If you want to know how to create a personal budget in Excel, this article is for you!! The cornerstone of your economic stability is a plan. Making a budget can give you far greater confidence in your financial choices. With Microsoft Excel, we can easily make that plan. This article will demonstrate how to create a personal budget in Excel.
This is the overview of a personal budget.
Introduction to Personal Budget
A personal budget is a financial plan that outlines an individual’s income and expenses over a specific period, usually a month or a year. It provides a clear overview of how much money an individual has coming in and going out, which can help them make informed decisions about their finances.
The personal budget typically includes all sources of income, such as wages, bonuses, and investment income, as well as all expenses, such as rent or mortgage payments, utilities, food, transportation, entertainment, and savings. By tracking these expenses, individuals can identify areas where they can reduce costs or increase savings.
Creating and sticking to a personal budget is an effective way to manage money, pay off debt, and achieve financial goals. It can also help individuals prepare for unexpected expenses and save for future purchases or investments.
How to Create a Personal Budget in Excel: With Easy Steps
Creating a personal budget is a difficult task, especially if you are not using the application frequently. This step-by-step tutorial will show you how to establish a budget in Excel that can be readily modified to match your needs, regardless of how straightforward or intricate the budgeting is.
Step 1: Set Time Period of Budget
The first step is to set a time period for the budget. The time period of a personal budget can vary based on an individual’s needs and preferences, ranging from a monthly budget to a yearly budget or even longer.
In our example, we will have a monthly budget. Hence, the time period will be 1 month. Let’s assume that it is January 2023.
Step 2: Categorize Income Sources
Next comes the categorization of income sources. We have listed some common income sources in our budget. The list is below (column B).
Step 3: Classify Expenses
The income sources are followed by the expense sources. There are some broad expense categories like Necessary Expenses (column C), Occasional Expenses (column D), Regular Repayments (column E), etc. Under each category, you will find sub-categories. The list looks somewhat like this.
Please remember that the classification varies from person to person. You will have your own income and expense categories. I am just illustrating a sample here.
Step 4: Record Actual Incomes
The next step is to record the actual income. At the beginning of a time period, you will set a projected income (column C) from all your income sources. Then, you should record your actual income (column D) against these projected incomes.
See the screenshot below to know what it looks like.
Next, you need to calculate the subtotal. This requires a simple formula using the SUM function.
For example, to calculate the sum of the projected income,
- Go to C12 and write down the following formula >> press ENTER
The subtotal for actual incomes is calculated using the same way.
- The formula in cell D12
This image represents the subtotals.
Step 5: Compare Actual Incomes & Projected Incomes
Next, I will compare the actual incomes with the projected ones. This will be useful in analyzing the budget at the end of the period. To do so, I will subtract the projected incomes from the actual ones.
In cell E7, write the below formula >> press Enter >> use the Fill Handle tool.
Step 6: Track Actual Expenses
The income-tracking is immediately followed by the expense-tracking. You have to record your expenses once you are done with recording your income.
The tasks are,
- Tracking expenses of each sub-category.
- Calculating subtotals of each expense category.
The tasks are similar to the previous steps. This image shows how it should look after completion.
Please note that I have demonstrated only Necessary and Occasional expenses. There are some categories too in the Excel file attached to this article.
Step 7: Make Comparison Between Projected Expenses & Actual Expenses
Next, I will compare the projected expenses and actual expenses. This is also similar to how we compared projected and actual expenses. This is the output of this step.
Step 8: Calculate Income & Expense for Specified Time Period
The next step is the summarization of the budget. The summary will help us get insightful information to control our financial activities.
Projected Income Vs Expense
First, let’s compare the projected income and projected expenses. It’s easy to calculate the projected income. You will get it from the “Personal Budget” sheet.
- The formula in C7 will be,
- Once you press ENTER, you will get the output.
For projected expenses, you have to add the subtotals of all the expenses.
- The formula in D7 will be,
='Personal Budget'!C22+'Personal Budget'!C33+'Personal Budget'!C45+'Personal Budget'!C54+'Personal Budget'!C61+'Personal Budget'!C67
- On pressing ENTER, you will get the output.
Actual Income Vs Expense
In a similar fashion, you have to calculate the actual income and the actual expenses. This is the image representing the actual income and actual expenses.
- The formula used in cell C8 is
- The formula in D8 is
='Personal Budget'!D22+'Personal Budget'!D33+'Personal Budget'!D45+'Personal Budget'!D54+'Personal Budget'!D61+'Personal Budget'!D67
Step 9: Highlight Key Information
Now, I will highlight some key information from the budget above. I will find out,
- The difference between the actual income and projected income.
- The difference between the actual expenses and projected expenses.
- The remaining balances.
The difference can be calculated by subtracting the actual values from the projected ones. For example, to get the difference between the actual income and projected income,
- Go to cell C9 >> write down the following formula >> press ENTER
- Similarly, I got the difference between the actual and projected expenses.
The Projected Balance is the subtraction of the projected Expense from the projected Income. To get that,
- The formula used in cell E7 is
- Similarly, the Actual Balance is in cell E8
- The Difference in Balance is in cell E9
- Finally, I have highlighted the information.
Read More: How to Make a Household Budget in Excel
Valuable Insights to Get from Personal Budget in Excel
The purpose of creating and maintaining a personal budget is to control your financial activities. With its help, you can track your income and expenditure, get to know what expenses you are making too much, etc. Let’s use this budget to get such insights.
Analyze Projected and Actual Income from Income Sources
You can analyze your projected and actual income from different income sources. For example, if you look closely, you will see that you earned $50 less than the projected income in the month of January 2023.
Reduce Expenses from Projected and Actual Expense Profile
Your personal budget is a great tool that you can capitalize on to reduce your expenses. For instance, you have used an excess of oil worth around $74 this month. So maybe it’s high time you controlled the use of personal vehicles.
Additional Feature: Track Your Savings in Excel Personal Budget
You can use a budget to record your savings too. This will make your budget more informative and help track your savings. I have added a new sheet in the Excel file to record the savings.
How to Use Excel Built-in Templates to Create a Personal Budget
Excel has so many templates for budgeting. If you want to use those templates then,
- Go to the File.
- Then select New from the window.
- Then, type “budget” in the search box and press ENTER.
- After that, select the one you choose.
- Select “Create” from the next window.
- Excel will end up creating a new budget for you.
Frequently Asked Questions
1. How often should I review my personal budget?
Answer: It’s a good idea to review your personal budget at least once a month to ensure you’re staying on track with your spending goals. If you have significant changes in your income or expenses, it may be necessary to review your budget more frequently.
2. What are some common mistakes people make when creating a personal budget?
Answer: Common mistakes people make when creating a personal budget include underestimating expenses, failing to track spending, and not accounting for irregular expenses like car repairs or medical bills. It’s important to be realistic about your expenses and review your budget regularly to make adjustments as necessary.
You can download this sample personal budget and practice.
The above procedures will teach you how to create a personal budget in Excel. I hope it helps everyone. If you have any suggestions, ideas, or feedback, please feel free to comment below.