Pocket Budget

Step 1: Download and install the template, and create a new budget document

  • Get the Pocket Budget Spreadsheet download pack from http://peterjohnlightfoot.com/products/pocket-budget/, save it to your computer, and unzip the contents to a local folder.

  • Move the “Budget Template.xltx” file from where you unzipped it to {Your-User-Profile}\Documents\Custom Office Templates.

  • Open Excel (or if it’s open, click “File” > “New”), then choose the “Personal” template category, and click “Budget Template”.

  • When you want to save your budget, click “Save” and provide it a name.

 

Step 2: Add your bank account(s)

  • Right-click the “Account Template” sheet, and choose “Move or Copy…”.

  • Choose where to place the new sheet – e.g. “(move to end)” – and check the box to “Create a copy”, then click “OK”.

  • Double-click the name on the new sheet (“Account Template (2)”) and rename it to something meaningful. Press [Enter] when you’re done.

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  • Repeat for each bank account that you will be using.

 

Step 3: Add your pocket account(s) and capture allocations

A pocket account is a fictitious account that will be used to manage a particular allocation of funds to a subset of expenses, for example Entertainment, Groceries, or Petrol. These type of expenses occur infrequently and/or with varying amounts, and the best we can typically do is to estimate a once-off allocation for the period, based on previous spending.

To add pocket accounts, repeat the steps in the previous section, using the Pocket Template” sheet as a source, for each pocket account that you will be using (as shown below). Use names that are simple and meaningful to name your pocket account sheets, as you will need to enter them on the relevant bank account sheet(s) later on.

For each pocket account that you want to use, do:

  • Right-click the “Pocket Template” sheet, and choose “Move or Copy…”.
  • Choose where to place the new sheet – e.g. “(move to end)” – and check the box to “Create a copy”, then click “OK”.
  • Double-click the name on the new sheet (“Pocket Template (2)”) and rename it to something meaningful. Press [Enter] when you’re done.
  • Repeat for each pocket account that you will be using.

Once you’ve created the sheets required for your pockets, place the appropriate “Allocation” amount in each:

The summary on each pocket sheet will update to reflect the available amount:

 

Step 4: Capture planned pockets and static contracts against bank account(s)

Capturing the planned pocket accounts is simply a matter of capturing the names of the relevant pocket sheets into the Description” field of the Pockets” section of the bank account where the money will be used from for that particular pocket.

Thus, to pay my planned Groceries and Petrol from my ABC Bank current account, I would add the names of those sheets to the ABC Bank – Current” sheet, as follows:

A static contract is an item (income or expense) that occurs regularly each period, and is resolved with a single payment that is fairly accurately anticipated. Where a static contract needs to be resolved with multiple payments (e.g. weekly rent occurs several times per month), those individual occurrences need to be separated out (meaning that it would still only make sense for items where the number of payments and their amounts can be fairly accurately anticipated, as with the example of weekly rent).

There are separate sections on the account sheet for “Income” and Expenses”, and they both provide a Description” column, as well as Planned” and Actual” columns. During planning, contracts should be captured into the appropriate section by specifying a Description and Planned amount only:

If you have more than one bank account, place items against the appropriate bank account where the money will be paid into or out of. You may also want to use items like (income) “From ABC” and (expense) “To XYZ” to plan for- and manage transfers between accounts.

With the above in place, the summary section of the bank account sheet would update to reflect the captured data:

 

Step 5: Open a period

At the start of a period, update the Opening Balance” and Current Balance” of each bank account to the appropriate opening value.

 

Step 6: Capture your income

When you receive money into your bank account, update the appropriate bank account sheet’s “Current Balance”, and capture the Actual” amount against the planned income item.

 

Step 7: Capture a static contract expense

When you pay a static contract expense item, update the appropriate bank account sheet’s “Current Balance”, and capture the Actual” amount against the planned expense item.

TIP: Planned” and Actual” amounts do not need to match. Instead, any non-blank Actual” amount will finalise its associated Planned” amount, whether it’s more, or less, or zero.

 

Step 8: Capture a pocket expense

Money expensed against a pocket account can be captured in the Out” column of the appropriate pocket sheet.

This activity will roll up to the appropriate bank account sheet. Be sure to also update the “Current Balance” of that bank account.

TIP: To allocate ad-hoc amounts during a period, without affecting the “Planned” amount for the pocket, capture amounts in the In” column of the pocket sheet. This will increase the “Remaining” amount, but leave the “Planned” amount unchanged.

 

Step 9: Manage your budget

Key to successfully managing your spending, is your awareness of how much money you have available, meaning that the key to the success of this tool is that you need to update it regularly and often. No matter how good you are with numbers, there is too much going on in your life to accurately keep track of all the little bits and pieces that you still need to cover during the month.

I suggest to check your sheets daily from just before payday until around the 5th of the month (assuming you get paid monthly around the 20th or somewhere thereabouts). This is usually the time when most automatic payments (and also most of the big and chunky payments) are taken from your account. It’s important for you to be aware of these changes and how they affect your bottom line. After this “peak time”, a weekly update is usually sufficient to keep up to speed.

TIP: I find that updating just before planning the weekend to be a good habit, because it helps keep you from committing to activities that you shouldn’t be committing to at that time.

The “bottom line”, in this case, is the “Available” summary item on each bank account sheet. The accuracy of this value depends on three equally important parts:

  • Your bank account “Current Balance” is reflected correctly;
  • Your “Planned” and “Allocation” amounts are all captured correctly; and
  • Your “Actual” and “Out” amounts are up to date and captured correctly.

TIP: If you seem to have more money available than you are expecting, one of those three is probably missing. Most often, you’ve missed capturing an “Actual” amount, or missed updating a “Current Balance”.

 

Step 10: Close the period

More or less at the same time that you open the next period, use the same bank account balance to do a final update of the “Current Balance” in this period. Save the file with a name that indicates which period it is for, and keep it for your records. Over time you can review previous budget periods to see how your spending habits are improving.

 

Bonus step: Reserve some cash

Use the “Reserve Amount” field to remove a specific amount (e.g. a savings amount that is being kept in the same bank account) from the “Available” amount, so that it is not inadvertently used.

 

Wrapping it up

My hope is that this will make some small difference to someone. If you have any other questions or need help with using the sheet, let me know… also if you have any other queries or suggestions, I welcome any and all feedback.