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Many people want to get better about budgeting but don’t know where to begin. Some people will like using apps, others the envelope method, but others may find that a basic online spreadsheet is the best way to keep track of the money coming in and going out.

Here, you’ll learn how to easily do that last option using Microsoft’s Excel spreadsheet program. It has some impressive features that can make it user-friendly and efficient as you budget. It can help you manage your money and hit those financial goals.

Step 1: Opening a Workbook and Creating the First Month

To begin creating a budget, the user will open a fresh Workbook in Excel by hitting File > New > Blank Workbook. Before diving into building the perfect budget, they need to save this file somewhere safe. After completing the first draft, it may be worth it to back it up on a USB drive or on a cloud-based platform. After saving the file, they’ll move on to building out the budget.

One way to keep track of this monthly budget, and review past months’ spending and saving progress is to create a tab for each month of the year. For extra convenience, the budgeter could consider beginning by creating a “template” tab to build the initial budget in and then copy it over each month and edit it as needed.

💡 Quick Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.

Step 2: Adding Income

Before creating a spending budget, the user will start by looking at expected income for the month. Doing so makes it easier to formulate a budget that is realistic, making them more likely to stick to it. To begin building the proper formulas to help calculate income, the user will take the following steps:

Select cells A3-A11 (if more space is necessary later on, expand this selection past A11) and hit “Merge and Center.” Then write the word “income” and center it.

Merge the cells B3 and C3. Label these cells as “Source” which will show where the income is coming from. Some may have consistent income sources such as “Paycheck 1” and “Paycheck 2.” Others may have more sources they need to track “Side Hustle Income” or “Unexpected Income.” After choosing income sources and properly labeling them, merge every row from B and C through row 11 or whatever the chosen stopping point is.

While not necessary, one can label cell D3 “Date” which is where the budgeter can track which day they received a type of income. If they have predictable sources of income, this option may not be worthwhile, but for those with flexible incomes (say, seasonal workers who earn an hourly rate or entrepreneurs), it can help them stick to a budget and follow up on missing payments.

For the final step of the income section of the budget, which is more of a benefit to those with varying monthly income, label section E3 as “Planned” to identify what the originally planned income is. Then label F3 as “Earned” to identify how much money was in fact earned from each labeled source of income. For G3, label it “Difference.” This cell will automatically calculate the difference between the expected income and the income actually earned after adding the proper formula.

To create the formula needed to automatically track the difference between expected and earned income, add the formula “=SUM(F4-E4)” after every row it should apply to. Then replace the F4 and E4 with the cells that correspond to the “Earned” and “Planned” income sections.

💡 Quick Tip: When you overdraft your checking account, you’ll likely pay a non-sufficient fund fee of, say, $35. Look into linking a savings account to your checking account as a backup to avoid that, or shop around for a bank that doesn’t charge you for overdrafting.

Step 3: Adding Expenses

After wrapping up the income section of this project, the budgeter can start planning what their typical monthly expenses may look like. (Make sure to add those commonly forgotten expenses, too.) They can do this on the same tab that they calculated their income in or they can create a separate tab. How they organize their budget is totally their call!

They’ll use the same format for building out expenses as they did with their income (although if they choose to continue working in their original sheet, they’ll need to adjust the row letter and column number accordingly) and will name this section of the budget “Expenses.” Using the same labels from the income section is fine, as is creating new ones.

They’ll only have to make one major change to this process, which is to use a different formula for the “Difference” column. In order to best calculate expenses, they can use the following formula: “=SUM(Planned Number-Actual Number)” which will calculate how much they overspent.

When creating spending sources, instead of income sources, they can make as many or as few as they’d like. For example, someone may want to make one row that represents all utilities or they may want to designate a row for every single utility they pay. Another budgeter may want to budget for overarching categories such as living, automobile, entertainment, food, travel, and savings. It really depends how detailed someone wants to get about their budgeting.

For those drawn to a more detailed budget, they can create multiple sections for their expenses, they don’t have to be all lumped together. It’s fine to repeat this process again and again to create more detailed categories such as basic living expenses or business expenses.

Recommended: 15 Causes of Overspending

Step 4: Adding Some Goals

For those who want to expand their budgets past basic incomes and expenses, they can repeat the process used to create the income section of the budget and make some more specific savings goals.

One way would be to create a category that tracks how much they hope to save that month in general, another would be to break it down by savings category. Similar to expense sources, it’s possible to break goals down into separate sections, such as one that provides a more detailed look at saving for retirement or tracks a big expense they’re saving for, such as a down payment on a home or a wedding.

Using the same basic formulas for tracking expected income and how much income is actually earned in a month, the user can track what they hope to save and how much they actually do end up saving.

💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.

Step 5: Customizing a Premade Template

If someone’s not interested in learning how to create a budget in Excel from scratch, they can use a premade budgeting template provided by Excel or one of the many free or for-purchase options that are available online.

Even when using a premade template, it can be helpful to review the tips for creating an Excel budget from scratch shared above, as they may allow the budgeter to customize the template to their needs.

At the end of the day, creating a template from scratch will allow the user to truly customize it to their needs, especially if they follow a particular budgeting method. That being said, a template can save a lot of time, especially for those who aren’t comfortable using Excel.

Step 6: How to Track Spending and Stick to a Budget

For those who have been hard at work creating their Excel budgets, it’s time to take advantage of that budget. It seems unlikely that anyone wants their Excel efforts going to waste, so one might want to make a budgeting check-in plan that they can easily stick with.

At the end or beginning of every month, it is a good idea to sit down and review if one went over or under last month’s budget, as well as take some time to build out the new month’s budget. That may involve simply copying over the template created earlier or the user might need to make a few tweaks based on how much they earned and spent last month.

