. Other expenses are for one-off payments such as a Mother’s Day gift and large purchases such as replacing a boiler or repairing your car engine.

Lastly, write ‘Total Expenses’ below. This is where you can see the total amount of money leaving your bank account each month.

In reality, you can get as creative as you want with your categories. However, it’s recommended to keep them as simple as possible. This will help you with keeping track of your monthly outgoings without confusing things.

Your expenses category should look something like this:

Suppose you’re saving towards a financial goal or putting money towards investments every month. In that case, it can help to create a separate category for these “expenses”.

Examples include putting money toward a house deposit, a private pension, or a stocks and shares ISA account.

You can also add a debt category for things such as student loans and credit card debt.

Your savings and debt category should look something like this:

Step 3: Add your columns and budget period

Now that your categories are sorted, you can create tables to separate your budget by month.

To do so, navigate to cell B1 and type the month name, e.g., January. Below in cell B2, you can write ‘Budget’. This column represents how much you are budgeting for a particular category.

Next to it in cell C2 write ‘Actual’. This column is where you will enter how much you actually spent that month on that particular category.

Finally, in cell D2, you can enter ‘Difference’. This is the difference between what you budgeted for and how much you actually spent, enabling you to see if you went over or under your budget for that month.

You can repeat this process until you have each month for the year covered. It should look something like this:

Step 4: Insert formulas to automate parts of your spreadsheet

The great thing about using a spreadsheet is that you can let it do all the calculations for you by using formulas.

For instance, instead of manually calculating the difference between your budget and the actual amount each month, you can create a formula that automatically updates it when you enter your budget and actual figures.

To do so, click on cell D4, which should be in the ‘Paycheck’ row and ‘Difference’ column. Write the formula ‘=B2-C2’ and press enter. This will automatically calculate the difference between your budgeted paycheck income and the actual income you received that month.

Click on cell D4 again, and drag down from the bottom of the cell border to cover ‘Side Hustle’ and ‘Investments’. This will copy the formula into those cells, saving you time in writing it out again.

When you come to the ‘Total Income’ row, you’ll want to write a different formula – the SUM function. The SUM formula will add up your different income sources to create a total.

To do so, click on cell B7, which should be in the ‘Total Income’ row and ‘Budget’ column and write the formula ‘SUM(B4:B6)’. This means that it will sum up the values between cells B4 and B6 to create a total. Then, click on cell B7 again, and drag from the bottom of the cell border across to cover all columns.

Repeat these steps with your expense and savings categories.

Step 5: Enter your values

At this point, all the difficult steps have been taken. All that remains is to enter how much you want to budget for a particular income or expense and enter how much you actually spent at the end of the month.

Since formulas have been entered into the ‘Difference’ section, it will automatically update when you plug your budget and actual figures in.

Step 6: Iterate

There you have it, you have now created your very own budget spreadsheet from scratch. However, that’s not the end of your budgeting journey.

As the months pass and you continue to input your spending figures, you may find that your existing budget is no longer working for your current financial situation.

For instance, you may have recently got a pay rise at your job and will therefore need to update your paycheck budget. Also, you may have decided to book a holiday in a few months and need to save extra money to afford it. Therefore, you will need to make an extra sub-category in your savings section to account for it and perhaps lower your entertainment budget for the upcoming months.

As you can see, your budget will constantly evolve. What starts out as a basic template will become tailored to you and your lifestyle over time.

How to customise your budget spreadsheet

Nobody wants to look at a boring spreadsheet with a plain white background. Fortunately, you can customise your budget and add a bit of colour to it.

You can do this in various ways, such as highlighting each month or each category in a different colour. However, you can also program certain cells to perform a particular action. This is called conditional formatting.

For instance, suppose you want your ‘Difference’ column to turn green if the value is positive and red if it is negative. Simply right-click on the ‘D’ column and click ‘Conditional Formatting’.

You’ll be able to create a format rule that turns the cell green if the value is above 0. Create another format rule that turns the cell red if the value is below 0, and watch your spreadsheet transform.

You’ll no longer have to read your figures individually; you’ll now also be able to read them visually.

Alongside conditional formatting, you can create graphs and charts to provide further visual analysis of how your personal finances are going. Simply click ‘Insert’, then ‘Chart’, and customise the chart to display your desired information.