Lesson 2: Reduce the Burn

Reduce the Burn: Analyse your Expenses and Cut Costs

Here is an Excel sheet. If you do not have Excel, you should be able to import the file into Google Sheets. If you had to use Google Sheets you can download the file as an excel file and upload it.

The template is a protected workbook that locks certain cells in order to preserve critical formulas. However, if the protection disappears, please only change values in cells that should be changed.

The basic steps in the assignment are as follows:

1. Choose a budget goal and decide what time period it applies to (month, quarter, year?)

2. In the leftmost column on the sheet type in your expenses (if you need to add rows it will be easiest to add rows to the middle so that the formatting gets carried over). The current content is just there as an example.

3. Fill in the relevant information for every Gray-filled cell.

4. Some key ratios calculate automatically.

The goal of this assignment is for you to gain some insights into you spend so feel free to be thorough and complete. Remove anything that you would not want to share before uploading the file back (for example if you used names with salaries your advisor does not need to know names). While this information is useful for your advisors, it is more for you to reflect upon your expenses. The benefit of submitting the information is that the advisors may be able to suggest substitutes you did not think of to save you money.

Column Definitions:

1. Expense – What you are spending money on

2. Category – Use the drop down to choose the category.

3. Budget/Cost – The recurring cost for the time period or the one-time cost (i.e., furniture)

4. Padding – The fuzzy factor so we account for the unknown, we suggest 30% but you can change this for things you know are very fixed.

5. Total – This is the amount with the padding factored in

6. Revenue Produced/Cost Saved – Other than some essentials that are simply required everything you pay for should help generate revenue or save you money, this is that number.

7. ROI – The return on the investment for that expense

8. List Substitutes – What are your other options.

9. Budget/Cost of Cheapest Substitute – Note that it doesn’t have to be cheapest but whatever you choose, but we say cheapest as this is an expense cutting exercise. Put $0 if there are no substitutes or you are using the cheapest option.

10. Difference – The savings by switching.

11. Switching Cost – It can cost money to switch from one system to another, especially if it is linked with your other systems. What is that cost?

12. Switched Revenue/Cost Saved – If switching means lower revenue or higher costs write that number here. If it is unchanged then write the number, you wrote before.

13. Switch ROI – The ROI if you were to switch this can be useful if you save 50% and it reduces your revenue by $1. It might be worth the lost revenue to go with the much cheaper option. Infinite will show up when the cost of the service is $0 because you cut it entirely.

14. Switch? – Decide Yes or No. The estimate new budget calculation adjusts your budget for the savings associated with switching. Note it does not factor one time switching costs, this will guide your decision to switch qualitatively.

15. Why or Why Not? – Why would you switch or why wouldn’t you switch. This is your notes and comments section.