[Hey guys! Out at the beach this week, but as promised I’ve got a handful of killer guest articles for you starting with this one – on how a reader completely changed his finances around by building out an impressive spreadsheet! He drops screenshots of it, as well as descriptions of what each of the twelve tabs do (yes, 12!!) and it’s all pretty amazing stuff. If you get turned on by numbers, you may want to close the door right now as it’s about to get HOT up in here! Haha… Enjoy!]
I would like to explore the reasons why I focus on my financial world, and what I’ve learned along the way.
For me, it began when I wanted to spend a substantial amount of money every month for 3 years and I did not know if I could float it.
I graduated as an engineer in 2007, and after 2 years of designing commercial HVAC systems I decided I wanted to shift career paths and move into business by getting an MBA at a local university. It would cost $400/mo for around 3 years. I did not track my expenses at the time, and I had no real clue if I had room in my budget for it or not. I was desperate for information so I could better manage my money.
During my MBA program, the most important thing I learned was that you can only manage things which you measure. If you do not measure, there is no feedback to improve upon.
I researched online and ended up at Crown Financial which got me recording every expense for a month to decide whether I could cut enough out of my budget to add the MBA program in.
I was making about $50,000 at the time. I was single, visiting restaurants with friends frequently, and spent a good deal of my money on pocket knives and frivolous things that did not improve my life, nor make me happy. I wanted to start the MBA program as soon as possible and I could not do these things immediately because I was not managing my money well. This made me upset, and I became determined to become a better money manager.
The reason I focus on my finances is because I want to spend my money on things I value, and to do that I need to manage the money and know where it’s going. I don’t want to spend $0 dollars each month, but I want every dollar spent to go towards things I enjoy. That was the ground breaking epiphany that hit me years after I started getting serious about my financial state.
After a month of recording every expense, I came up with a spreadsheet that let me track things easier than writing them down on graph paper. I started to actually enjoy inputting my receipts into the excel spreadsheet and balancing it with what my bank accounts said. All in an attempt to be a good steward of my wealth and use it in better ways.
After I determined I could do the MBA program, it became even more important for me to continually track my income and expenses since my fluff income was eliminated.
This spreadsheet slowly evolved over the last 6 years. At first it was just a budget template. Now it is a massive workbook that has all of my critical updated information, and is extremely useful to me when making financial decisions.
I started out just wanting to make decisions wisely. Now I open my dashboard and strive to increase my net worth monthly, and make decisions that help it increase faster, instead of only making decisions based on whether I can fit things into my budget or not.
I was single when this started, and now I am financially responsible for 4 young children and a homemaker wife. Knowing where our money is going is security for us. We can anticipate our future and plan accordingly. Our plan is never exactly correct, but having a plan is important and measuring our spending has been critical to actually owning our decisions.
My spreadsheet has 12 major tabs that are used regularly.
Here is a brief breakdown of each, accompanied with a screenshot to see how it looks in action.
Tab #1: Dashboard
This sheet lets me look at my net worth, my account values, and my current budget state. Below the chart is a net worth tracking area I update monthly after I pay my mortgage.
Tab #2: Checkbook
I input every expense into this sheet and reconcile it with my online accounts daily around lunch time. It gets more difficult to reconcile the longer I wait. I track our budget categories weekly, and close out the week on Thursday night when my wife and I discuss the week ahead.
Tab #3: Budget
Figuring out how to keep track of monthly and annual payments this way has been huge for helping me budget accurately. You can see items 4 and 5 are monthly and annual Bigs (they are detailed below)
Tab #4: Forecast
My spreadsheet knows all of my monthly, annual, and weekly expenses, and will forecast as long into the future as I desire. I quit my mortgage bank escrowing my taxes and insurance monthly, and now I pay my taxes / insurance myself. Doing this allows me to make pinpoint decisions like when we’ll be ready to renovate our kitchen, or how buying a vehicle will impact our resource availability later when we need to pay our home tax and insurance.
