Why I Prefer a Spreadsheet to Track Expenses & Manage My Finances

I’ve been diligently managing my personal finances and tracking household expenses for more than 20 years.

How diligent, you ask?

Well, I can tell you that my cable bill in February 1998 was $8.03, and that I spent $141.16 in 2006 for an annual subscription to the Los Angeles Times.

I can also verify with total certainty that 7% of my income in 2007 went towards groceries, and vouch that I spent $88.95 at my local K-Mart in August 2001. Just don’t ask me what for, because I’m not that thorough with my record keeping.

Why Tracking Expenses Is Important

Taking the time to track and analyze your income and where it’s going is a crucial element of managing your personal finances. That’s because doing so uncovers hidden money leaks that help you better allocate your resources, thereby ensuring you always get the most out your paycheck.

It makes it easier to set financial goals too.

Of course, prior to tracking your expenses, you have to record them.

While not impossible, trying to track all your cash purchases can be extremely tedious and time-consuming. On the other hand, everything purchased on your credit and debit cards are automatically recorded and available for review online or as part of your monthly billing statements — which is why I use credit cards for as much as I possibly can.

As for keeping tabs on how you spend your money, there are a panoply of options available.

Now I realize many people are initially attracted to sites like Mint, OneBudget, Adaptu, and MyBudget-Online because their automation features essentially make the job of tracking your money almost effortless. The trouble is, in the world of personal finance I believe too much automation can be a curse. That’s because when money management tools become too user-friendly, a lot of folks have very little incentive to understand the data being made available to them.

For the financially undisciplined, over time that’s a surefire recipe for failure.

The Big Advantage of Spreadsheets

For me, the more old-school hands-on approach is the only way to go; I use my own custom-designed Excel spreadsheet because it forces me to actively manage my personal finances. It also gives me more control than using a web-based site like Mint.

In fact, every January I give my readers a peek at some of that spreadsheet’s top-level graphs and financial breakdowns in my annual State of the Household post.

True, a spreadsheet is not as sexy as automated money-tracking web-based applications, but it’s the same tried-and-true method I’ve been successfully using to track my income, net worth and expenses for more than 17 years now.

Here’s a just a small portion of the Excel worksheet for my household expenses in 1999:

Click on figure to enlarge it.

Although the custom Excel spreadsheet I developed was quite simple in the beginning, it has grown in detail and complexity over the years, with pie charts and graphs that clearly show the results of our household spending and current trending patterns.

Today, my spreadsheet breaks out our household expenses into 13 major categories and 50 subcategories. The major categories include:

  • Loans
  • Utilities
  • Medical & Dental
  • Automobile Expenses
  • Groceries
  • House Expenses (excluding the mortgage)
  • Entertainment
  • Taxes
  • ATM Withdrawals

And A Few More Quick Tips …

  • If you’re just starting out, it’s important to make sure you set aside about an hour or so at least once per month for reviewing your checkbook, receipts, and/or credit card statements and recording your expenses in your spreadsheet.
  • By frequently updating your financial spreadsheet, you’ll not only be able to quickly catch any potential errors on your billing statements, but you’ll also keep from falling hopelessly behind on your record keeping duties.
  • If you’re not an expert in Excel, there’s no need for despair; Microsoft has scores of budgeting worksheet templates for your to download and modify to suit your needs. In fact, their personal budget worksheet template has been downloaded over 3.6 million times.
  • If you’ve never used a spreadsheet, don’t be intimidated — they’re not hard to use! Yes, spreadsheets are extremely powerful tools for those who know how to take advantage of all they have to offer. But for most folks, the basics needed to properly track expenses can be learned in less than 30 minutes.
  • If you don’t want to spend money on a spreadsheet such as Microsoft Excel, you can try the free equivalent from OpenOffice. I’ve used OpenOffice before and it’s an extremely capable alternative. You can also take advantage of the free personal finance templates provided by Google Docs or Savvy Spreadsheets.
  • Once you’ve effectively disciplined yourself to always spend less than you earn, tracking expenses becomes a viable alternative to budgeting that allows you to focus on optimizing your finances in order to get the most bang for your buck.
  • And last but not least, remember this: In the end, it doesn’t really matter what tool you use. What is important is your commitment to actively manage your finances.

