Budgets

Budgeting Basics: Income Tracker

As I mentioned in my post about how budgets matter, the best budgets both increase income and decrease spending.  It is this dual characteristics of budgets that really makes them useful as a financial tool for moving a family toward financial independence and a greater impact on the world. But if budgeting focuses on both income and expenses, where should I start in creating my budget? I think for the sake of this series we are going to take a look at the income side of budgeting before we look at the expenses side – but when I first created my budget spreadsheets I did it in exactly the opposite fashion.

I think the real issue is making sure that you have the double focus when you work on and implement your budget because both really, really matter to your long term financial situation.

Where Does My Money Come From?

This is the first question that you need to ask yourself when beginning to get your financial house in order.  Luckily, this is generally a very easy question for us to answer.  Most people know exactly how often they get paid – biweekly, semimonthly, monthly, or on a irregular basis – and probably also know how much they are going to get paid – unless they have variable hours, worked a lot of overtime, or just received a raise.

This predictability is very good for you and your family.  It all boils down to the fundamental personal finance equation I talked about in Budgeting Basics: Budgets Matter -

Money Earned – Money Spent = Money Saved + Money Given

Predictability in the Money Earned variable in this equation means that by manipulating the Money Spent variable you can increase the sum of the equation.  A quick example – if I know that I make $100 a month, I know that I have to keep my spending under $100 if I am going to be able to save or give any money away.  Without this relative consistency, I can become uncertain about the future and miss out on opportunities to save or give.  Knowing my income helps give me a framework within which to create spending, saving, and giving goals that are meaningful and actionable.

After all, it is really hard to see where your money is going to go if you don’t know anything about how much money you have.

How To Create An Income Tracking Spreadsheet

I recommend watching the video in HD

In the video I explain all the steps that I have outlined below.  If you like to see examples, watch the video.  If you just want the gist, read my outline.

  1. Open your spreadsheet application of choice.  For most this means Microsoft Excel – but for those cheapskates out there (like me) you can get free productivity software that includes a spreadsheet editor from Open Office or Lotus Symphony.  I use Open Office but am interested in checking Lotus out.
  2. Title your sheet “Income”.  In Excel you do this by double clicking on the sheet tab on the bottom of the window.  In Open Office you need to right click on the sheet tab.
  3. Create a title for the table you are about to create. I like to give my tables some space from the top of the spreadsheet. Enter your title in B4. Bold the title and make it a larger font so that it stands out. I like size 14 font.
  4. Give your table some meaningful headings.  I like to use the following headers for my columns.  These aren’t necessary, but I find them useful:
    • Date – This is the date that the funds were handed over to your family
    • Source – Who did the handing over of the funds
    • Amount – The amount of money that was handed over to your family
    • Who Earned It – Who in your family earned the money
    • Type – If you only have one source of income, this really isn’t that important.  But if you want to track things like interest income, second job income, internet income, dividends, rental income, etc than this column could be a source of some pretty useful information.

    You really only need as many columns as the information that you want to track. In my family’s case, I wanted to see the breakdown between my wife’s and my income because we had a goal to be saving the entire sum of her paycheck when she was working. You could have two columns or you could have fifty. Do what feels best for you.

    I would do these on Row 5 starting in Column B.

  5. Add some borders to give your eyes focus.  Borders are not necessary, but they do provide some structure to the page and help give your eyes boundaries to look at.  They also help provide a termination point for your table, which is important for step 6 found below.  I like to have a border box around the whole table, the table title, and each column heading (date, source, amount, who earned, type, etc.).  Then I like to have a border separating each column in the table from the other columns.  Add borders as you see fit.
  6. Create a Total cell at the bottom of your table.  At the bottom of your Amount column (if you are following my pattern this will be in somewhere in column D) enter a SUM function.  You can do this by:
    • Selecting the cell that you want the sum to appear in
    • Type =sum(
    • Highlighting with your mouse all the cells in the Amount column
    • Typing )
    • Hit the ‘enter’ key

    Then in the cell just to the right of the sum type the words Total. You can bold this text if you want.

When all is said and done, you should have a spreadsheet that looks something like this:

Budgeting Income Statement

Click Image To Enlarge

If you aren’t feeling adventurous and just want me to give you a spreadsheet to download, you can download the Excel version of the income tracker or you can download the Open Document version of the income tracker.

~0O0~

There are plenty of things that you could do to add a custom feel to your income tracking spreadsheet.  My wife would probably change the font to something “pretty” and might spruce up the screen is some splashes of color.  I prefer the Spartan feel of blank cells and white space on my budgeting spreadsheets, at least on the simple ones like this.  Feel free to modify as you see fit.

If you send me a picture or a copy of the file I’ll be sure to post the picture here for others to see.  Budget on!

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