One thing is for sure - if you use personal finance spreadsheets, you’re in the great company of multiple self-made millionaires who swear by spreadsheets as the best way to track all facets of their money, according to millionaire interviews by ESI Money.
Saying that there are a few options to track money these days would be quite an understatement! With quite a number of automated tools, there are so many financial tracking options to cater to different needs and personalities.
But if you haven't considered personal finance spreadsheets (powered by Google Sheets or Microsoft Excel), you might be seriously shortchanging the impact of spreadsheet budgeting and financial tracking on your finances.
Well then, let’s dive into what makes personal finance spreadsheets a desirable option for people interested in diligently tracking their money.
Why Spreadsheet Budgeting and Financial Tracking Beats Automated Tools
1. Spreadsheets are customizable
We’re all different, maybe you’ve noticed? My wants and needs are different from yours, and so your tracking needs are different from mine, and everyone else's for that matter.
Spreadsheets thrive in customization. They support custom expense and budget categories that meet your needs as opposed to predetermined categories that don’t quite work. When it comes to visualizations, sometimes simple is better, sometimes it’s not. Either way, spreadsheets can deliver simple or complex custom visualizations every time. And these are only the tip of the iceberg.
2. Spreadsheets are engaging
Anyone who uses a spreadsheet can tell you - personal finance spreadsheets force you to take an active role in your finances. There’s something about manually logging your transactions - or anything for that matter - that helps you truly process what you’re writing.
So it takes an additional hour or two a month to get your finances in order when using spreadsheets, yes sure - that's not very enticing when you could spend no time at all with automated tools. But I’d argue that those few hours might actually be essential for your financial success.
Here’s an example: You are 42% more likely to achieve your goals if you write them down. It helps you visualize your future, understand the impact that your actions now can have on your future, and helps you prioritize.
Automation when it comes to finances can be very useful, but I find that it can be a double-edged sword, taking away the crucial element of engaging with your finances to truly understand the impact of your financial decisions.
3. Joint money management
So you have a life partner that you manage your money with? Wouldn’t it be super helpful if you could centralize all your money in one place? A spreadsheet allows you to combine your finances seamlessly.
What’s more, spreadsheets support easy collaboration on the spreadsheets together with such impeccable sharing capabilities.
4. Spreadsheets are flexible
Raise your hand if you have ever bought both pillows and cleaning supplies at a Bed Bath and Beyond, or perhaps gas and drinks at a gas station. It is very common to make payments that have varied expense or budget categories in one transaction. With spreadsheets, you can divvy up these expenses and bucket them correctly in accordance with your custom set expenses categories.
5. Set and track financial goals
We all have financial goals that we’re working toward. If your goals are SMART, meaning they are time-bound and specific, you can track them on spreadsheets. In this way, you can monitor your trends and see how you compare to set goals.
Related: How To Set S.M.A.R.T Financial Goals
6. Automated tools fundamentally change and even disappear
Have you heard of the guy who spent $88.95 at his local K-Mart in August 2001? Well, he’s got his 20 plus years old personal finance spreadsheet to thank for that piece of information right there. Not to mention the rest of his expense tracking, net worth trends and so much more over the last two decades.
Unlike spreadsheets which fundamentally don’t change, apps and software change, get acquired and even disappear, a concept known as platform risk.
Take for instance Quicken, which despite being around for decades, experienced quite some changes in the platform when it got acquired in 2016. Features disappeared, new ones appeared - and all were outside the control of the user. And it’s only been 5 years - consider what can happen in two, three decades. A lot!
If seamless long-term financial overviews are what you seek, spreadsheets are hands down most reliable.
7. Notes & Descriptions
Yes, this is absolutely deserving of its own bullet point! Your memory can only take you so far when it comes to recalling financial decisions from 2, 3, 10 years back! The ability to add notes to your expense and investment transactions, and more, is absolutely key.
Whether you would like to provide more context for a major expense or detail the reason there was a big jump in your investment account (such a rollover from one investment account to another) - this is only truly possible on a spreadsheet.
There’s no doubt that personal finance spreadsheets can come in very handy in your wealth-building journey. The best part is that you can get the best of both worlds - use automated tools to track your money, then put all these numbers into your own spreadsheet to benefit from the additional and impactful features that come with personal finance spreadsheets.