Lecture on Creating a 2024 Budget in Excel

Introduction

• Presenter: Dave, CPA
• Objective: Learn the basics of budgeting and using Excel to determine if a major purchase (e.g., a car) is feasible by year-end.

Initial Setup with ChatGPT

1. Generate a Basic Template
   • Prompt to ChatGPT for a simple budgeting template for 2024.
   • Obtain and copy the resulting template into Excel.
2. Enhance the Template
   • Request more detailed categories for income and expenses.
   • Convert the provided information into a table format for easy Excel copy-pasting.

Working with the Excel Template

1. Basic Adjustments

   • Insert an additional column between A and B for "monthly dollars".
   • Add rows at the top for 'Annual Salary', 'Income Buffer', and 'Expense Buffer'.
   • Define and input a sample salary (e.g., $50,000).
   • Calculate monthly salary by dividing the annual salary by 12.
   • Add other income sources: freelance, investments, etc.
   • Use formulas like =SUM() to calculate totals.

2. Formatting and Formulas

   • Use shortcuts (Ctrl+C/V for copy-paste, F4 to lock cells in formulas, Ctrl+Shift+4 for currency format).
   • Set up automatic column-width adjustment.
   • Apply conditional formatting for clarity (e.g., make totals bold, use color coding).
   • Differentiating income and expenses by formatting (blue for income, red for expenses).

Refine Income and Expenses

1. Detailing Income Sources

   • Example sources: annual salary, freelance income, investment returns, other sources.
   • Aggregate all income sources for a comprehensive view.

2. Detailing Expenses

   • Common expenses: rent/mortgage, utilities, groceries, transportation, etc.
   • Add any missed expenses using ChatGPT's suggestions (e.g., vacation, pet care).
   • Instead of copying values manually, use relative cell references and drag formulas.

3. Buffer and Variable Adjustment

   • Insert buffers to flexibly adjust income/expense projections.
   • Use multipliers (e.g., 80% for income drop due to COVID).

Comprehensive Calculations

1. Calculate Net Income

   • Sum all sources of income and subtract expenses, factor in tax rates.
   • Use relative and absolute cell references for accurate computation.

2. Cash Flow Management

   • Monitor beginning and ending cash balances for each month.
   • Adjust cash flow projections using initial bank balance as a starting point.
   • Use conditional formatting to highlight positive/negative cash flow.

3. Scenario Analysis

   • Test different financial scenarios (e.g., income drop/increase, expense hikes) on the budget.
   • Check cash reserves for sustainability over the year.

Final Adjustments and Tweaks

• Apply conditional formatting to net income for instant visual feedback (green for positive, red for negative).
• Validate the budget by cross-checking various scenarios and their impacts.
• Make sure to have buffer zones to cover unexpected financial changes.

Conclusion

• Full walkthrough of setting up a dynamic and flexible budget in Excel.
• Ensure budget sustainability and preparedness for different financial scenarios.