If you get nothing else from my blog, you need to get this post. I spent thirty-two years of my life without having a plan for my money before spending it. Just as the saying goes, “He who fails to plan, plans to fail,” this was me. I failed on a monthly basis because I could not control my spending. Worse yet, at the end of the month, I could not tell you where my money went. It was gone, and I had nothing to show for it except a full stomach and clean car.
All that changed last December when I put together my first zero based budget. A zero based budget simply means that every dollar I receive is designated before I ever get the money, and all the designated money equals my net income; thus totaling the leftover amount to be zero. I also know that if I receive any extra money in the course of the month it will be applied to the top debt in my debt snowball.
Budgets have been overwhelming for me because I have always tried to create an annual one.? I quickly would get frustrated as things came up that I didn’t think of, or I simply didn’t have enough income to pay for everything I wanted in the budget. Doing a monthly budget makes it much easier. You must still plan and think about expenses that only occur in certain months, but you don’t have to stress out about an entire year.
The average person in North America will not have a pre-designated plan on how their paycheck is spent prior to receiving it.? Of course the average person in North America is B-R-O-K-E, broke as well. The bottom line principle of this budget is to give every dollar a name before we get the dollar.
One warning to heed; if you have not been living financially responsible (like I was) and this is the first budget you have done in some time (like it was for me), then you may have trouble living on it for the first month.? That is why you want to make sure you are putting in what you actually spent in the columns next to what you budgeted. Then you can go back and make an adjustment for next month’s budget. I was about $1,000 off on our January budget, maybe $100 off on our February, and since March we have been pretty much right on target.? It may take that long for you as well, so be patient.
I am attaching a link to an excel spreadsheet that you can use to make your monthly budget. I will spend a little bit here explaining how it works. In a few days I will provide a more detailed instruction sheet. If you are totally computer illiterate, this may not be for you (if you are reading this on a computer then you will probably be okay, but if a friend printed this page so you could read it, stick to the paper and pen). I am not a computer programmer, so all the fields can be edited. What I have done is made most of the fields that you need to enter data in green. Fields you should NEVER put anything in are red (formulas total these numbers for you). You should download and save the file into a folder, and then do a file, save as, and name it the month that the budget is for, and then keep it in a folder that is titled by the year. This way you can have a history of what you have been spending and also the debt you have paid off.
On the form itself, first go to the tab titled debt snowball. Once here, enter all your debts that are not a mortgage, car payment or student loan. If you would rather, you can actually include these debts in the snowball as well (I do), just don’t put them on the cash flow plan too, as they would then be accounted for twice. Next, enter the account balance for each debt (type over the numbers from mine), then enter the minimum monthly payment. Later in the month, you will come back and enter what you actually paid.? Be sure to delete the lines you are not using by right clicking on the line number and then selecting delete. Do not delete the Total line.
Next go to the Allocated Spending Plan tab and enter all of your planned paychecks for the next month (May). These two numbers (minimum payment total and paycheck total)?will total out and automatically appear on your Cash Flow Plan. Once you have entered your paychecks or planned income for the month (only enter the net amount), then go to the cash flow plan tab. Once here, in the column titled sub-total, place the amount you wish to allocate next to the category as you go through the list.
Once everything is entered, go to the bottom of the Cash Flow Plan tab. You will see that your total expenses and total income have been listed for you. Below that is a line that says difference. This is the difference between your income and your expenses. You have to make adjustments in your cash flow plan or your income until this number equals zero. If it is a positive number that means you have too many expenses and either need to cut them or add income. If it happens to be a negative number, then you are one of the lucky ones.? Take the difference and add it to the top item in your debt snowball and that should make your number zero. Once that number is a zero, the hard part of your budget is done.
At this point, go back to your Allocated Spending Plan tab. You now have to allocate according to your expenses which check will pay how much of each of your allocations. So start at the top and put your first item in, then put a “/” and place your new balance next to it (the amount of your check minus the amount of that item). So if my check was for $1,000 and I paid $100 for tithe, in the category for tithe underneath paycheck 1 I would place this entry, “100/900.” Then if my next entry was $100 for groceries, next to groceries put the following entry, “100/800,” and so on until that check is spent. Sorry, I haven’t made formulas for this one yet, you have to do the math the old fashion way.
I know there is a lot more instruction needed, but I will try to place that in a separate document. Please respond with questions, suggestions, or general comments about how effective this is by sending a comment. There may be others with similar questions, then I can put it out there for everyone. If you will use this, it can be a life changing tool in?and of itself!? Peace, out!
Monthly Cash Flow Plan? Excel File (.xls)
Hey, I figured out how to lock individual cells in an xls file. This should help.
Comment by Amy — April 18, 2006 @ 9:04 am
I plan on doing a serious upgrade to this budget over the next couple of weeks. My upgrades will include locking cells, more formulas and built in instructions for each line. I will let you know when it is available, of course!
Comment by Joel — April 18, 2006 @ 10:09 pm
Can you believe it!?!? I must be the only person in the world that does not have Excel. I can’t even look at this file.
I’ll have to get you to print me one off when you get home, Amy.
I’m tired of this dinosaur computer…heehee
See ya guys!