Photo Credit: PeaGreenGirl



Comments

    • 2

      Len Penzo says

      I tend to use them for everything to, Roger. As you and I both know, they can be used for a lot more things than finances; even stuff completely unrelated to math.

      Spreadsheets are amazing — and very powerful — tools.

  1. 5

    says

    I originally used excel but switched to quicken when I found a free version laying around my apartment. I have no clue how it got there! I input all of my expenses manually and can look up reports for anything I have entered. I just need to make sure I back it up regularly…

  2. 6

    says

    Haha, you’re right – even us Type As avoid entering cash transactions in their Mint accounts (and I have at least one account that won’t update through Mint). I do make it a point to log into Mint twice a month to figure out if anything weird is going on…

  3. 7

    says

    Right on, Len. I know a lot of folks cringe at the perceived tedium of tracking expenses, but I agree with you: It’s the foundation of household financial planning, crucial, when combined with a budget, to meeting short, medium, and long term goals. The most important thing is to choose a tool, any tool, dive in and get started!

  4. 8

    says

    I use Excel for us too. I only started about 6 years ago though, so it is not nearly as impressive. ;-) My way is a lot simpler than the look of yours though. I have a column that lists categories, a column that lists the budgeted amount we are supposed to stick to, and a column for how much we actually spent…sometimes it’s a yay and somtimes it is a bummer…

    • 9

      Len Penzo says

      I didn’t want to get into the dirty details of mine, Crystal, because I didn’t want to scare anybody off. But my spreadsheet slices and dices the household expenses, as the saying goes, six ways to Sunday. I’ve got about 25 different worksheets covering every year of expenses, plus summary sheets, pie charts, line graphs and other goodies. Only an accountant or engineer would really appreciate it.

      Everyone else would just call it overkill! :-) lol

  5. 12

    says

    I have a question, Len. When you enter your totals into your Excel workshop for say groceries, do you enter the amount you paid plus the sales tax, or do you leave the tax out and put it in a separate category?

      • 15

        says

        Hello,

        I get hung up on a similar detail. What do you do with the sales tax when your receipt falls into multiple categories? For example, I might get groceries, household goods, and health/beauty items all in the same trip.

        Thank you :)

        • 16

          Len Penzo says

          I would spread the sales tax proportionally, Miranda.

          For example, let’s say you have a receipt showing you spent $99 with 10% sales tax. If your receipt was broken out like this …

          Groceries $40
          Household goods $30
          Health/beauty $20
          Sales tax $9

          … then you could apportion your sales taxes evenly at 10% for each category (so, $4 for groceries, $3 for household goods, $2 for health/beauty).

          So your $99 bill comes out to $44 for groceries ($40 + $4), $33 for household ($30 + $3) and $22 for health/beauty ($20 + $2).

          This may not always work perfectly when groceries are involved because not all groceries are taxed, but it is close enough for government work!

          • 17

            Miranda says

            Thanks, Len! Good ideas seem like they should have been obvious once someone else points them out. ;) This is working splendidly!

  6. 19

    says

    The spreadsheet is great because you can easily summarize columns and link numbers from tab to tab to compare month to month.

    We recently switched to just a standard spreadsheet to track our expenses (instead of using quicken/mint), because it really holds us accountable to see the debits and credits side by side in realtime.

  7. 20

    says

    Spreadsheets are still the most used tool for most of the businesses. As a matter of fact still around 85% of financial sector uses spreadsheets.
    Off late the demand for spreadsheets have drastically gone up. With the entrants such as CollateBox http://www.collatebox.com/ the stage is set pretty big, I have been privileged to use Collatebox for managing and tracking sales n finances n am enjoying the tool.

    • 23

      Lola says

      Panoply (noun): a wide-ranging and impressive array or display…

      Apparently, it also means “a complete suit of armor”. :)

  8. 24

    says

    I like using a spreadsheet too because of the control. Plus I can really customize it. You are absolutely right—you will discover your money leaks. After reading one of your comments, it sounds like you have your own system of creating spreadsheets!

