How do I track my income and expenses using a spreadsheet?

Dubai: Tracking your income and expenses can be as simple as budgeting every month’s salary or as extensive as tracking several years of transactions.

“When it comes to budgeting, start small and as you track your costs further, it is bound to get more complex. This is when budgeting tools help,” said Dubai-based wealth advisor Mohammad Shaan.

“Keep in mind that budgeting isn’t something you’re good at as soon as you begin, but rather you perfect the skill of money management only gradually, and over time.”

Do I use a spreadsheet or budgeting tools to track costs?

Making your own budget spreadsheet is a common practice for people paying off debt or just trying to spend less than they make.

Using a worksheet or spreadsheet to track when your bills are due and when you plan to pay them each month has often proved to be a time-tested way to manage your money.

Some budgeting applications can also help get your finances in order, with popular ones in the UAE being 'Emma', 'Fudget', 'Wally', 'YNAB' (You Need A Budget) and 'Yolt'.

Why spreadsheets can have an edge over applications

Like a worksheet or spreadsheet, budgeting applications require users to manually input all of their expenses and income.

If you can’t find a budgeting application that is best suited to your needs and you still prefer to manually enter your transactions or control the layout of your budget, worksheets will help.

While this approach may be labour-intensive and time-consuming, doing so can help you understand exactly how you’re spending your money each month, with the added benefit of not having to pay for it.

What are the different techniques in using a spreadsheet?

There are more than a few ways to budget your incomes and expenses using a spreadsheet. To know what approach is best suited for you, here are some techniques that are more popular than others.

• Budgeting using a fixed/variable costs technique

One popular way to do so is by using a Microsoft Excel sheet or Google spreadsheet. If you don’t have access to Microsoft Excel or Google Sheets, you can use the same functions in OpenOffice Calc, and access your budget using one of their various applications.

Al Ain-based Irish expat Sandee McCann and her husband keep their expenses separate. "I keep track of charges on our credit cards on an Excel sheet and either attribute charges to him, myself, or as a split cost," she explained.

Here’s a sample of the type of worksheets they use:

• Budgeting by dividing income, costs, debt and investments

Another way to go about it is to segregate income, expenses, debt and investment. This is how Dubai-resident Sidhartha Halder keeps track of his incoming and outgoing finances.

“I build a yearly plan with careful analysis of big expense blocks to set the goals for each type of savings or investment categories. I then track details every month, with the idea of saving first and spending after that,” explained Halder.

Here’s a template of the type of worksheets he uses:

How do you set up your budget using the above techniques?

1. Write in your income. Using your budget spreadsheet, write down your expected income under a section titled ‘income’. List each salary out separately in the sections provided.

2. Create categories. Moving down to the expenses section, write down all the categories you typically spend money in. Include categories for all bills, spending, debt payments, and savings.

3. Estimate your expenses. Now that you have categories, list out the amount you expect to spend in each category in a column titled ‘budgeted’. Keep reading for how to determine how much to plan in each category.

How do you determine how much to budget in each category?

After you printed out your last 3 months’ of bank statements, go through every transaction and label it with the budget category it falls into.

Then, add up the total of each category and divide it by three to get the average spent in each category over the last three months.

Here’s an example: If you spent Dh2,475 spent on groceries the last 3 months; Dh2,475 divided by 3 months, equals, about Dh825 per month spent on groceries.

How do you determine where you need to cut back?

Next, determine where you need to cut back. If you are struggling to make ends meet or spending more than you make every month, look at the categories you feel are the least essential and where your spending is the least controlled.

Typically, you’ll be able to make big cuts in your restaurant, personal spending, groceries, entertainment, and miscellaneous categories.

Try cutting back at least 10 per cent in each one and setting that as your new budget. Don’t hesitate to cut back more if you know you’re spending way too much.

Here’s an example: We would cut the Dh825 per month we have been spending on groceries back by 10 per cent for a new grocery budget of Dh740 per month.

Now you have a budget set up with all the categories you’ll need, and you’ve made a plan to cut back a bit going forward.

Let’s look at a sample budget

Let’s take a look at a sample budget and put all of this information into practice. Scan through these numbers and then we’ll break them down.

Next, let’s break this down to make sure we really understand what we’re looking at.

Dh3,200 is what you actually earned, as opposed to the expected amount being Dh3,000. If you have a fixed salary the amount will be the same. List extra debt payments or saving amounts as an expense (in this case, it’s Dh1,557).

When totalling your entire expenses, it will come to Dh3,200 (same as your salary income). Although nothing (Dh0) is left, since you already put Dh1,557 towards extra debt payments or savings, you’re on track.

The above can also be considered an example for what is known as zero-based budgeting.

How often should you balance your budget?

Financial planners recommend balancing your budget regularly, preferably weekly. “If you go much longer than that, you may find it harder to balance because there will be more transactions to make a mess of it,” Shaan noted.

“Make sure you always balance the budget the day before you get paid again. Zero out your account by sending any unspent money toward your main goal, e.g. debt payoff or savings. Make sure your bank account doesn’t actually hit Dh0, though. Leave a buffer in there or wait to actually move the money until after you’ve gotten paid again.”

Will you need that money to cover your expenses for the next pay period? If so, let the leftover money roll over into the next pay period to cover your expenses.

Mark the leftover money as income on your budget for the next pay period so that your master budget will match your bank account. Only let it roll over to the next pay period if you know you’re going to need it for an upcoming expense.

Bottom line

As everyone's financial situation is different, you may find that not every category in these worksheets below is applicable to your income or spending.

You may even recognise that some months are different than others, but you should find after going through this exercise that you are more prepared for those changes and that you're accounting for unanticipated expenses as well.

Should you find that at the end of the month that you are consistently spending more than you are bringing in, it might be time to take a closer look at where you're spending your money and adjust those areas where you can to make up the difference.

Should you find, on the other hand, that you consistently have money left over every month, you now have the opportunity to decide what to do with that extra cash.

Perhaps you need to build up an emergency or ‘rainy day’ fund. You could also be contributing more to your retirement savings. Consider paying off certain loans faster, or perhaps you can start saving up for a special or large purchase.