SETTING UP

YOUR BUDGET TRACKER

BROUGHT TO YOU BY
CPA BERMUDA

6
6
Step Six - Setting Up Your Budget Tracker

Review Your Finances,

Set up Your Basic Budget Tracker

There are two simple steps to the method spend. Note the section to show annual
of managing your household costs and your costs of car, house insurance etc. divided
budget: by 12 - even though you haven’t spent
the money, the budget needs to show
• Monthly (or quarterly) Track Actual in-
that the expense will be covered.
come & expenses, the monetary things
that happen in re-al life. • You are encouraged to set those pro-
jected amounts aside in your emergency
• Then, define your budget - you determine
savings fund.
what you would like to receive in income
and what you want to control in allocat- Truthfully, many people find the two-column
ing your spending each month. Many budget-to-actuals just too hard to keep up
of these are fixed costs: rent/mortgage, with. They prefer to simply track income
utilities, transportation, school fees. You and expenses monthly, hopefully making
have to pay them. However, you are plan- sure that there is always a sur-plus of posi-
ning ahead as well for those once-a-year tive cash at month end, however small.
cash hits, vehicle registration, vacation,
land tax, house or tenant insurance, edu-
cation, etc. There is one serious problem with simply
tracking income and outflow. We all
It is very seldom that these two - actual and
know what that is - the unexpected, un-
budgeted are the same. Close to - is good
planned for annual/semi-annual expens-
enough!
es to license the car, property insurance,
See the two charts ABOVE again. spe-cial condo assessment, co-pays for
dental braces, medication, an accident,
In Fig. 1, We assume that you have com-
and so on.
pleted the simple tracking income / ex-
pense chart for Actual inflows and outflows These unplanned for items can throw a
of cash for the first month. simple monthly cost plan into disarray.
In Fig. 2, you can see the sample two col- My suggestion always is to set up a bud-
umn worksheet: get, and actual by itself, as a reminder of
those annual ex-penses, then use the single
• Budgeted amount - enter the budget-
tracking method of Figure I for your real
ed amounts, those costs that you have
income / expenses each month.
defined as how much you would like to
Starting Your Plan by There are three reasons (rules) to review
your finances once a month, or quarter, or
Reviewing Your Finances! more, if needed:
1. No one, but no one, can manage your
money the way you can.
Try not to feel 2. If you don’t manage your financial
affairs, you haven’t a clue where you’ve
overwhelmed initially, been, where you are, or where you are
just start! going.
3. Neglect your finance review, when
something goes badly wrong because
your identity was scammed, you were
overcharged, you will never know —
Your monthly bank statement - or online until it is too late.
transaction activity is a good place to begin.
Will you only have yourself to blame? FOR-
Yes, it is time-consuming. It may take you GET BLAME, just resolve to do better!
a day, a couple, a week, or a month to go
through at least one-three months of bank
transaction activity. Additionally, if you are
at the start of a New Year, then it is a good
Figure 1 Tracking Your Income
time, a traditional time for review because - Expense Numbers
you will be receiving all of the year-end
reports that show cumulative activity: your Start with the Illustrative Bermuda Simple
cash and credit card accounts, investment Monthly Income-Expense Tracker Worksheet
and pension accounts, insurance if you at Fig.1 above, or you can try other budget
have variable life, or cash value build-up, math tools that I’ve researched for you.
your expenses and the recognition that — “
I spent that amount on that? Electronic and manual tracking spread-
sheets - See links in reference section.
What was I thinking!
The Do-It-Yourselfers can use a generic
It is true that the number of people who find electronic spreadsheet. There are countless
this exercise tedious, boring and over- downloadable templates that you can tailor
whelming are many, measurable by their for your personal use. Free spreadsheet
complaining, procrastinating, just finding software is available from open sources:
any excuse to put the chore off. Apache Open Office, LibreOffice, Excel,
Uh, you don’t want to do this, I know you Mac Numbers, Google, and many others.
don’t, however, as your Moms used to Search for the free ones and experiment in
say, “It’s good for you!” learning.
• Use a commercially set up budget plan-
ner (also free) such as Open Office or
Vertex42 - easy to find in Google search,
just search free budget planners.
• Use Our Simple Budget Worksheet fea- Then, Still on Money In, add any cash
tured in the accompanying chart – tai- income from part time jobs, interest or
lored for the Ber-muda environment. Fig.1 dividends, rental unit(s), pension annuity
above and in Resources End of STEP. payments (if retired), and so on, all listed
• Manual Tracking the old-fashioned way on your bank statements. Don’t forget to
is sometimes just as easy, by hand, using include other cash payments you may earn
legal or two column 8/11 inch lined paper on side hustles - that are not accounted for
and copying the format of Fig.1 or 2. Use on your state-ment.
one page for each monthly set of income/ Remember you want your complete finan-
expense categories. You don’t even need cial picture for the month. You can’t plan
electricity! for anything, if you don’t know what your
• Add the totals up manually each month resources (cash and assets) are!
on a calendar type planning book then
enter on your Master Income/expense Don’t list things like inheritances, lump sum
sheet for the month. You can also create payments, or even bonuses - they are not a
one for the for the year. monthly cycle item. In fact, they are “sur-
prise” gifts. They require different spending
/ saving decisions.