Sandy
Comment by Sandy — April 19, 2006 @ 11:11 pm
I do believe that Microsoft offers a free program that allows you to view Excel documents. Just a FYI.
Comment by Michael — July 14, 2006 @ 4:24 am
Thanks Michael, I will have my tech support (my wife Amy) look into it for me. That would be very helpful!
Comment by Joel — July 14, 2006 @ 11:50 am
Excel Viewer 2003 - “With Excel Viewer 2003, you can open, view, and print Excel workbooks, even if you don’t have Excel installed. You can also copy data from Excel Viewer 2003 to another program. However, you cannot edit data, save a workbook, or create a new workbook.”
I’ll look for something that lets users edit the data so they can take advantage of all of your cool formulas.
Comment by Amy — July 14, 2006 @ 1:16 pm
You can also try this free online service provided by Google: spreadsheets.google.com
Comment by Amy — July 14, 2006 @ 9:10 pm
OpenOffice.com is a free download that works with the Windows Office suite of software. I have used it here at home for 2 years or so.
Mari and gang in California
Comment by Mari Waters — July 15, 2006 @ 2:24 pm
Thanks for the spreadsheets!! I have wanted to put Dave’s forms into an Excel file and just haven’t taken the time to do it.
Your story is so inspirational. I don’t know you from Adam but am so proud of you for taking the high road and not weaseling your way out of what you owe. You are definitely not Donald Trump!!!
Lisa in Boerne, TX
Comment by Lisa — September 5, 2006 @ 1:14 pm
Joel,
Thanks so much for creating this. I had tried on my own, but yours is far superior. We had just read Ramsey’s book and have been trying to establish a budget and pay down our debts. This should be a great tool to assist us. I am just now filling in the blanks for December. I will let you know how it goes.
Comment by Kim and Karen — November 25, 2006 @ 1:59 pm
When I started using the TMMO in December of 2005, I went to microsoft office online and did a search for an ExCel family budget. It had all the formulas built in–I just had to change the headings to fit the needs of my husband and I. Just wanted to share an alternate ExCel sheet that is very user friendly.
Joel and Amy,
Like I said above, my DH and I have been following the baby steps since 12/05, in that time we have paid off over 35,000 in debt. We were newleyweds, so we didn’t have anything to sell, but I did get a second job and my DH started working overtime. We have gazelle intensity and are down to 2 debts on our snowball—only 90,000 to go!!! Anyway, just wanted to say to keep up the great work!!
Comment by Kelly — April 27, 2007 @ 8:16 am
Thank you Joel! My wife and I just started FP 2 months ago and I could not find a good system that worked for us. The gazelle budget on Dave’s site works great but you cannot save and customize the allocated spending plan, which is what we needed. I even bought software off of his site, still very lacking. You have saved the day!! This is a gift that keeps on giving. Thanks for sharing your story. We finished BS1 and are digging into a big hairy snowball! I’ll let you know how it goes.
Comment by Stuart Brown — December 19, 2007 @ 2:21 am
Open Office also has a free spread sheet program as well. Best part its free, worse part if your used to office the comamands.
Comment by Rob in Madrid — December 24, 2007 @ 7:37 pm
Thanks Joel,
I had just bought Dave’s software, tried it, and decided it stinks and was very frustrated when I ran across this website and tried your spreadsheet. I knew it could be done, but didn’t have the know-how to do it myself quickly. Thank you very much.
Comment by Laure — May 12, 2008 @ 11:10 pm
No problem; glad to help!!
Sorry to hear Dave’s software is no good; I never tried it because my spreadsheet does everything I need.
Comment by Joel — May 12, 2008 @ 11:30 pm
Joel, I noticed on one of your first Replies you mentioned creating a newer updated spreadsheet with advanced formulae and features. I did not see a link in the Replies with this information. Is your original link at the end of this blog the update spreadsheet that you referred to? Thanks for this resource. My wife just picked up Dave’s book last night and we’re trying to create our budget right now. We’ve organized where all of the money is going and created our envelope system, but as much as I enjoy doing things on the computer, I wasn’t looking forward to all of the pen/paper. I knew that I could type it up, if necessary, but thought I’d check online first. Thanks for providing your excel spreadsheet for budgeting.
Comment by Kaje — June 8, 2008 @ 2:35 pm
Hey thanks a bunch for putting this out there for folks to use! I have been looking for something to use but everywhere seems to have a monthly fee. This is great! I am just putting my budget together and if nothing else, this just helps me visualize my expense to income ratio and where to put my money. Thanks again!!
Comment by Brandon — June 17, 2008 @ 4:46 pm
Joel, I like the spreadsheet. I customized the cash flow plan and deleted the unused lines to clean it up a little. However, in trying to do the same with the allocated spending plan I notice that deleting any of the lines causes all the formulas to mess up. Is there anything I can do to prevent this? I’m not very good at the technical side of excel. Thanks and continued good luck on your journey!
Comment by Kiley — October 13, 2008 @ 9:08 pm
Thanks so much for this!! I’m just getting started with Dave Ramsey and figured I might be spending the day creating these excel spreadsheets myself. Fabulous! Thanks again.
Comment by Jody — October 25, 2008 @ 10:47 am