1) Download your Bank Statement into Excel or Numbers monthly
There is not another initial point that I believe more important to start with. If you’ve read other blog entries from us, you will find this section slightly repetitive for good reason. I have an entire free demo (subscribe below) on how to confidently export your banking data into a monthly or yearly report while extracting only the USEFUL data. Ultimately our three column theory is meant to be clean and easy. Preform this step and have 100% control over your financial independence.
2) List out expected costs, flag them when they come in
Let me present a picture of data from our bank statement after following step 1 correctly and extracting the data into our preferred form.
Below is an example of a list of expected costs that you can keep track of easily every month. Sometimes you may have to update it when things change but normally if it is a consistent, annual or expected cost, there is little excuse to not have it constantly updated.
When they come in flag them one color. Know your colors and have them listed. Have something basic like this, which can also act as a category indicator for future reference. You want to flag them on both your bank statement output and your monthly cost estimated listing.
Using this process every month you are ensuring that your expectation over cost control is at least being met. If you have any sort of expected cost and it misses and you do not notice, that is not a good sign. Make it easy on yourself every month and be confident that you are not missing billing due dates. This can negatively impact your credit and you could lose access to important services such as health insurance or hosting costs for your website.
Build color coordination for future Filtering exercises. If you don’t know about how to use effective Filtering visit my article “10 Excel Tips”. Providing indicators like this can literally save you hours at tax time and will help you to have more confidence in your financial structure.
3) Highlight items in broad categories. Food, Travel, etc.
Additionally, we can create more general terms for your spending list. These categories should be able to capture how you spend money in broad useful terms.
For example, we can use another column to give more depth to our list of costs. This level of detail allows for greater organization and cost analysis when all is said and done.
Use Filter function again to give yourself a way of sorting through massive amounts of banking data with ease each year. Trace all of your food purchases for an entire year with two simple clicks of a mouse. Be ready for tax time in no time. This simple exercise can help your label areas of needed improvement or situations in which progress has already been made.
4) Keep monthly excel files consistent
One of the best ways that you can budget well is by keeping records consistent every single month for all months. This may mean keeping your monthly bank statement work in separate spreadsheets or keeping them in a single yearly collective spreadsheet. The key here is to keep colors, classifications, tags, and list structures consistent. If there is a one off item, leave the tag blank for your future review. Keep your files in a single organized folder on your computer and ensure that you are using functions to back-up your data. Act in the short-term, prepare for the long-term.
5) Track business vs non-business costs separately, use “Filter function”
We are already 95% there in our budget tracking system. Simply apply more active business vs non-business categorization into your tracking habits. Let’s see what a finished product looks like below.
Using a “Filter function” to sort between all of the different color classifications in your statement will allow quick and easy understanding of where you spend your money. You will be able to understand the difference between the major costs that come in and when, while also learning about smaller spending habits for business and pleasure. Give yourself a budget each month to optimize spending habits.
There is a lot of value in your old bank statement data. All people have access to online banking excel exports of their banking data. Just add some organization and some colors. Make your statements useful for budgeting, saving money, and planning for future needs. Spend two hours per month budgeting effectively and you could save two hundred dollars per month, who doesn’t love to make 100 dollars an hour?
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