Tab #5: Utility
I have to get my utility budget number from somewhere, so I use the last 12 months average. It’s nice having data so I can compare how installing new furnaces / windows will impact my utility bill, and to also make intelligent decisions regarding return on investment when upgrading appliances as well. I usually note on this sheet when certain things happen each year just to keep track of things.
Tab #6: House
This is really just an amortization spreadsheet. Knowing how to do this helped me intelligently compare refinancing options, and showed me how fast changing my mortgage to a 10 year increases our net worth monthly – therefore helping me stomach the pain of eliminating some of my income fluff for good purpose. After seeing the numbers it was impossible to resist. I could talk about this for great lengths, but wouldn’t recommend it without some serious thought. It has added frustration to my life but right now I’m glad we did it.
Tab #7: Gas
Every time I fill up one of our vehicles, I reset the mileage tracker and record the trip miles and overall miles on the receipts to input here later for posterity. It also tells me when to change my oil.
Tab #8: Debt
Our debt has since been cleared, but I assure you there were several accounts here a few years ago while we were steadily hitting them with the snowball method. Here is a snapshot of the last debt we paid off in late November so you can see what the tab looks like:
Tab #9: Bigs
I record the expenses on all of our big items (home, pool, van, lawn work, hobby expenses, veterinarian, health and vacations). It’s nice to be able to look back and see things like this. And when you’re selling a vehicle, having this record can justify a higher price.
Tab #10: Retire
This spreadsheet lets me forecast when I’ll be able to retire based on my current actions. I’m aiming for 55 now. The buttons on the right adjust my salary during retirement to keep a minimum balance of 0 by the time I’m 80, 90, and 99. I think planning for a 4% distribution is probably a wiser way to go…
Tab #11: Invest
This is just an automatically updated sheet that keeps track of my investments and shoots it back to my dashboard report and retirement calculator. I update the shares weekly by hitting the button to add my weekly investments to the total.
Tab #12: College
This lets me calculate how much I need to save for my children’s college. I can hit the button at the top and it will automatically calculate my save/month to make the minimum end balance 0. My current plan involves paying my home off, and then funneling that additional capital over to college savings.
The Current Situation:
At the end of 2011 I completed my MBA and passed my Professional Engineering exam. I was married in January of that same year, and we had our honeymoon surprise of twin girls shortly thereafter. I was laid off in April of 2012 and ended up in another engineering job I truly enjoy and love.
I used some of the excel skills I learned at my old job, and from constantly tweaking my financial spreadsheet, to solve a really big problem at my new job that quickly caused my salary to increase. I was promoted to senior engineer shortly later and recently accepted another promotion shifting from engineering to management.
We had another child (boy in June, 2013) and our 4th child was just born last month. I’m currently making substantially more than what I was when I was laid off from my old job, and recently was given a company car and enrolled in a golden handcuff program.
Having my MBA turned out to be a key part of why I was promoted to manager from engineering. And tracking my expenses helped get me here.
UPDATE: Within hours this post went viral on Business Insider (over 1.5 million views!!), landed on the home page of Yahoo! Finance, and then went on to hit the top of Reddit getting over 900 comments! Isn’t that incredible?? I knew this was a great post but man… we sure do love our #’s, haha… Thanks again for taking the time, Kyle!
[EDITOR’S NOTE: I asked our friend here if he could share the template with us in case anyone wants to try it out, but he wasn’t 100% comfortable with it as there was too much sensitive info to be scrubbed off. He did, however, send over a revised template that you can use if you want to give that one a shot! You can download it here :) Though he recommends building one from scratch so you can customize it to your liking. (I do too, however, it can also help starting with a base to work off… That’s how I ended up with my financial snapshot/budget I use, which you can find here, as well as a handful of others since I know you’re now completely turned on, haha… Good luck!]
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!