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Budget planning for any goal

I started making yearly budgets after I started my first job in 2015 as a way to track my spending, saving, and estimate my tax withholding. After getting married in 2017, and Grace going freelance full-time my spreadsheets have gotten more complicated, but have remained an invaluable tool to stay on top of taxes, cash flow, and, of course, project budgets.

Budgeting Process — John and Jane Collected

I created a sample spreadsheet that shows a pretty straightforward budget and tax situation (see disclaimer) for John and Jane Collected along with their child Joe Collected. Like Grace and I, they enjoy home renovation and have a healthy budget for completing projects this year.

John and Jane live in Texas, so they don’t have a state income tax to pay. John Collected primarily consults from home and manages their rental property, while Jane Collected has a traditional employer. John and Jane prioritize their school-aged son, their home, which they are fixing up, as well as saving for the future. These values are reflected in their budget.

They end every year by putting together projections for next year’s income and expenses based on the current year. They fill the yearly budget for each expense sub-category which rolls up into totals for each general category. The spreadsheet also calculates their monthly and bi-weekly spend level for each sub-category, and rolled up general category.

They then fill out their projected income which comes from Jane’s W-2, and John’s profit from his Schedule C and their rental profit from Schedule E. Jane adjusts her tax withholding (W-4) to account for taxes on John’s Schedule C and Schedule E income, which simplifies his life as he does not need to remit quarterly estimated taxes to the IRS (note: they aim for no over- or underpayment).

The spreadsheet then calculates their estimated taxes (Federal and FICA, less any prior year refund), as well as their budget surplus or deficit. Since they might end up with a budget deficit, they would either have to be OK drawing on their cash savings or cut their budget somewhere to get closer to a neutral/positive budget.

Monthly updating

Each month John and Jane review their year-to-date budget, fill in the date of their update (cell D1), and categorize their expenses into the sub-categories under the “As of XX/XX/XXXX” column.

The “remaining monthly budget” column then automatically calculates their remaining spend level, and rolls up into the general categories.

The “On Track” column then gives a quick glance to see where they are over- or on-budget for each of the general categories.

After this step, they update their year-to-date income, and they get a read on their cash flow in cell F52, which is negative for the current month as they have spent more than they’ve earned so far year-to-date.

Free download

Feel free to download, modify, and keep your own yearly budget!

Our personal budget has each year separated into tabs, and the tabs are linked together to provide a running total of savings, investments, as well as a forecast of earnings and expected tax policy. Before big decisions, like moving, I typically run different cases a few years out into the future for planning purposes.

I’ve more recently gotten less concerned with updating our full budget every month, and just keep a running monthly cash flow to keep tabs on income and expenses, which makes updating take a few minutes every month (e.g. input mortgage, credit card bills, and income each month).

This blog post and related downloads are for informational purposes only, and are not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors regarding your individual tax situation.

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