- The Budget: This is the same as a lot of other budgeting tools. You enter expenses and incomes. Expenses are divided up into monthly, weekly, and long-term expenses. The tool will calculate the income vs. expenses. Not many surprises here.
- Cashflow Planning: This is where cashflow planning starts to differ from other tools out there. The tool takes your budget and creates a hypothetical checking register that forecasts balances into the future. A quick glance will tell you if and when there will be a problem and you can make a plan to deal with it. Keeping it up to date also keeps you confident that your checking account is balanced and shows you how making certain adjustments will affect your finances in the future.
Getting Started
First, download the file here. It's a macro-enabled Excel file.
Open the file and, if necessary, enable the macros. Start on the "Budget" tab. You'll see several numbered sections.
Section 1, Monthly Expenses: In this section, enter expenses that are due on or around the same day every month. For me, that is things like rent, water, cell phone, and the gym. You'll also notice that the tool wants to know what day these things are due. Personally, I like to give myself a few days of breathing room. For example, my water bill is due by the 10th. But they are the only bill I have that can't be paid online immediately. I use my credit union's bill pay to push a check to them. That check needs to be cut and mailed at least a week before the due date, so I set my water bill's due date as the first rather than the tenth.
Section 2, Weekly Expenses: This section is for things that are paid every X number of weeks. For me, that's things like gas every week and groceries every other week and having my hair color touched up every six weeks. Enter the expense name, amount, frequency, and a starting date. The starting date is the date that the weeks will be counted from. So, if you put in 1/1/2017 as the starting date with a frequency of 2 weeks then the expense will be accounted for on 1/1/17, 1/14/17, 1/28/17, etc. If you're starting in the middle of a year then you should list the next due date as the starting date. If you're starting or creating a new year then you can use any date in the previous year. In the future, these starting dates will NOT have to be changed for the tool to work correctly.
Section 3, Income: This section is pretty straight-forward. Enter your income source, amount (Net), frequency, and either starting date or day(s) of the month you get paid. If you are paid twice a month (i.e. the 1st and the 15th regardless of the number of days in a month) then you'd use the Pay Day columns to choose which two days. If you're paid monthly or every two weeks then you'd enter a starting date that is a payday. As before, the starting date should be the next payday if starting in the middle of the year, but can be any date in a previous year when starting or creating a new year.
Section 4, Long-Term Expenses: Now we're back to expenses. These are expenses that might only be paid once a year, but are significant enough that they should be saved for each month. For me, these are things like Christmas, insurance, and car tags. I also put some of my more expensive hobbies here as to spread the cost out over the year. Enter the expense name and amount. Then choose how often it's due and how often you want to save for it. Again, you need to enter a starting date if it's a weekly or monthly that will be the first date that expense is scheduled. If you want to save semi-monthly then choose which two days of the month to schedule that expense.
Section 5, Surplus Distribution: After you have entered all of your expenses and income, if you have a surplus of income, this section is where you will decide what to do with it. This is where I enter things like mad money, extra car principal payments, and extra savings (because you're already saving monthly or weekly, right?). Enter the item name and the percentage of the surplus that you would like to allot to that item as well as how often you want to budget for them.
Now for the moment of truth. At the top of the page, enter your current checking balance (necessary for the first year only) and starting date (use the current date for the first register and New Year's Day for any subsequent years. Now, click the "Generate New Checking Register" button. A few minutes later your register will be ready. The register will always run from the starting date that you entered in cell F1 until the end of that year.
At the bottom, you'll notice that you have a tab labeled "Checking 20XX" with the year you just created. At the top, you'll see a couple of amounts. Minimum Balance is the lowest amount that your checkbook will be in the current year. If this number is negative (red) then scroll down the list until you reach the first red entry. Use the Add Row and Delete Row buttons to move around entries if you can. Or know that you'll need to transfer money in from savings before payday and then back out after payday. After you've fixed any negative amounts, you have your plan for the rest of the year.
Tracking Your Checking Account
You can now use this register to track your expenses and keep your checking account balanced. In the F column, there are red "X" notations. When an expense is made, but not yet cleared, delete the X and the column turns yellow. When the expense clears the bank, enter a "C" into that column and it will turn green. The "Current Balance" amounts and "Ledger Accounts" will reflect these changes. Current Balance is all transactions regardless of whether they've cleared. "Ledger Balance" is what should match the balance the bank has.
When Things Change
Life happens and things change. If, for example, the cable bill goes up after you've made your register or the car gets paid off, then use the "Update/Delete Entries" button to update or delete an entry. Choose the tab for either delete or update. Choose the item to be updated or deleted. If it's an update then enter the new amount. Check the register(s) that you want to update. Click the "Update" or "Delete" button. You may have to go back through and update your plan here.
If you need to add a category then use the "Add Entry" button. Use the tabs to enter the required information for each of the 4 types of entries. Again, you'll probably have to update your plan after this is done.
Extra Features
There are a couple of extra features in the tool. You can create a loan amortization schedule using the "Generate New Loan Amortization" button on the Budget tab. There are also tabs for a savings account and it's straightforward Excel. There is also a page for your long-term bills. In the Items box across the top, enter each item. In the register in the bottom, enter the debits and credits for each category (making sure to name them exactly the same thing as in the items box). This will give you a running total of each category. This allows you to earmark these funds in a single account rather than having separate accounts for each long-term expense.
Notes:
For me, this system works best when I have one account for bills that strictly follows this plan. This is the account that paychecks are deposited into. It has no debit card access. My husband and I each have a checking account that spending money is transferred into. I also have an account that is strictly for paying the credit cards. As soon as something is charged to the credit card, the amount is transferred from either the bill account or a personal checking account is transferred to cover it and the bill is auto-paid each month.
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