I have no idea what I’m doing, I know nothing about real estate, nothing about money, and I'm going to live with my parents or a cardboard box for the rest of my life. This is what I hear from a lot of people these days, so if that statement resonates, I highly recommend you stick around.
As a Realtor, it’s easy to say, talk to a mortgage lender, get your finances in order, save some money, and just like that you’ll have a house with the snap of a finger. And of course that’s easier said than done. I think as professionals at times we assume your accounting skills are an A+ and your budget is recession proof, but just like the age old saying, “if you don’t use it, you lose it”. Of course, as a self-employed person I have a sense of accounting and budgeting, since I pay my taxes quarterly and I allocate funds toward my business, personal life, and into several savings buckets for whatever my goals may be. And full disclosure, Yes I did get a business degree, but I hate complicated things just like anyone else, especially budgeting since it can actually be so simple. Seeing an excel spreadsheet with 10-20 pages breaking down this and that is just a little too much for my brain, so I figured I’d give you a look at how I do my budgeting, so you can get yourself on track if you find yourself slacking.
Full disclaimer, I am not a financial advisor, this is just the way I do it and it works for me, it may not work for you, but this is the easiest way I have found to stay on top of my finances. I’ve never been a huge fan of utilizing general budgeting rules, because everyone’s situation is different and what happens is people get discouraged when they figure out one of the categories is exceeded, so they feel financially doomed, and say screw it. So this is a little different. This is all laid out on a spreadsheet for me, but if you don’t have google sheets, excel or aren’t that savvy with technology, don’t get discouraged, this can be set up on paper too. Let’s jump over to my spreadsheet here and I’ll explain it all for you, how it works, and the formulas involved to give you a good budgeting strategy you can use to achieve your financial goals.
You have the date range at the top that can be changed each month, what I do is simply copy the sheet and change the month on it, so at the bottom you’d have October 2023, November 2023 and so on and so forth. On the left side we have the income each month, so you would add your paychecks, and any other miscellaneous things you did to get some of that green stuff in your pocket, and that includes the lemonade stand you did last week and made $50 and some change, add that too. We don’t want any dollars left behind. In this table it will add it all up and total it at the bottom, then we move over to the right side titled fixed expenses, which would be your car, phone, Netflix, anything that is fixed and doesn’t change each month. If for whatever reason it’s a loan payment where the interest varies so it’s off by a few cents each month, just remember to change it in this table. And again, it totals it all up and puts it at the bottom. Under these two tables is a budget for the month, as well as the budget for the day.
This could be a little overkill depending on how in depth you want to go but it is a formula that automatically calculates this for you, so it doesn’t hurt to have. The budget a month is calculated by taking the income minus the fixed expenses, then the budget a day would just be that divided by the amount of days there are in a month.
Scrolling down you have this large table for the whole month, showing the date, which changes when you adjust the date at the top, the expenses, the amount, as well as the balance you have left based on your daily budget. So what I do at this point is go on my banking website at the end of each month or throughout the month, and see all my transactions for the month, I typically use a debit card and a credit card, so I would go through all my debit card transactions and list them all on here, and list what they are, for example the expense was starbucks, and the amount was $10. And what this does is allows you to not only catch what transactions weren’t made by you so nothing falls through the cracks, but also keeps you aware of what you spend your money on. If I look back and see that I went to Starbucks 20 times and it costs me $150 at the end of the month, I might rethink going there so often if I have a strict savings goal in mind, no matter how hard it would be not to. As far as a credit card, i’ll just put in the expenses table, the day I paid my credit card and how much it was, instead of logging those expenses too. Of course, keep an eye on them and make sure they are all yours, but you don’t need to chart those too. Once you’ve filled out the entire month, it’s totaled at the bottom and that value is then used for the next table.
Of course these percentages are just an example, but I can show you how to alter this if your situation is different. Since the IRA contribution for the year is $6500 I have $541.66 a month being put in there, if stocks is 2%, tax reserves are 20%, housing savings is 35%, the figure at the bottom of the last table I mentioned would be brought up here automatically and the percentage would be automatically taken from it. Oftentimes I have noticed the biggest issue for people when trying to save money is trying to figure out what percentage of each check goes where, so this helps remove the thinking so you can just move your money wherever it needs to go. The goal of course would be to have these percentages total 100, so each dollar is allocated somewhere. On the right side it says placement, where is this money going? For me, I have several accounts for each one of these items to ensure funds are not being mixed, so I might say the house savings is going into my banks savings account, my tax reserve is going into my money market account, my stock fund is going toward the purchase of this particular S&P 500 mutual fund. Be aware of where this money is being directed, because if all this money sits in one account, you may find yourself burning through it pretty fast.
SET IT AND FORGET IT
I am a firm believer in “set it and forget it”. So most of these accounts are out of sight and out of mind, I don’t have a card or a checkbook connected to them, I would have to go through a time consuming process of transferring money out if I wanted it, and since I know myself pretty well, the harder it is to get that money the better. Then under this table if your goal is to save for a house, put that visual in front of your face to have a goal to work toward. Of course, I could’ve made this a little more technical and had a current house savings goal versus what the goal is, but if you’re like me, my money is all over the place, some of it is in stocks, so going in there everyday to update the pluses and minuses in the market wouldn’t be the best use of my time.
