The Budget Planner

It's oft said… "In debt? Do a budget!", "Skint? Draw up a budget!", "Wife run off with the milkman? BUDGET!" The problem is most budgets don't work; they only look at a month's spending and miss too much out. This is a unique budgeting guide, including the free budget planner tool, with special techniques to manage and control your cash.

What's the point of a budget?

Drawing up a budget properly will answer two important questions for you:

• Do I spend more than I earn? This can lead to major problems, as continued overspending leads to serious debt. The Budget Planner will definitively answer this question and give you a real assessment of your finances.

• What can I afford to spend? The most important thing is to prioritise your expenditure and stick within your means. If you discover you're overspending, by correctly budgeting using the Piggybank Technique it should be easy to do this.

What's different about this budgeting technique?

Traditional budgets fail as they concentrate on one month's expenditure yet we don't always spend by the month.

It may be weekly or, in the case of Christmas or Summer Holidays, annually; this leaves most budgets missing out a chunk of expenditure - and thus not adding up.

The Budget Planner is therefore designed so you can enter how often you buy certain items and, rather than the typical 20 categories of spending, has over 90 (many added due to users' suggestions) to ensure you don't miss anything.

Download the Budget Planner

There are two versions of the free budget planner tool; if you have spreadsheet software such as Excel or Open Office, then that's the best version to use.

Important: Do not start to use the planner before reading the tips for filling it out below.

Spreadsheet Users	Non Spreadsheet Users
Download it here: Users of Microsoft Internet Explorer right-click on the link and select 'save target as' to download it to your computer. Users of other browsers (i.e., Safari, Firefox, Opera) left-click and from the dialogue box choose to save the file to your computer Budget Planner Spreadsheet	Use it here: Budget Planner Online Version
Easy to use even if you've never used a spreadsheet before	Easy to use, but can't be saved, so print out your results
Usage Notes: While technically it’s a spreadsheet, it doesn’t’ feel like one, and is very easy to use. The spreadsheet is optimised to work in Microsoft Excel but should also work in Open Office (which is available for free see Free Office Software). Technical Questions/Notes: If you need technical (i.e. about the software not budgeting) help read or post on the Spreadsheet Budget Planner Help thread. The Budget Planner is deliberately password protected so underlying equations can't be changed. If you've tried opening it and are asked for a password then you'll need to enter the word "money" although if you do use this and you accidentally change an equation we can't give you individual technical help so please be very, very careful.	Usage Notes: This budget planner uses JavaScript; which most people automatically have (or can download). If the download is slow your screen will go blank, just be patient, do not refresh (an updated version is due by March 08). Technical Questions/Notes: If you need technical (i.e. about the software not budgeting) help read or post on the Online Budget Planner Help thread.
While every endeavour has been made to ensure the download's virus-free, please do use your own virus checker. This site takes no responsibility for any viruses inadvertently transmitted
The history of the automated budget planner The Budget Planner was originally designed as a paper budgeting system for the original edition of The Money Diet book; yet one reader, Tony, was so grateful as it renovated his finances, wonderfully he volunteered to turn it into an all-singing, all-dancing spreadsheet/online tool. Since then that budget planner has been continually updated to the version above.

Doing the budget planner accurately should take about an hour; it's best if you gather together your bank and credit card statements first, preferably the last three months' worth. Between them it should list all standing orders, direct debits and give you an accurate idea of what you spend.

For example, for food shopping, gather together all your receipts for the last three months, add up all food spending listed, then divide by three to reach your average monthly spend.

If you can, also gather together your payslips to establish exactly what you earn plus any bills or other documents if possible (though your statements should also detail this info).

Tips for filling out the budget planner

• Are you doing it just for you or for your family?

  It's very important to be consistent when budgeting. First decide who you're filling it out for: is it just for you or is it for your partner/family too? Finances often can't be separated in which case you should sit down and do it together.

• MoneySave while you do this

  It's always surprising to see quite how many different things you spend cash on. Worse still is how much money you truly spend on them. Yet there are always ways to save. It's worth considering that as you write them down - are you getting the best value for your money? Can you get them cheaper elsewhere? You'll find much more info on this in the Money Makeover article.

• Ensure items go in the correct column

  Choose whether you most commonly spend on something by the week, month or year and fill that in - but do ensure you have the right column.

  You can't put an amount in more than one column. So if, for example, you always do a big monthly food shop and then weekly ones too, you need to calculate what you spend over a month yourself using a calculator (or you can use The Demotivator to calculate the combined spending over a year and then enter that).

• Overestimate, don't underestimate

  It's tempting to try and fool yourself by underestimating your expenditure. This is a MoneySaving sin, and you will be punished. Try and be accurate and, if you're not sure, guess larger not smaller - that way you'll have cash left over and not be short.

• Watch out for double-counting

  Some types of spending overlap into different groups; be careful not to count expenditure twice. For example if you've included your car insurance in the motoring section, don't include it again under insurance.

• Pay special attention to credit card repayments

  The credit card section is designed for you to enter the cost of repaying your existing credit card debts. Don't confuse this with spending where you simply use your credit card and pay it off in full.

  The best way to explain this is with an example. Say you spend £500 each month on food shopping that you pay for on your credit card but then pay off in full. This spending belongs in the food shopping column and not in the credit card column as, otherwise, you'll be counting it twice.

• Don't include company pension contributions in expenditure

  Pension payments are included in the expenditure section; if you send a cheque or have a payment from your bank account each month to pay into your pension, include it there. However, if your pension comes straight from your salary as a payroll payment, don't include it as, when you fill in the income section, you should just fill in the amount you receive after all deductions.

