Tuesday, January 12, 2010

Creating a Budget, Part 1

On Thursday, January 14th, our next Financial Peace University class will start. Classes are starting in your area, so go online, enter your zip code and get signed up.

The word “Budget” registers in the same part of your brain as the word “Diet.” We lovingly call it the dreaded “B” word, because most people hate the concept of living on a budget almost as much as they hate the thought of starting a diet.

It’s not that bad.

In fact, I can promise you that you will find that you give your income more muscle when you use a budget: you really have more of it than you think.

Today, I will show you how to begin creating a spreadsheet using Google Docs.

Budget Basics 101

In our household, Cindy and I run a zero-based budget. To date, I am not aware of any software that takes this approach. For example, for many years, I tried to use the budgeting system that you find in Microsoft Money. It did not work for me.

The best software tool that I have found is a spreadsheet. Although I personally use Microsoft Excel, you can use the spreadsheet that is freely available on Google Docs.

Next, you need to realize that the ONLY portion of the budget that you really know is your income. If you are like me, I had no idea how much I needed per month for gasoline and groceries. Knowing that you don’t know, be prepared to make adjustments to your first three months of budgets often.

Finally, start with a large set of categories. You will not be able to put money in each category, but this will give you something to think about.

Getting Started With Google Docs

Google Docs is a set of free software applications that allow you to store and edit documents online. You will need to create an account with Google. After you have created your account an logged in, you are going to select “Spreadsheet” from the “Create New” drop down.


A spreadsheet is a tool that allows us to create rows and columns.

Today, we are going to create a “quickie” budget. This will simply have our categories, the total amount of income per month and the amount that we are going to spend in each category.

Once you have created a new spreadsheet, you will have a blank slated:


You will notice that, between row 1 and row 2 there is a slightly thicker separator. This is how Google Docs indicates that the first row is “Frozen” to change.


Because I am going to want to add additional information into the header, I will freeze the first two rows instead.

image This will separate the Header Information (row 1) from the data information (row 2) and beyond.  To do this, select the Tools Menu, then Freeze rows and finally, Freeze two rows.

From the file menu, Save your work. Congratulations, you have created a spreadsheet in Google docs!

In part two, we will create the categories and header sections and I will show you how you can have the spreadsheet do all of the math for you so that everything stays balanced.

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