It sure might seem like there can't be many things more boring than budgeting and spreadsheets -- so a budget spreadsheet sounds extra-deadly, no? But hold on -- don't be too hasty. Just as taxes can be slightly interesting, an excellent spreadsheet can actually keep your attention for a bit, too. Especially if it's all about some of your favorite subjects: You! And money!

The thought of budgeting may have you wanting to run for the hills, but it doesn't have to mean keeping detailed records of every penny you ever spend for the rest of your life. It can take many forms, including perhaps just spending a few hours once a year or so, tracking all your sources of income and all the ways you spent it.

But why?
Understanding why you should budget can help you get yourself to do it. The main benefit of budgeting is that it will give you a relatively clear picture of your financial habits and situation. You might know that you need to rein in your spending and might be wincing at the thought of losing your cable TV or stopping your tennis lessons or having to pass up your daily Venti coffee with two pumps hazelnut, two pumps vanilla, two pumps caramel, five Equals, and extra cream.

By figuring out exactly how much money is going where, you can more clearly see where you can make some changes, and you can weigh your options against each other more rationally. (And let's face it, a budget spreadsheet can be quite helpful with this -- though a simple notebook can work, as well. And there are handy websites, too.)

Your efforts might reveal that a $4 coffee every weekday is costing you about $1,000 per year, and that your weekly $40 tennis lesson costs $2,080. That pack-a-day smoking habit, when cigarettes cost $6 per pack: nearly $2,200. An extra $40 on your cable bill for lots of premium and movie channels? $480. When you see these numbers, you might realize that you can keep your cable channels, and that quitting smoking can save your tennis lessons, too. (Cut out all these items, though, and you can save more than $5,500 -- which will add up to close to $30,000 in just five years. See what budgeting can do?)

Categorically speaking...
If you want to set up a budget spreadsheet, or even just start keeping track of your money management in a notebook, you'll need to list categories. Everyone's expenses and inflows are a bit different -- for example, Internet costs might be an entertainment expense for some, a work expense for others, and nonexistent for still others. Here are some key categories to consider as you set up your list:

Inflows:

  • Salary/main job income
  • Dividend income
  • Income from side jobs
  • Proceeds from sales
  • Capital gains reaped from investments

Outflows:

  • Rent or mortgage
  • Groceries and household necessities (toilet paper, detergent, etc.)
  • Eating out
  • Utilities (water, gas, electricity, garbage, sewer, etc.)
  • Transportation (car, maintenance, repairs, gas, public transportation costs, parking, etc.)
  • Taxes (property, income, etc.)
  • Telephone and communication
  • Debt repayments
  • Travel (airfare, hotels, etc.)
  • Clothing
  • Savings
  • Insurance (home, health, car, disability, life, etc.)
  • Entertainment and recreation (cable TV, Internet, season tickets, etc.)
  • Medical and health (doctor visits, glasses, gym memberships, etc.)
  • Charitable donations
  • Education
  • Child-related expenses
  • Pet care
  • Miscellany

Once you've set up your list, spend a month (ideally, spend three) tracking where your dollars go. The more specific you can be, the more useful the whole exercise will be for you.

Using a budget spreadsheet instead of a notebook can be extra handy, as you can set it up to automatically convert monthly expenses into annual costs, and to automatically total expenses and inflows. A budget spreadsheet is also great if you want to tweak numbers. Turn those five expensive coffees each week into two and the spreadsheet will automatically adjust everything for you to show you how much you'd save.

You don't have to spend the rest of your life budgeting, but spending a little time on it for a very limited period can greatly improve your financial future.