  9. 25

    Matt Riley says

    Len, I also use excel to track my expenses. I built mine around a main check register that will account for up to 10 bank accounts. It then aggregates everything into a budget sheet and has a few charts and other goodies. I would be very interested in seeing your spreadsheet. I am always looking for ways to further “geek” my spreadsheet out. Would you be willing to share a blank version of your spreadsheet with your audience? Thanks and keep up the good work!

    • 26

      Len Penzo says

      I can do that, Matt. It’s going to take me a bit of time to “sanitize” it though — I’ll work on that this weekend and try to get it to you as soon as I can. :-)

        • 30

          Len Penzo says

          I have to beg for your patience, Matt. It’s on my to-do list. I’ve just been really busy. I hope to get to it not to long after I get back from FINCON. :-)

          • 31

            Akta Patel says

            Hi Len,

            Great post! I just recently got married and was comfortable using a basic version of quicken on my laptop. Unfortunately that system isn’t working for me anymore. In addition to groceries and monthly bills, I’ve realized my expense tracking will now have to include a large array of categories that are not easy to track via quicken. I was wondering if you might be able to send me a blank version of your spreadsheet. I’m an account by profession and I can definitely understand the interest in details as well as the unlimited possibilities in analyzing the trends of a personal budget. Thank you in advance.

  10. 33

    Willem de Leeuw says

    I’ve used Microsoft Money for more than a decade now for my personal finances and love it. As it’s a sunset product (no longer supported or developed) you can also download it for free from Microsoft.

  11. 34

    says

    Nice write-up.
    I use Excel too. I have a smart phone and the file is in Google Doc. Each time I spend I just write it in the spreadsheet and I clean everything up once a week.
    The problem is my partner who instead of having a smart phone – refuses to do so. ;-)

  12. 35

    says

    I bought a day planner for 99 cents and use the month pages to track all of my daily spending that is not regular bills (since January). It makes me really aware of what I am spending money on. But I use Quicken for weekly check-in’s of my regular expenses.

  13. 36

    Anthony says

    Hi Len, I signed up for your newsletter approx. 20mins ago. Enjoyed what I read/scanned as I had a quick look around. Came across this post & found it interesting. One thing I like to do, which I know is rather simple, however it gives me peace of mind, is manage my outgoings/cash flow. I HATE any bills that turn up that are a SURPRISE. As we all know household bills incl. mortgage/car/insurances etc. are relentless. What I like to to do is auto-pay everything weekly, so I don’t even have to think about it. So I just calculate the yearly cost of anything & everything, divide by 52 (weeks) & that is what I auto-pay each week to everyone. (don’t ask any providers ‘can I do it’, just do it – they won’t knock the money back). That way when any regular bill/account arrives I’m normally in credit with them at least a few dollars. Since reading this post however, I’ve added another row item to the spreadsheet & called it ‘Savings’, so hereon in each week I’ll be paying myself also without thinking about it. Sorry if this is all really simple stuff, it’s just that for me I love simple solutions w/good outcomes.

  14. 38

    Justin Caton says

    For my budgeting I use “You Need a Budget” or YNAB for short. It has the benefits you get from using a spreadsheet that you have to enter in your expenses as you go. YNAB saves you from having to get the spreadsheet to properly manage categories and budgeting. The greatest thing about YNAB is that it has a great facility to allow you to budget for the future. Too often we are spending our time trying to track the expenses of the past. But only once you are able to budget for and influence future spending decisions do you get the greatest benefit. The other thing I like about YNAB is that they teach a budgeting method and the software helps you to implement that method correctly. I’ve used mint.com and excel in the past and now that I’m using YNAB I don’t plan on going back.

  15. 39

    Jackie Cadotte says

    I use a similar Excel format and added columns that list the interest rate on the credit accounts. That way I can make extra payments on the highest interest accounts.

