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How to Create a Master Budget

The first step to actually creating your budget is to do a master budget. Later in the week I’ll be showing you how to create your working budget using a variety of tools. The Master Budget Excel file I’m using in the screencast will be made available to newsletter subscribers. You can also do your master budget using paper and pencil if you prefer that.

What is a master budget?

A master budget is a temporary document that helps you prioritize your budget categories and help ensure you have the money in your account when you need it. This is very important because when you first start budgeting you run the risk of overdrawing your account. The master budget also helps you see if you have enough money to meet all your budget categories and allows you to make adjustments before you create your working budget. It’s kind of like a template of sorts and you’ll use it as a reference tool for creating your first 1-3 budgets.

Once you get a month ahead and can budget for this month with last month’s money, you won’t need to use the master budget anymore because you’ll already have all the money you need for the month and won’t have to worry about timing.

How to prioritize expense categories

There are three ways to prioritize your budget categories:

  1. By Timing – You first want to make sure you have money for your set bills. Some people will run into a scenario where they have enough money for their monthly bills overall, but maybe they all come due in the first half of the month and your first paycheck won’t cover them all. In a situation like this, you’ll want to contact the companies and see if you can change some of the billing dates to the second half of the month.
  2. By Importance – Make sure the most important categories are funded. These can be needs such as food, clothing, housing, and transportation. These can also be things you value like savings, charitable donations, or power money.
  3. By Need – Even though groceries are very important and must be budgeted for, you may not need all of your grocery money budgeted for your first paycheck. Maybe you only need half now and half in the second part of the month. In contrast, maybe a category isn’t at the top of the list in importance, but you need the money earlier than other categories.

A word about Excel

I’m going to use Microsoft Excel a lot throughout this course and I consider it a basic personal finance skill. The Master Budget file that is available to newsletter subscribers is not protected and the formulas can be changed or deleted. I did this on purpose so that people would be encouraged to play around and see how I’ve created this document.

If you feel like Excel is confusing or threatening, please let me know and I’ll create some tutorials showing you the basics of excel.

Master Budget Download

The master budget excel file will be available to newsletter subscribers. You can also do a master budget on paper or in your own excel spreadsheet. There’s nothing magic to my spreadsheet, it’s just created to save you some time.

Posted in Uncategorized | 4 Comments »

4 Comments to “How to Create a Master Budget”

  1. Jason Says:

    Hello. I recently subscribed but can not find where the master budget excel file is available for download. Please confirm where I can find it.

    Thanks very much,


  2. Sam Says:

    You should receive an email with a link to it. If you don’t, let me know and I’ll send it to you.

  3. pamela Says:

    This is great! Have gotten started, but would like to know what’s the best way to input expenses that have to be paid in one lump sum or quarterly, such as insurance policies or property taxes. Thanks.

  4. Sam Says:

    Most people eventually want to budget every month for periodic expenses. However, if you have enough savings in your account you could just wait for them to come up and budget the entire amount in that single month. Otherwise, for each periodic expense just look at how many months before it comes due and divide the amount owed by the number of months.

    If it’s a yearly expense that you just paid just divide the amount by 12. If you have a bill due in 5 months, divide the amount by 5 and budget that each month.

    It’s a great feeling to have a periodic expense come due and have the money for it ready in your account.

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