Easy Budget Stressless Spending Tracker Step-By-Step Guide
We know that it’s a difficult leap to get from what you want to what you actually undertake. Most people have ambitions that will eternally be on a bucket list; it happens to the best of us.
When we got serious about taking a mid-career break, we knew we needed to better align our money management to our goals. We started by trying to stick to a strict budget but quickly realized that the result was more stress than financial gain.
That’s why we created this easy budget spreadsheet for lazy budgeters like us.
It focuses on the big spending areas for impactful action, without the overwhelm of unnecessary data or having to over-invest time on unnecessary penny pinching.
It only took a quarter of a year to start earning the 3x benefit of spending less, saving more, and enjoying freedom from constantly worrying about money.
Now here are the steps to get started using this lazy budgeters spreadsheet for achieving goals in life:
The Spending Tracker is based on the Pareto Principle, or 80/20 rule, to optimize personal finance management. The fundamental premise is that 20% of actions lead to 80% of the outcomes. That means you’ll achieve the greatest results by focusing on the 20% of lifestyle choices that make-up 80% of total spending. Housing, transportation, food, taxes, and healthcare are the “big 5” expenses for most families.
Since financial independence is also a really important goal, it’s valuable to see the impact purchases have on reaching total financial freedom (i.e. time until you have enough money to make working for income a matter of choice)—the ‘Years to Achieve Financial Independence’ column provides that extra nudge by correlating savings to (sabbatical) goal success.
You can read more about this formula at the popular Financial Independence Reddit forum.
Initial Spreadsheet Setup
1.) Review all sections of the spreadsheet so you have a sense of the overall framework:
note the cells that are highlighted in yellow—you’ll ONLY update the yellow cells.
all (other) fields have formulas that will update automatically.
2.) Make sure your spending categories match what’s on the spreadsheet. If you have other (or more or less) major spending categories, adjust the spreadsheet to reflect your big expense areas.
3.) Input your spending by month
Update the columns with the months for the current year.
Enter the total of your monthly expenses, which should be easy to find in Mint.com’s “trends” tab under “spending by category”. (don’t forget to update the date range)
Create a new column for each month as you progress in your tracking. The more months of data you have, the more accurately the calculations will reflect your long-term lifestyle.
4.) Input your ‘Gross Income’ by adding together
Amount paid from job(s);
Interest and dividends from savings and investment accounts;
Additional income from side hustles, real estate rental, or the like.
5.) Update ‘Amount Saved’ with your total monthly savings after you’ve paid for your core and non-core expenses. If you don’t know this number, you can calculate it by adding together
personal contributions to retirement accounts;
employer contributions to retirement accounts, health savings accounts (HSA), or similar;
any other contributions you make to checking, saving, or investment accounts (IRA’s, Roth IRA’s, HSA’s, etc).
6.) Enter Your Estimated Current Net Worth
You should be able to find this number in Mint.com (or similar personal finance app);
Or, just search the web for ‘net worth calculator’ and you’ll find plenty of options. Generally they will all help you to calculate your net worth by determining the difference between your assets and liabilities:
Assets—what you own—including money in your bank accounts, value of investing accounts, your car, etc.
Liabilities—what you owe—including mortgage, student debt, credit card debt, etc.
Subtract your liabilities from your assets to determine your personal net worth
A Few Extra Helpful Hints
Savings Rate is one of the most important numbers in forecasting how long it will take you to achieve financial independence.
This popular post by Mr. Money Mustache does a great job of expounding on this concept. And, this also holds true for how soon you can afford to take your sabbatical.
Estimated Investment Nominal Return is based on Warren Buffett’s rule that you should expect 6-7% annual return in the stock market over the long-term.
Buffett explains that “the economy, as measured by gross domestic product, can be expected to grow at an annual rate of about 3 percent over the long term, and inflation of 2 percent would push nominal GDP growth to 5 percent. Stocks will probably rise at about that rate and dividend payments will boost total returns to 6 percent to 7 percent.”
Investment Safe Withdrawal Rate uses the 4% rule to guide how much can be withdrawn annually from investment portfolios while still maintaining standard of living post-retirement.
There is lots of debate around this topic, but the 4% rule is still the most widely accepted, and we’ve found it works sufficiently for us (so far).
Once you get the hang of it, your end-of month finance check-in should only take about 15 minutes.
We hope you get even greater return on investment from this spreadsheet than we have. If you have any questions or suggestions, please reach out to us!