That’s a quick overview of the spreadsheet and of course I have a copy of this spreadsheet in the description for you to use, that you can download. I’m not charging money or anything for it, I just hope it helps you with your savings goal and if you have questions about it, don’t hesitate to reach out, I’d be happy to help. And like I said, it can be done on paper too. Set it up just as I did on this spreadsheet but on paper, maybe consider putting it in a binder, with each month in it, and just doing the math yourself instead of having formulas do it for you and placing this somewhere in your home or office that has you looking at it periodically.
YOU DOWNLOADED THE SPREADSHEET?!
Okay, so you downloaded this spreadsheet or have your pen and paper ready, it’s blank and ready to be catered to your particular situation. What now? I am not a huge believer in generalized budget rules as I mentioned, I do think there’s a time and place for them, but overall, investing some time in figuring out what kind of saver and spender you are would be the most beneficial, because at the end of the day, no one wants to pinch pennies and hate life, moderation is key. So after you have filled out your income, fixed expenses, and all your miscellaneous expenses from the first day of the month to the last, you have a dollar amount that’s leftover after everything. Maybe you have a stock option, IRA, or 401K that you’re already matching with your company that’s coming out of your paycheck so your savings and stocks don’t look as extravagant as my example here, so you can just allocate some to your savings account as well as a separate account for house savings and an emergency fund.
CREATING MULTIPLE ACCOUNTS
My stocks and money market accounts are through fidelity, so I just open up several accounts where I can just leave money, same thing with any bank, you can have several savings accounts if you want, some may charge for it, some may not. Just understand that it won’t be perfect for the first month and maybe not by the 3rd or 4th, this is just a tool to allow you to get better than you were before financially. Maybe after a few months you can see you spend a lot of time going out to dinner with friends, or getting starbucks. Instead of having all these fancy stock accounts, maybe you have a savings account or budget for the amount you can spend on dinners or starbucks each month. If these are things you value, there’s no need to get rid of them, just create a line for yourself in terms of how much you can spend each month. Also understand that goals can change, and these percentages can shift. If your main goal right now is to save for a home, increase that percentage as high as possible while still allowing yourself to have some leftover money to have some fun, do things with your friends, go out to dinner, buy gifts, get new tires for your car, etc. You could have house savings at 30-40% and at the end of the month you might say hey, you know what, I didn’t have a lot of money for gas, or to buy food, next month you might consider putting it at 25% instead. Budgeting really is trial and error, you need to figure out what works best for you, but oftentimes the setback is just having the tools like this spreadsheet to lay the visual out in front of you to mess with over the course of several months.
LET'S TALK SAVINGS "BUCKETS"
The best way to maximize your budget is to figure out what your “buckets” are, that your leftover money will be allocated too (which will be put in the savings and stocks section of the spreadsheet). For example, it could be house savings as bucket #1, stocks as bucket #2, rainy day fund as bucket #3 and emergency fund as bucket #4. And of course these buckets could be catered to whatever your situation looks like. The main goal here is to have these buckets equaling 100%. This is going to take a lot of honesty with yourself and what your situation looks like. If your goal is to save for a house, we might make that 40%. If your car is one more grocery run away from blowing up, maybe you need to allocate the next chunk of funds to your emergency fund for 30%. Then of course if you value fun or taking a weekend trip from time to time, your rainy day fund might take next priority at 20%. The 10% remaining balance can be thrown into your stock accounts. Growing up we were always told to throw money in our savings account, but the problem with that advice is it doesn’t give each dollar we make a purpose, and when it comes to saving and budgeting effectively that’s the number one thing you can do to turn your life around. In today’s world, we often blame inflation and the cost of living in general for the fact we can’t rub two nickels together, but the reality is, people don’t take a second to fill a spreadsheet like this out or even put pen on paper to see what their situation looks like and if they can make any changes to better their situation.
For those of you that have made it this far, what are your thoughts on this spreadsheet? What’s something you do right now that allows you to save money effectively? Drop your thoughts and experiences in the comments below.
Don’t forget to download your free copy HERE
Thank you as always for reading along! If you're looking to buy, sell or invest in the wonderful state of Michigan, please don't hesitate to reach out I’m happy to be your go to resource. Stick around for the next video, until next time.
Andrew McManamon is a Michigan REALTOR® with Signature Sotheby’s International Realty and provides real estate services to Buyers, Sellers and Investors throughout SE Michigan including Livingston County, Oakland County, Washtenaw County, Genesee County & beyond. Andrew has become one of the rising stars of Michigan real estate agents. Prior to his real estate career Andrew was responsible for managing a senior living facility in Brighton, Michigan as a dining supervisor and an activities assistant. Andrew’s passion to help people is unlike any other, and he continues to strive to be best resource he can be. Andrew graduated from Cleary University in Howell, Michigan with a double major and currently resides in Brighton, Michigan.