Budgeting Tool with 5 Step Walk-Through
I’m excited to follow up on the recent publication of The Snowman’s Guide to Personal Finance with a few tools. The first is a budgeting tool available for download below. It walks you through a 5 step process to ensure you’re getting the most from your money.
How the tool works
We’ll go through the following five steps, with sample numbers and notes for reference.
Awareness: Gather your bank statements from the last three months and list your expenses in the tool.
Reflect: Add other expenses (e.g., annual costs) not on your statements and order the ‘Annual spend’ column from highest to lowest.
Prioritize: Review the list to see what’s most important to you and where you can cut back.
Budget: Eliminate items that aren’t a priority and add any new spending or saving you wish to do.
Spend: Spend on the items you’ve prioritized and cut back elsewhere, repeating the process over time.
Once you’re done, you’ll have a prioritized budget specific to your preferences and values. This will allow you to save more without sacrificing your current standard of living.
Reasons to budget
Creating a budget and understanding how your money is spent will help you to get the most from your dollars to help live a fulfilling life. You can read more about the process and rationale of creating a budget here. To summarize, a budget is meant to take your money and assign it dollar by dollar from top to bottom on your list of priorities. Recognizing a budget this way makes it a lot more attractive because you’re not saying no to this and no to that, but rather you’re saying yes to the things that are most important to you.
Screenshots of the tool in action
After reading through the directions and reviewing tabs two through five for background and examples, you’ll enter your current spending details in the blue cells of the first tab.
As you type in the description and amount, you’ll also select the frequency (e.g., daily, workdays, monthly) and category (e.g., spending & debt, housing, leisure) from drop-downs. This will give you a sense of where you’re spending and how much. An important value presented throughout the page is the ‘Annual spend.’ Many people are shocked at the annual cost of smaller purchases.
After entering all your spending, you’ll sort the spending from highest to lowest to easily see where most of your money goes. It’s then time to review your spending to see where you can cut back and where to increase saving or spending. Once you’re comfortable with your new budget, it’s time to update your spending habits in line with your plan.
If you have feedback or ideas for other tools, please let me know in the comments below or email me at steven@snowmansguide.com.