FIG. 1 INPUT Your Net Cash

Inflow in the Money In Section FIG. 1 TRACK Your Cash Out-
flow in the Money Out Section
Enter your monthly gross income before
any bottom-line adjustments. This is so that
you can see your real net pay - the amount Categorise your spending habits using the
that is left after your payroll deductions for MONEY OUT column in Figure 1.
payroll tax, health insurance, life insurance, This is the toughest, most annoying section
5% pension match, old age contributory of this exercise. How on earth are you going
pension, etc. track all the little items? Heck, you sure
Then, before you enter any other income know what your mortgage or rent payment
(or expense) received jump down to enter is - to the penny while grocer-ies, electricity,
the deductions (expenses) listed on your cable/phone/Internet, transportation (gas
paycheque. Notice how the numbers are for bike/car) are fairly predictable.
negative red - denoting subtraction from The rest of that spending - especially the
your gross paycheque. The net amount left ATM withdrawals will be challenging –
should be the net paycheque listed on your since the informal rule on spending is this:
bank statement. The smaller the cost of the items, and the
It is important to enter the amounts this larger the number of cash with-drawals, the
way because your bank statement does not harder it becomes to remember just exactly
show your health care deduction, pension, what it was that you did buy. Especially on
etc. yet they reduce your pay - as you well those days when you’re harried and every-
know. Plus, it gives you the real picture of thing in your life seems out of sync.
all your expense outflows.
The Just Don’t Know Where Now, you have input all Money In and
Money Out for the month. Where are you
the Money Went! with the actual in-come/expense tracker?
Anything left over?
Take the attitude of no moral philosophis- Can you consider starting a Small Stuff
ing, such as were these expenses neces- Savings account? Review STEP FIVE
sary or just regretful splurge items? Simply again.
designate all those items in the Just Don’t
Know category.
This is the hardest category because most Figure 2 - Set up the Budget
of it is cash slippage; that is, it just slips
through your fin-gers every day.
Estimates using what you
actually spent for the month -
but only as a guide.
You must get control
of the Just Don’t Know Note that all numbers used in the budget
chart Figure. 2 are the author’s GUESSTI-
cash spent. MATES. Only you know what your realis-
tic numbers are.
EXAMPLE: I’ve used a family of three, with
You may be appalled at just how much gross combined earnings of $120 thousand
cash has slipped away. If you don’t ferret a year – for two employed parents and a
out those unidentifi-able expenses every small child. Just about anywhere in the
month, you will lose control of your budget world, these salaries would be con-sidered
very quickly. super fabulistic, but our island is a different
Credit card payments. Yes, it sounds like expensive challenge - as we all know.
duplicating costs. However, if you bought Two parents earning $60,000, annually,
that “stuff” months ago, you still have to their combined gross salary is $10,000 per
pay it back. Your goal is to have zero bal- month but take a look at the deductions to
ance credit card each month. arrive at their net pay. Hardly anything left at
Other expenses – the catchall list. Some month end to save!
people like to set aside money for holidays, Your budget is trying to set limit guidelines
birthdays, vaca-tions, etc. However, in Fig- on various items to help you control ran-
ure I, we are tracking Actual cash spent, not dom spending. So, for instance, you would
items that will be paid for in the future. specify just how much you are willing to
Figure 2 will demonstrate how to plug and budget - for those Just Don’t Know Items
plan for those future annual (or semi-annu- so that you can plan to avoid hurtling over
al) costs by the-oretically setting aside the that number again.
Budgeted number amount each month.
You get the point.
First, list the necessaries. The bills you Then, list credit payments, if more than one
must always pay first and the monthly esti- card, catchalls, and the just don’t know
mated amount: expenses like ATM withdrawals, expenses
paid in cash, etc.
• rent/mortgage, these don’t vary that
much - if at all. • Credit card payments
• food, decide on your budget limit - see if • Catchall: birthdays, holidays, vacations
you can stick to it • Just Don’t Know expense items, ATMs
• utilities, use a good estimate - not too etc.
low, not too high by reviewing your prior
bills, easily ac-cessible online
• transportation, car, bus, ferry, bike Now the reckoning,
• phone/cable /internet, same thing - set comparing actual costs to
a limit - track your prior usage and arrive
at a happy medium cost for the whole budget estimates
family Expenses - remember the first column
• personal health care, this category can is your budget expenses, these are the
be a fixed cost - or variable if you elect to estimated costs you want to control not
DIY, say nails, hair etc. what you are spending on each item cur-
• day care, the cost is the cost, not much rently. The budget and actual expenses
flexibility may be different to start with.
• entertainment, other activities See Fig.2 chart!
• clothing / shoe purchases. How many
Do you have any cash left over? Is your
outfits do you really need?
month ending number - positive or nega-
Next, the out-of-the-blue surprise bills that tive?
you completely forget about because they
Yes, surplus to put aside for your rainy-day
happen once a year. Divide those costs
fund. Yay!
by twelve (or by six if semi-annual or 4 - if
quarterly) - as you only pay these inter- No, decide what can you cut back on, or
mittently, but you need to allocate money alternatively raise extra money. See be-
for them each month. Remember how we ginning of Budget sec-tion for small stuff
mentioned avoiding those awful, big ticket slippage and income-raising ideas.
surprises?
Your budget should include a monthly
• car/bike insurance, savings amount – that once you establish a
• car/bike/boat registration, controlled budget is the first thing you do.
• land tax,
• life insurance,
• house insurance, etc.
• others?
There. You have Your Simple
Bermuda Budgeted to Actual
Worksheet set up.