As tempting as it can be to set it and forget it, the budgeter should try to check in on their budget more than once a month. Setting a quick weekly check-in date with their budget will allow them to update how much they’ve earned and spent so far during the month. That way, they’ll know if they need to scale back on spending in a certain category or if they can relax in another category.

While it takes a decent amount of self discipline and motivation to stick to a budget, awareness can be the first step in staying on track. By checking in with their budget frequently, savvy planners will remember their short-term goals and longer-term ones and hopefully will be a little extra motivated to meet them.

The Takeaway

There are many effective budgeting tools, and using an Excel spreadsheet can be one of them. It can allow you to track your income and your spending and saving, while making updates in real time. This can help you manage your finances and contribute to meeting your financial goals.

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A hedge fund is an investment vehicle that invests in securities and other assets with money pooled from investors. They’re similar to mutual funds or exchange-traded funds, but hedge funds rely on high-risk strategies and come with much higher fees. Because of this, they’re subject to less stringent regulations, and only certain types of investors have access to these funds.

While most investors may not engage with a hedge fund, especially younger ones, it can be useful to know what they are and how they work.

What Is a Hedge Fund?

Hedge funds are set up by a registered investment advisor or money manager, often as a limited liability company (LLC) or a limited partnership (LP). They differ from mutual funds in that they have more investment freedom, so they’re able to make riskier investments.

By using aggressive investing tactics, such as short-selling, debt-based investing, and leveraging hedge funds can potentially deliver higher-than-market returns, but they also have higher risks than other types of investments. In addition to traditional asset classes, hedge funds can a diverse array of alternative assets, including art, real estate, and currencies.

Hedge funds tend to seek out short-term investments rather than long-term investments. Of course assets that have significant short-term growth potential can also have greater short term losses.

Historically, hedge funds have not performed as well as safer investments, such as stock market indices. However, the goal of hedge funds isn’t necessarily to outperform the stock market. Investors also use hedge funds to provide growth during all phases of market growth and decline, providing diversification to a portfolio that also contains stocks, cash, and other investments.

Generally speaking, only qualified investors and institutional investors are able to invest in hedge funds, due to their risks and the high fees that get paid to fund managers.

Types of Hedge Funds

Each hedge fund has a different investing philosophy and invests in different types of assets. Some different hedge fund strategies include:

•   Real estate investing

•   Junk bond investing

•   Specialized asset class investing such as art, music, or patents

•   Long-only equity investing (no short selling)

•   Private equity investing, in which the fund only invests in privately-held businesses. In some cases the hedge fund gets involved in the business operations and helps to take the company public.

What Is a Hedge Fund Manager?

Hedge funds are run by investment managers who make investment decisions and manage the risk level of the fund. If a hedge fund is profitable, the hedge fund manager can make a significant amount of money, often up to 20% of the profits.

Before selecting and investing in a hedge fund, it’s important to look into the fund manager’s history as well as their investing strategy and fees. This information can be found on the manager’s Form ADV, which you can find on the fund’s website as well as through the Security and Exchange Commission’s (SEC) website.

Who Can Invest in a Hedge Fund?

Hedge funds are not open to the general public, and there are several requirements to be able to invest in them. In order for an individual to invest, they must be an accredited investor. This means that they either:

•   Have an individual annual income of $200,000 or more. If the married investors must have a combined income of $300,000 per year or more. They must have had this level of income for at least two consecutive years and expect to continue to earn this level of income.

•   Or, the investor must have an individual or combined net worth of $1 million or more, excluding their primary residence.

If the investor is an entity rather than an individual, they must:

•   Be a trust with a net worth of at least $5 million. The trust can’t have been formed solely for the purpose of investing, and must be run by a “sophisticated” investor, defined by the SEC as someone with sufficient knowledge and experience with investing and the potential risks involved.

•   Or, the entity can be a group of accredited investors.

How to Invest in a Hedge Fund

Investing in hedge funds is risky and involves a deep understanding of financial markets. Before investing, there are several things to consider:

The Fund’s Investing Strategy

Start by researching the hedge fund manager and their history in the industry. Look at the types of assets the fund invests in, read the fund’s prospectus and other materials to understand the opportunity cost and risk. Generally speaking, the higher the risk, the higher potential returns.

In addition, you need to understand how the fund evaluates potential investments. If the fund invests in alternative assets, these may be difficult to value and may also have lower liquidity.

Understand the Minimums

Investment requirements can range between $100,000 to $2 million or more. Hedge funds have less liquidity than stocks or bonds, and some require that money stays invested in the fund for a specific amount of time before it can be withdrawn. It’s also common for there to be lock-up periods for funds and for there to only be certain times of year when funds can be withdrawn.

Confirm You Can Make the Investment

Make sure that the fund you’re interested in is an open fund, meaning that it accepts new investors. Financial professionals can help with this research process. Each hedge fund will evaluate an individual’s accreditation status using their own methods. They may require personal information about income, debt, and assets.

Understand the Fees

Usually hedge funds charge an asset management fee of 1-2% of invested assets, as well as a performance fee of 20% of the hedge fund’s profits.

The Takeaway

Hedge funds offer investors — usually, wealthier investors — the chance to invest in funds that are usually high-risk, but offer high potential returns. There are many rules surrounding hedge funds, and many investors may not even consider them as a part of an investing strategy.

For accredited investors, investing in a hedge fund may be one part of a diversified portfolio, although it depends on the investor’s risk tolerance, time horizon, and investing goals. If you’re not an accredited investor, or you’re worried about the risks associated with hedge funds, it may make more sense for you to consider other types of investments or to stick with ETFs, mutual funds, or funds of funds that emulate hedge fund strategies.

Ready to invest in your goals? It’s easy to get started when you open an Active Invest account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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