budget worksheet – Our Financial Path.

It can be hard to find how to be happy when you do not really know where you are heading. Without goals, life can seem a bit vague. Fortunately, it is never too late to find your purpose and find your true happiness.

This week, I have learned that our water tax bill just jumped from about $90 to a whopping $600 because of a small plumbing issue that was leaking fresh water down the drain twenty-four, seven for the past year!!! I never looked into the issue before I got a real incentive to do so. Honestly, I heard a strange noise coming from a pipe but never looked into it. In the end, I fixed the problem myself for a total cost of ten dollars.

Most issues can be fixed cheaply if you ask the right questions to the right people. I have zero experience in plumbing and thought I had to call a plumber. They usually charge at least $50 just to show up then, $45 to $150 per hour of labor but instead, I called a local plumber and described my problem, simply asking which parts I would need to fix it.

I then visited our hardware store and chatted with one of their oldest guys on the floor to seek his knowledge. He explained to me the proper way to attach the parts and my total cost ended up to be right under $10.

If you are ready to get your hands dirty, you can fix almost anything around the house for a fraction of the price. Ask the pros or search YouTube for some How To videos, they are some on every topic imaginable. In the end, it only took me half an hour to fix my issue.

Any house owner should be attentive to his property. Listen to new noises, look for new cracks. Fixing it early on will always be easier and cheaper than if you wait until a problem becomes critical.

Moral of the story is; if something breaks, fix it now. You do not always need to outsource all your house maintenance, you will learn a lot and save a ton!

Fix your finances early on

The same goes for your personal finances, if there is a leak somewhere, fix it now. Take the time to rethink your financial life to optimize it and attain your goals faster. So many people and spending away without thinking about the true meaning of their expenses. Living their life buying things to impress people they don’t know with money they don’t have.

Goals and happiness

The first step of our financial makeover is to clearly define your goals and to create a plan to attain each goal. Money is often thought of as an antagonist, an enemy that keeps you from doing what you want to but it is exactly the opposite; Money is a tool to achieve your goals. Ultimately, money can be your tool to financial freedom. Money should make you happy, not trap you in a lifestyle influenced by peers and marketing agencies.

I suggest writing down your goals and going back on them at least once a year, depending on the time frame of your goal, to reassess.

Having long-term goals is a great start and can be a great motivator. Retiring early, for example, is certainly a huge priority for me and this pushes me to outperform at work, pursue side-hustles, and stay on target with my savings.

However, I am also thinking of my other goals to work on projects I love, travel the world, and spend time with my family. Balancing all of these, I get to fully enjoy the journey towards early retirement while living a life of happiness.

Once this is done, start writing down everything that truly makes you happy. This might be a hard exercise but it will truly enlighten you in later steps.

Track your finances

Do you know how much you are actually making per year? Do you know how much you spent on food last month?

Now that you know what your goals in life are, you need to know if you are on the right track to attain them. I highly suggest Personal Capital to track all your accounts in a simple, clean, app that lays out all your earned income and spending.

Once you know how much is coming in and where it is going out, you can then start optimizing your financial life to attain your goals. Personal Capital offers a great free tool to set monthly spending targets and easily budget all of your expenses.

Fix the leaks

Start working towards your dreams instead of working simply to pay the bills. If you feel trapped in a consumerism hamster wheel; buying things you feel you deserve since you work so hard and working so hard to pay for all those things, know that it is never too late to change. Now that you see where all your money is leaking, you can go back to your happiness list and see which expenses are truly making you happier.

Break down your expenses into 3 general categories; Activities that make you happy, Things that make you happy, and stuff you have no choice to pay for.

The latter should be optimized to maximize the other two. For example, I do not get much joy out of driving, so we own 10 years old cars that get us from point A to point B. Even if manufacturers spend billions on advertising (the big-3 spends almost 3 billion a year each), I am not inclined to spend my hard-earned dollars on a brand new car just to keep up with the Jones.

By optimizing our transportation expenses, we are able to enjoy life and focus on our goals.

To come back to our example, we have a super economical Honda Fit, but we also own a mid-size SUV that consumes twice as much gas and did cost more to purchase. It may not be the cheapest way to get from A to B but it is a great contributor to my happiness since it has all the room we need to enjoy all the outdoor sports we enjoy. Would a newer SUV make me even happier though? I do not think so.

Once you categorize your expenses, go back to your goals list and see which expense is compromising your greater life plans. Once you start patching up the leaks in your budget, you will find yourself with more flexibility, more power over your life, and more happiness.

Stay on top of things

Just like a house, your budget needs maintenance and refining. Revisit your goals and happiness list once in a while and stay on top of your finances.

Add to your lists, tweak them, and never forget to enjoy the journey.