I’ve input some GUESSTIMATE numbers,

now you input your real income and ex-
penses, then you de-cide what percentage
you will try to save.
Repeat every month - simply track your
actual income and expenses.
Don’t forget that you are saving - if you are
Then compare your actual costs to your
currently employed!
budget amounts.
Your Bermuda National Pension Scheme
The budget amounts won’t change be-
is putting away 10% of your gross sala-
cause you have now defined a limit on your
ry every single month, every single year,
spending for the year.
unless in 2020, you temporarily elected
The goal is to see how close you can bring 6%. Monitoring your pension accumulation
your actual costs to your budget amounts! to-date (covered further under Employee
Each month! Benefits) is another opportunity to manage
your finances going forward.
Can you see a pattern? You can resolve
these unknown expenses by setting up a Many Bermuda families, way back when,
simple necessary budget using your real never had a formal budget, but they knew
numbers to filter out and control the ran- the value of mon-ey!
dom spending.
Heads of households who worked two jobs:
the day job for someone else, the night job
for the family. The extra income went imme-
Feeling bad that your diately to reduce their mortgage principal
balance and other debts.
net monthly savings
Families who built their homes themselves -
numbers aren’t better? after working all day.
They didn’t save with bank deposits; they
used any extra cash above their living ex-
penses (and a small cushion) to buy build-
ing materials. Some months, there was only
enough cash for a few boxes of tiles.
Bermuda Homes overlooking St George’s Harbour
Scott Stallard Photography

But, they persevered.

These are not just stories; I have met some
of these determined individuals.

It took years to
build by saving and Listen to tips for
Making a Basic
budgeting, but!
Budget
They finally owned a
home, a wonderful
appreciating asset. Listen to tips for a
Simple Budget to
Track ALL Income
and Expense
References
& Resources

Budget Calculators, Spread sheets and

Motivational DIY Websites
There are thousands of budget websites,
charts, and DIY help. Just type budget
into a Search engine, what a huge
surprise - take your pick
Here are some websites I like, just type
names into your favourite search engine:
360 Degrees of Financial Literacy Home
Budget Analysis
www.Vertex42.com calculators - these are
free, designed for the more experienced BROUGHT TO YOU BY
individual who has worked with
spreadsheets, etc.
There are just as many or more websites,
blogs, Facebook, Instagram person
accounts of managing a budget
Jamila: Journey to Launch to Financial
Freedom - Budget Boot Camp. I like
Jamila for her personal touch and
motivational webinars, meetings, and
podcasts! She has been featured on
CNBC, Buzzfeed, Money, Business Insider
and more.
NEFE Financial Literacy. The National
Endowment for Financial Education from
high school to adult-hood, NEFE has
worked hard for more than thirty years to
promote, teach and motivate Americans
to become financially successful.
www.Nefe.com