You don’t have to raise your hand….but I’m pretty sure most people have, at some point in their lives, been in financial crisis. When you’re at the point where technically you make enough in a month to cover all expenses, but you cross your fingers and toes that your income will hit the bank account BEFORE your expenses do.
Alright, THAT is what we’re planning for in this post. If you have $10,000 in the bank account, and $2,000 of expenses hitting in the month, this level of planning is completely beyond what you should be worrying about. The one exception I could think of is if you keep your money in one account, and pay bills from another, and need to make sure that you’re transferring the correct amount to the “bill paying” account in time for the cash to clear before the bills do.
(I worked with a girl once who, I swear, spent hours on the phone every week talking with her bank trying to get cash from one account to another in time to not overdraft. She had it down to the penny and down to the day, it seemed.)
What you’re going to do is make a very, very simple Excel spreadsheet. If you don’t have Excel (or a similar spreadsheet program) you can sign up for Google Docs online, and use their spreadsheet maker. It’s limited in function, but will meet your needs admirably AND be viewable/editable by your spouse, etc.
Open a new spreadsheet, and save it. Make it something clever, like “Budget Spreadsheet.”
In line one, column A write “Date.” Column B, write “Income”. Column C, write “Expense.” Column D, write “Total.”
In line two, column A, write today’s date. In column D write your current bank account total.
Now, click once on cell A2 (column A, line two) so that the cell is selected (outlined in bold black lines. Yes, I know I’m being simplistic- if you don’t need this level of detail, just bear with us!) Hover your cursor over the bottom right corner of the cell until it becomes a plus sign, click and hold, and drag your cursor down the page. You should see the date increasing in the subsequent cells. If you’re in Excel, it will be smart enough to know from just one date. If you’re in another program, you might have to write today’s date AND then tomorrow’s date in the cell below, select both cells by hitting shift+down arrow, and then dragging from the bottom right corner so that the program knows you want a continuation of that same date pattern, rather than just copying down the date in the first cell. Drag as far as you want- I like to go 3 or 4 months, or up to a year.
In cell D3, type this formula (without the quote marks!) “=D2+B3-C3” What you’ve just said is “take yesterdays balance, and add today’s income and expenses.” The “equals” sign shows the program that you want this to be a formula. A plus sign is also a way to show you want it to be an equation. Hit enter to leave that cell, then click on it once to select. Hover your cursor over the bottom right corner, and click and hold, then drag down until you reach the last line you dragged a date to. Each subsequent cell will now pick up the total from the day above it, and add/subtract the current day’s income and expense.
OK? I promise, this is about 3 minutes worth of work- it just takes a lot of words!
All that’s left is to type in all known expenses and incomes, on the appropriate days. I use column E to write a short description of the income and expense. For example, if the September 20th line has income AND expense, the cell in column E might say “piano income/utilities.” I know when I expect to visit the bank to deposit all my piano tuition checks, so I’ll enter that information for every month. I know when to expect my husband to bring home a pay check, so I’ll enter that in all the months. I know when my mortgage, credit card bill, health insurance, church tithing, and utilities are all due, so I’ll input those for all the months with estimates of what they’ll be. Some are easy, because they’re constant (like health insurance and mortgage.) Others are subjective (like utilities and tithing), and I’ll put in my best estimate.
This kind of budget does not allow for padding and extras- if an unforeseen expense comes up, you’ll have to add it in, and watch your future balances. The point here is to put in all the income and expenses you know of, and then scan column D. Does it ever go negative? That means on the day the expense in that line clears, you don’t have enough cash. Bummer.
BUT, now you know, and you can try your best to do something about it. Can you make a little extra cash before then? Can you be a bit more frugal and lower some expenses? Check the bill due date, and see if it’s possible to pay it closer to the due date if you’ll have the cash by then? Budgets are all about knowing and planning, even when the news isn’t good.
Does column D stay positive? If it’s close to zero, watch out! If it never gets close to zero…congratulations. You have a balanced budget, now please be careful with it. 🙂
Filed under: Budgeting and Finances, Homemaking | 2 Comments »