If you are only focusing on the end destination, you will give up long before the finish line. Hopefully, you will be able to maximize everything on your happiness list while completing your goals list within the time frame you imagined, Mr. Xyz.

For most people, starting a budget can be hard and even harder to follow through. I think that a simple personal budget is always better than no planning at all and can drastically help your savings in the long term. Finding your own way is the first step to a clear and sound financial path. I will share a few tips that helped us a ton. If you just want your free budget worksheet, you can scroll to the end of this article.

Keep it simple

Most budgets include too many things to follow or are simply too tedious to maintain. I suggest a simple, easy to track, budget that you can actually follow month after month. I included a free copy for you to use at the end of this post.

The first step before starting your plan is to know where you are currently spending your money. Using a free tool such as Personal Capital will greatly help you track your income and spending and has a lot more to offer to improve your financial well-being! I suggest you get the Personal Capital app but if you really want something just to track your spending, a simple budget app or Mint will do the job. Once you know where your money is going, it is time to categorize your spending and create a simple budget.

Going through each little details will make it impossible to maintain and follow through. I suggest keeping track of major categories such as Groceries, Auto, Home, but skip the subcategories like Home Insurance, Home Maintenance, Home Lawn Care. You can use this free template and modify it for your own needs.

You need to account for the main categories of spending (in order of importance):

Fixed Expenses (Rent, Utilities, Payments…)
Variable Life Expenses (Groceries, Gas, Entertainment…)
Investments (401k, Roth IRA…)
Savings (Emergency Fund, House Down Payment…)
Guilt-Free Spending (Restaurant, Gifts, Shopping…)

I would say that number 1, 3 and 4 should be fixed, I know exactly what my mortgage payment is every month and I invest a fixed amount of my salary every paycheck to get my employer match and maximize my tax benefits. Then 2 and 5 are the most variables and the easiest to cut down. We eat well and spend about $500 a month on groceries but on the other hand, we have cut down restaurants and entertainment. If you are struggling to cut down, you can follow my money-saving tricks to learn easy alternatives to your current spending habits.

Keep your budget updated

This is the part were simpler budgets overcome larger, extended, worksheets. Going back to your file and seeing how you are doing over multiple months, or years, will keep you on track and give you a perceptive on where you stand. You can track it manually in excel or you can let aggregators like Personal Capital or Mint do it all for you.

Keep goals

You should also include goals into your personal plan. Having a goal in mind will motivate you and including it in your budget will show you how attainable it is. To come back to my previous point, keeping track of that goal month after month will motivate you to continue forward and push until completion. An easy way to track goals is having separate accounts for different goals. We have a vacation account where we save up for our next trip!

Stay out of debt

Budgeting is a perfect tool to increase your savings but your priority should always be to repay high-interest debt first. If you have credit card debt or high-interest student loans you should definitively include those in your budget and prioritize them. I also recommend you take a look at my tools to repay your debt faster.

Keep revising and rethinking

Once you completed your budget, rethink each and every category and their respective spending. You can make it a goal to reduce certain expenditures or to cut them out completely. From my personal experience, the easiest things to cut to reduce your spending are:

Replacing cable with Netflix (around $50/month in savings)
Bring your own lunch to work (around $200/month in savings)
Not driving to work (around 200$/month in gas savings depending on the distance)
Inviting friends for drinks at your place instead of bars (around 50$/night out in savings)

For each expenditure you should ask yourself; do I really need this?

As Maslow’s Hierarchy of Needs states, your physiological needs such as food, clothing, shelter are the most important. The second tier is safety; this includes insurance, utilities, and so on. Anything after those can be reduced, cut, or accepted as guilt-free spending. Once you attain this mindset and choose your luxuries, you will enjoy them even more. You should also take concrete steps to save money if you really want to cut down on your expenses.

Keep it loose

If you are not using a free tracking tool like Personal Capital, you will probably not get all your figures to the cent on the first try. Keeping some wiggle room in your budget will make it easier to follow. Keep in mind that setting unachievable targets or cutting unreasonably could demotivate you. We all need to budget for fun and luxuries.

Reverse budgeting

When you get more advanced or if you are already comfortable with your abilities, you can try to reverse budget like me. I use reverse-budgeting where I plan to save first, then spend what is left. If you are like me and save more than half your income, you might want to plan things differently and start with a fixed amount of savings each month. This might force you to be frugal and inventive but it can drastically increase your savings rate!

1. Investments (or Debt repayment)

2. Essential Expenses

3. Discretionary Money

The whole point of a budget is to get you to save more (or repay debt faster) so why not prioritize that in the first place. Paying yourself first optimized debt repayment and savings goals and can be set automatically. The reverse-budgeting method teaches you to live within your means and avoid debt.

Get your free budget worksheet

No email, no sign-up or anything. Just click to view it in Excel.

Good luck and happy budgeting, Xyz.

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