Know What A Personal Finance Spreadsheet Must Have!
"Help! What do I put on my first personal finance spreadsheet?" When you're writing your first personal finance plan it can get very complicated!Not only that but do you know where one thing goes? Does credit card money count as 'income'? What is 'income'?
Alright, I'm going to share with you what every basic budget personal finance template must have so get ready! ;-)
Those things are:
- Income
- Expenses
- Assets
- Liabilities
- Cashflow
That's it! "That's it? What do they mean and why should I care?" Let's look at each one of these.
Income
Your spreadsheet must start out with your 'income'. Income is: money going into your pocket!
There are three types of income:
- Active: income you're directly working for (eg: a job)
- Passive: income that you're indirectly or not working for (eg:book sales)
- Portfolio: income from investments (eg: capital gains)
I recommend having a section for each one even if it means writing zero in the other forms of income.
You'll be training your subconscious to generate income from those areas (unless you don't want the extra income, of course!) ;-)
Note: If you have your own business I recommend giving it a separate budget personal finance template.
Expenses
This is the second part of your budget personal finance template. Expenses is the money going out of your pocket!
You can break them down into 'wealth expenses', 'necessities', and 'luxuries'.
- 'Wealth expenses' are your expenses geared towards being wealthier (eg: charity, investment, books, etc...)
- 'Necessities' are expenses that you must pay (eg: food, water, taxes ;-), etc...)
- 'Luxuries' are (you guessed it) the expenses that would be cut first if you had to downsize your lifestyle. This is up you but for I would say examples are: eating out, movie tickets, etc...
Note that I didn't say that you'd 'enjoy' cutting them first! Also this is all relative. For some people eating food is a 'luxury' but watching T.V. is a necessity! ;-)
Assets
Your assets refer to the things that 'put money into your picket'. For example a money-making business would be an asset.
They are important to include into your budget personal finance template because as you become wealthier you will acquire more assets (hopefully!)
It's also fun to watch your asset column grow too! ;-)
Note: Even though you can list items like your car or house as "an asset" they are really only an asset when you sell them. So list them here but just remember that they don't give you money unless they're sold!
Liabilities
Your liabilities are the things that 'take money out of your pocket'. For example a credit card debt is a liability. A house mortgage is another one.
There's some conflict about whether there's such as thing as 'good liability' and 'bad liability' (or good debt and bad debt). Many people believe that all 'debt is bad'.
Personally I believe that good debt (debt that helps put money into your pockets like debt to buy real estate) is helpful while bad debt (debt that takes money out like credit card debt) is harmful.
In any case, I believe Robert Kiyosaki (whose books explain that concept) when he claims that it's wise to treat debt like a loaded gun - carefully!
Cashflow
Your cashflow is the most important part of your budget personal finance plan. Your cashflow is the difference between your income and your expenses. This is the hardest part for most people to accept.
You see, you can have the best car, house, and clothing but if your cashflow is negative then sooner or later your lifestyle will end unless you do something to fix it (besides increasing your liabilities!)
My Conclusion
There you have it - make sure you have these basics on your finance sheet and I recommend starting with getting used to writing these items.
Again, when it comes to finances I recommend keeping it simple but make sure you hold yourself accountable for your budget, personal finance template and your money!
