Tower Loan Blog

How To Create A Budget: Setting Up A Money Spreadsheet

One of the most basic and essential parts of managing your money is learning how to create a budget. Making a budget is a crucial tool that allows you to craft a financial plan to analyze how to spend your hard-earned income, using your money more efficiently and maximizing savings.

Creating a budget is like setting up a roadmap to follow for your monthly spending. When you have a plan, you can be strategic about your purchases and more likely to use your money in ways that will help you achieve your goals. While following your budget will require discipline and dedication on your part, the reward of watching your nest egg grow will make the hard work worth it.

How to Create a Budget

What is the first step in learning how to budget money? If you never learned how to set a budget, it can feel overwhelming. The truth is, it’s actually fairly simple. All you have to do is set up (and follow!) a step-by-step plan and before you know it, you’ll have your own monthly spending map.

We know, easier said than done. So let us help you identify the basics on how to create a budget:

  • Determine your monthly income after taxes
  • Create a list of all of your monthly expenses, which can be in categories such as groceries, utilities, eating out, transportation, etc.
  • Set aside up to half (50%) of your monthly income for necessities and distribute the amount among the categories that fall under these needs
  • Set aside about one-third (about 30%) of your monthly income for non-essential expenses or wants, such as eating out, entertainment, travel and other extras
  • Set aside the remaining about 20% for debt repayment and savings

How to Create a Budget Spreadsheet

Learning how to make a budget plan (and sticking with it) is much easier when you have a spreadsheet to keep track of everything. Having a digital spreadsheet is one of the best tips for learning how to budget successfully. Does even just making a spreadsheet seem daunting? You’re in luck, there are lots of online apps that allow you to easily and quickly create a budget spreadsheet by entering in your income and expense figures. Many financial planning websites have downloadable templates, or you can simply do an online search for Google Sheets budget template or digital budget template.

Figuring out how to do a budget spreadsheet online isn’t as hard as it may seem. A digital budget spreadsheet will have categories for income items and expenses. If you use a template, the spreadsheet will already be set up to automatically track spending and income. Remember to classify all your income and expenses under the categories so you can manage your overall spending according to the percentages you determined in the beginning.

How to Make a Budget Plan

When learning how to create a budget, you need to set up an overall budget plan to manage your expenses. The most recommended method for first timers learning how to set up a budget is known as the 50/30/20 budget plan.

Set Aside 50% for Needs

After you determine your after-tax income, calculate roughly 50% of that amount to set aside for your necessities. This includes the things you can’t go without each month, such as groceries, gas, utility bills, rent/mortgage, and the like. Use your budget spreadsheet to enter the specific amount you plan to spend in each of these categories during the month, and aim to contain that overall amount to 50% of your total income.

Set Aside 30% for Wants

You shouldn’t dedicate all your money to necessities – we all deserve a little fun in our lives. You should always allocate some money each month for things you don’t need but want, such as entertainment expenses (museums, movies, streaming services), eating out at restaurants or bars, and travel expenses for your much-deserved vacations. Aim to spend no more than 30% of your total monthly after-tax income on these categories and record the amounts in your projected spending on your budget worksheet.

Set Aside 20% for Debt Repayment and Savings

Set aside the remaining 20% of your monthly income for paying down any debts and contributing to your savings. Plan out how much you want to repay on your debt each month, such as credit card payments, and put the rest into your savings account.

Tower Loan Can Help You Create a Budget

You don’t have to learn how to create a budget all by yourself. The financial experts at Tower Loan have a wealth of resources that can help you manage your money. Imagine how great you’ll feel when you have your expenses under control and are seeing monthly progress toward your financial goals. Turn to Tower Loan for the help you need to achieve financial freedom and success.