11 February 2014

The Greatest Club of All

Listening to: Lady, "Money."

I’ve done a lot of great things in my time, but this could be one of the very best. For the past year, Ameer and I have been tracking our expenses using a very special Google Doc. 2013 was our first year of Budget Club and it was a tremendous success. There’s a wild thrill to tracking every penny and dime you spend. Trust me, there is.

When I was younger, aka two years ago, when someone asked me “where does your money go?” I wouldn’t have been able to tell them. Now, after a full year in Budget Club, I know exactly where my money went. Unfortunately it’s all mundane stuff. Food, shelter, travel, karaoke, and bubble tea. No luxury boats or Wolf of Wall Street stuff on the list. But no matter, part of being in Budget Club is learning to be fiscally responsible. Extravagance is eschewed, it’s all about saving money! I know, it sounds very un-American of me, but I still participate in consumerism on a regular basis, don’t worry. Plus I take photos of things I want but can’t have, which is almost the same buying stuff.

Anyway, without further ado, we invite you to join Budget Club. All it takes is a commitment to tracking your expenses. That’s it. You can use Mint, you can use a piece of paper, whatever. However, we highly recommend our Google Doc, which is full of magical formulas. Somehow when you adjust the budget tab on the document the other tabs get changed. I don’t know how this works, it just does. Grab a copy of the template and try it out for yourself. Below is the how-to and some spreadsheet explanations. Plus a podcast episode we made, just for you.

Remember, it takes a lot of diligence (and anal-ness) to do Budget Club but the rewards are many. Give it a few months and as my accountant sister loves to say, "Better log it!"

Budget Club spreadsheet | Budget Club podcast

Getting Started:
  1. Go to the “budget” tab and input your income. Then fill out your fixed expenses, variable expenses, and annual expenses. Finally, throw in some tags you know you’ll likely use. Get that “money left to budget” box to zero (show in red at H4).
  2. Enter your variable monthly expenses as you go, categorizing and tagging each item. You can edit these at any time so don't spend too much time on this.
  3. At the end of each month, you need to lock down rows F, H, K, and L because those could change in the future if the master budget columns change. The locking down process prevents those individual columns from being affected by future edits. Instructions for locking down are included in light blue on the January tab.
Sometimes we get asked why we bother with a spreadsheet when there are clearly lots of options for personal finance out there. Well, I tried a lot of things but I kept returning to a Google Doc because it was customizable and easily shareable. Also, I use Spendee because it's pretty and an easier way of tracking each expenditure versus just using Evernote or Notes. I find that the attractiveness of the interface encourages me to input numbers. So yeah, Spendee.

Budgeting vs Reporting
Last year we simply had a huge list of categories for everything. This year’s innovation is to separate out the categories according to what’s useful. According to AMR’s financial planner, budgeting should be broad, used for all inclusive categories. Who cares if you flew, drove, biked, subwayed, it’s all just “transportation.” So, for budgeting purposes, the fewer categories the better.

However, when reporting, you want details. Under “food” I want to know if I was eating out, buying groceries, or just getting lots of snacks. The list of tags should be numerous because you can only analyze your spending when you have a clear idea about what's being purchased. In short, it's good to aim for five or less categories, but populate your sheet with as many tags as necessary. Go crazy.

The “Ann” tab
This is the tab for annual expenditures. Last year we used to have individual months where big amounts of money came in or out, wrecking our carefully balanced budget. No more! Instead of getting slammed because you just bought a new computer in February, you can now balance that out over twelve months. It offsets the big purchases and allows you to plan more responsibly. You can use the Ann tab however you like but we recommend throwing in vacations, holiday gifts, tax returns, and various one-off items in there. Note: This will change your variable expense, as the Ann tab is basically a mini-budget within the overall budget.

The last thing I’d recommend is to do this with some friends. We have a Budget Club of four people and it’s super fun to compare notes and be in competition to see who “won” the month. Basically the winner is whoever overspent the most, and they must be shamed until the next month. The social aspect of Budget Club is one of the best parts. Well, that and warm fuzzies you get from tracking all your expenses.

Feel free to ask Ameer or I if you have any questions. Or suggestions. We love suggestions!