• Treat holidays carefully

  Remember that when you go on holiday, you'll have expenditure while you're away; but you also don't spend on the things you normally would. So you may want to reduce the amount you put in your holiday category by a little.

  For example, say you normally spend £100 per week on food shopping and £30 on petrol. If you're abroad for the week, you won't spend this but you'll still be adding them in. Therefore if the holiday cost £700 and you spend £300 you may be tempted to put £1,000 in - but actually you're saving £130 of normal expenditure so it should only be £870.

• Use the 'Odds and Sods' sections

  There are lots of categories in the budget planner, but it's impossible to include everything. At the end of each section there's an 'odds and sods' category, spend a minute to think if there's anything you spend money on that is missing - and include it there.

• Thoroughly double-check when you finish

  One small error, such as putting the £1,000 annual holiday spend in the monthly column, can make an enormous difference. Before you finish the budget planner double check everything is correct and you haven't missed anything.

What the budget planner results mean

Now we have a true picture of your income expenditure. Hopefully you've pressed the button at the end which tells you the real truth of your finances. Either you spend more than you earn or you earn more than you spend.

Well done

Providing you've been honest with yourself, it's time to relax a little - but MoneySaving doesn't stop there. In fact it's just beginning. Paying less for things means you have more money in your pocket to enjoy life more (and possibly save some for the future too!)

The typical savings from doing this can be £3,000 - £5,000 a year. My estimate is it'll take a full day's work but look at the return. It'll be the best paid work you've ever done. The whole site is dedicated to doing this in every area of your lifestyle, but if you're looking for where to start, read the Money Makeover article.

Don't run the risk of a debt spiral - deal with this now!

Spending more than you earn may not seem like a big deal, yet it's a potential disaster - and not just financially. At best you'll be eating away at your savings; at worst, you'll need to borrow.

And this type of borrowing is the worst as it means you can't afford your lifestyle and thus there's no planning to the debt and no end in sight. Sadly I've seen this result in debt crisis too many times, and that doesn't just hit your pocket: it can hurt your home, family, mental health and relationship.

You may feel this is over-dramatising yet when there's no money left and you can't borrow more - and the creditors are asking for money back which you've no ability to repay - it touches every element of your life. This danger is what's called a 'debt spiral'. It works like this:

How do deal with overspending

You need to immediately look at your finances. There are a number of steps to this and they are all covered in detail in the Money Makeover article which will take you through it. The best thing to do is read that, but in a nutshell…

First of all you do all the pain-free savings possible; these are areas you can save money in which don't impact your lifestyle; cutting the bills without cutting back. Then you rework the budget again seeing if that means you now spend less than you earn. If not you need to start the pain-full savings; this means spending less, buying less and doing less until you are spending within your means.

The most important part of this is learning how to do Piggybank Budgeting, as explained below.

Piggybanking: Ensure you have the money to spend

Now we know what you currently spend money on it's time to rework it so that you're spending the appropriate amount; enabling you to keep control of your cash flow and balance the books.

There are two key facts you need to understand before you start to budget properly.

• You can't trust your bank account.

  Your bank account lies. When you check it, it only shows you a simple snap shot of the scene that day. It misses out what payments are due in or out, when direct debits are paid, when you need to do a shop. Never think that having cash in your bank account means your budget is balanced, though being overdrawn is a good indicator it isn't.

• Don't ask "What's the cheapest way?" Ask "What can I afford?"

  To get back on track, the most important thing to do is to understand that your finances must lead your lifestyle, not vice-versa. Many people look for the cheapest way to do something and consider that to be MoneySaving, yet actually if you're overspending it's more important to allow what you do to be driven by how much money you have, not by what you want to do.

  Let me clarify this with an example. People often get themselves into trouble at Christmas time by asking "how do I have a great Christmas, with a big tree, all the family round for dinner and hi-tech prezzies for all the kids on the cheap?"

  This is a bad question; it establishes your priorities without reference to how much money you've got. The right question to ask is 'What can I afford to spend this Christmas?' and plan your activities around that.

The Piggybank Technique

Now you know what money you have, you need to ensure you stick to it. This requires discipline, but it's much easier to do if you organise yourself effectively. To help with this I developed a simple system, called 'piggybanking', which has two simple steps to it.

Step 1: Use the Budget Planner to work out what money you have.

You may've been wondering until now what the "Part C - Monthly desired spend" column of the Budget Planner is for. The idea is once you've done all the savings in the Money Makeover article you can now prioritise your finances to balance your budget. Simply allocate the spending as necessary to match up what you plan to spend with the amount of money you have coming in.

Step 2. Set up different bank accounts for different purposes

Now you know how much money you want to spend on different items, the aim is to make always knowing how much cash you have simple for you.

To do this, set up a number of different bank accounts, each with money in it for a different purpose, so the money's effectively in little pots. When you get paid or earn the cash, have direct debits or standing orders shift the cash over to them from your main bank account within a day or so of getting paid.

This is a bit like using a piggybank, putting money in different ones for different spending. Which accounts you choose depend on your own personal priorities and spending habits. Choose whatever suits your lifestyle and makes it easier for you.

A simple example of six accounts:

This means whatever is left in your main bank account is actually spendable each month. And you really know how much money you have to spend at Christmas or to go on your holiday - there's no fooling yourself anymore.

It's perfectly possible the end result of this is that you can't afford the holiday you wanted, but more importantly, it means follow it properly and you won't spend what you can't afford.