  16. 40

    ami says

    Have a question..how do you account for line items on your sheet like clothing, household items, bills that are part of your monthly credit card bill without duplicating the charges on both line items. It seems confusing to me – this is because i have credit card debt that i am trying to pay off and carrying the balance forward every month is muddling it up.
    Thanks
    Ami

    • 41

      Miranda says

      Hi Ami,

      Did you ever come up with a solution? I’ve been trying to figure out the same thing. I want to put all of my purchases, be they debit, credit, or cash, into their appropriate categories. I also have a Loans category for payments I make toward any debt. I’ve been trying for a week to come up with an elegant way to make both my category subtotals and my giant pie chart total make sense, but I’m still coming up blank.

      Hope you’re having more luck! If so, please share! :)

  17. 42

    Paula says

    We use an Excel spreadsheet to track our budget AND to track our investments. As we have moved from job-to-job and roll funds out of a 401K into IRAs, we can see our net worth, diversification allotment, etc. We even track management fees, fund sector, etc. Some may say it’s overkill, but we know our net worth to within a few hundred dollars. At the end of the year, we make adjustments to our 401K selections to rebalance our funds going forward. We believe you have to know where you are so you can journey toward your retirement goals. We didn’t get our spreadsheet like this overnight. We started with the basic money-flow spreadsheet like you suggested and just gradually added to it. At the end of each year, we also ask ourselves, “What can I do to make this spreadsheet more useful?” After you get the format and formulas set, it’s just taking time to update the numbers on a regular basis.

  18. 44

    Imran Shaikh says

    We’ve been using a simple excel sheet for expense tracking for quite some time now, we would greatly appreciate if you could share your excel sheet template.

  19. 45

    says

    I started tracking my expenses with a sheet of notebook paper, a pen and a calculator (Really, I’m not THAT old, just a Luddite). After marriage and kids, I made an Excel spreadsheet. In some ways, I think it was easier back in the good ol’ days before using this new computer doohickey, but my expenses were easier back then, too.

  20. 46

    Imforget says

    i was searching many application because i think applications are better than Excel. After i found this website and use ur recommendation on Savvy Spreadsheets, now i’ve changed my mind to using sheet Excel.
    Thanks

  21. 47

    says

    I have started tracking my expenses in a spreadsheet too, but it is very difficult to update the table of a Google spreadsheet on my smartphone and if I wait until I get home, usually something is going to be forgotten to be tracked. That’s why I have opted for an Android app (Money Lover) for tracking my expenses, since I can add any expense with ease whenever I pay. The app allows me to export the data in CSV format, so I can write my own application that creates the reports I want to see.

  22. 49

    Lorin says

    I use Google Docs – available anywhere on my cell, that way. I started with a free budget template that I have customized over the years.

  23. 50

    Will says

    Love Excel spreadsheets! I’ve gone the opposite way of you though. Mine started very complex with multiple tabs, graphs, and charts and has simplified over the years. Today I use a smartphone app to categorize and track all expenses, I input everything at the point of sale and then do a quick balancing once or twice a month to make sure there are no discrepancies. My spreadsheet now has one tab per calendar year that I use to track net worth, I did include a monthly expenses vs income section to it to see cash flow but no more graphs. It’s easy and works best for me, but to each their own. What’s important is you do it and stick with it.

    Also agree that over automation is bad. I automate “paying myself first” and utility bills but found if I automated my credit card payments I was more likely to over spend and not notice the money leak even though I was still tracking all the transactions.

  24. 51

    says

    I am SOOOO going to show this post to my husband who asked me two days ago whether recording our monthly spending and income was “worth it”.

    I use the Money and Mint apps and Excel to track income, expenses and net worth. There’s nothing like seeing it on paper to know whether your behaviour is in line with your goals.

  25. 52

    says

    I use both apps and spreadsheets. Apps gives me alerts and can set up buckets etc but spreadsheets I’m able to manipulate (in a good way). The data I get from the apps help me track my finances details and with excel I look at the grand picture. I went from multiple tabs to 3. This is stored on Google Docs with access given to some family members in the event of my demise (not morbid just planning).

  26. 53

    says

    I think I’ll steal your idea. I do have various tools to do this, but tracking expenses via a spreadsheet would allow me to customize it to my real needs.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>