Engineer Budgeting

First of all I know this borders on being OCD – when I talk about this people roll their eyes. I think it’s important and I enjoy doing it – I’m sure there are easier ways of getting the same kind of accuracy. I don’t think everyone needs to be this precise, but I thought it would be a fun article to write and non-engineers might find it amusing. I use Yodlee.com quite a bit – it does a snapshot type deal of all your financial accounts and keeps track of bills. I’ve used it for years and love it. You don’t have to visit each site, but just log in here and it shows you a dashboard of everything. As far as security is concerned yodlee probably already has your log on information since it manages this for many large banks and it’s security record is stellar.

One of my passions in life – embarrassingly so sometimes, is that I love watching and keeping track of my finances meticulously. I never really cared much about money growing up, I did have a small lawn-mowing gig growing up where I did make a lot of cash – at least 15 year old Kyle thought it was a pile… but other than that, I pretty much grew up with my parents providing what I really needed and I got a lot of what I wanted by begging or mowing grass.

The real lane changer financially happened during my senior year of college. I had an opportunity to sign up for a class called “Personal Finance” that only 4^th years were allowed to take due to the high demand. I was a little worried about my future – knowing in the next year I would suddenly have a lot of financial responsibilities with very little financial know how. I would watch my parents balancing checkbooks and paying bills and I never really took the time to ask about the specifics. Regardless, I felt very unprepared going in to this class for my post-college financial world.

An older lady taught this class, and she was very thorough in her methodology. She taught us all the basics, simple budgeting, 401k, Roth IRAs, Mortgages, Interest Rates, the future value of money – I was stunned. We did everything in excel and she made us make pretend budgets and keep track of our spending and create reports and in the end I felt pretty confident that I knew how to manage my finances as an adult.

In my first job – I started as an intern and while they kept me pretty busy doing busy work I would eventually run out of stuff to do and have to wait for an older engineer to give me more work.

During this time I couldn’t really “not work” and had to work pretty hard at staying busy. Since I did work in spreadsheets often, I started working on creating a more useful spreadsheet to keep track of my finances. I started with something simple I pulled off of crown financial and it quickly got very complicated, then I would spend hours making it simpler and adding features as my needs got more and more complicated with time. I liked the idea, but since I was single and living at home I really didn’t need to budget very closely – I had plenty.

After a few years, the economy started to stutter and my company lowered our salaries by 10%, I had already begun the process of applying for an MBA program that would add a substantial increase to my monthly bills, so I felt very unsure about things financially and decided to forego the MBA and hope the 10% returned soon so I could get back on track with getting an MBA.

Today Kyle knows – that because I did not keep a close eye on my finances that uneasiness was really rather conservative. Eventually I was told by the MBA program that if I did not sign up by the following semester I would have to take an extra semester of pre-requisites to qualify for the MBA program. So I buckled down for a few months and started inputting each receipt into my spreadsheet so I would know if I could handle the $650 increase in expenses each month for the two and a half years it would take to finish the MBA. After that I never stopped putting every receipt into the spreadsheet – sorting them into fixed expenses and non-fixed, and then into all the different categories they could be. Doing so allows me to understand where the money goes and knowing where the money goes allows me to make intelligent decisions about how I spend my money daily.

It does not make much sense to try to explain the spreadsheet – I decided I would just post a default one (I used a make-up salary of 30,000 and made up everything else on it… FYI), so if anyone wanted to play with it they could. My old job paid salaries on the 1^st and 15^th, so I had structured the budget into a monthly budget tab. My current job pays our checks every Friday, so now I switched to a weekly budget.

Download Link: (It does have macros in it, so you'll have to enable them to use the cool button features)

Budget Spreadsheet Example

There are 7 tabs in the spreadsheet:

Budget – where a weekly budget is kept, at the end of the week you simply push the “Next Week” button and the excel sheet automatically creates a new week and moves any excess “Banked” money in the budgets to the next week. This way you can watch your banks – when they grow or shrink too much you can adjust your budget to be more accurate in the long term – or know you need to move money from one category to another.

Summary – Summary simply keeps track of your monthly low point financially, for me this occurs right after our mortgage is taken out. I like knowing this because if something does happen – say I get laid off, I know I have that much money clear and free at any point during the month. I try to keep a nice big safety fund in there (When I was laid off in March it took a lot of stress out of my life). It’s also a good measure of how each month went – if the summary gets bigger and bigger then things are well, if you continually lose money then your budgets are working out correctly.

Utility – utility keeps track of utility bills, I did a lot of energy conservation type work in my old job and found it extremely interesting to track my utility bills and notice how it changed with the seasons, or when I made an improvement like installing insulation upstairs or adjusting thermostat settings. I also compared my utility bill costs – kwh/sqft or therms/sqft to national averages to see where my house stood. If there is any interest I can talk about this more later.

 Annual Bigs – Annual bigs is the tab that keeps track of anything big that happens once a year, like insurance costs, vehicle tags, life insurance, cell phones, gym memberships – stuff like that. I also use this sheet to keep track of home repair costs, vehicle repair costs and some other etcetera stuff I like to record for posterity’s sake.

Mortgage – this sheet keeps track of my mortgage, I actually molded another person’s spreadsheet to this and it keeps track of extra payments made… stuff like that. Pretty self explanatory. I ended up making the decision to switch to a 15yr mortgage right before I got married… because I keep so close track of my finances – I could make an intelligent decision, know that I was capable of doing it – and it will save us a ton of money in the long run. I should have the house paid off a few years before the twins enter college, which will be helpful…

Retirement – this sheet simply keeps track of retirement, the cool feature here is that you can adjust what your pre-retirement interest rate (I used 8%) and your post retirement (4%) and see how that affects your retirement salary – it will automatically calculate this by giving you a inflation raise every year and depleting retirement by the time you’re 99.

DebtsPlan – the sheet is used to plan debt pay offs, it’s very simply created. Just pay off one debt at a time and watch the debt disappear.