Is your checking account efficient enough? Are you minimizing excess cash and putting your hard earned money to work? This calculator helps you do these things!
Below is the initial video tutorial demonstrating how the calculator is built. Below that, I will break it down further and explain!
I hope you enjoyed that!
To quickly summarize, building out this spreadsheet allows you to visualize the month as a whole and see when money comes in, and when it goes out. In order to account for variable expenses, I use what I term a, “miscellaneous fund”.
I am a huge fan of this budgeting method as it allows you to have a fund that is drawn down for fun / entertainment expenses, but keeps you in check as that same fund is used for unexpected things that come up.
Say, for example, you keep $100 a month in the fund. Let’s also say you use this to get a $25 dinner out once a week. If, unfortunately, you get a flat tire and have to pay $20 to get it patched, you would take that $20 from the same fund. We would know that we can’t afford a dinner out the last week of the month because our miscellaneous fund only has $5 left for the month.
This budgeting method forces you to limit unnecessary expenses when unexpected expenses come up during the given time frame.
How to Build it
To begin, we number out the days of the month down the first column. I always ensure that the name of the month is at the top as I keep each successive month on the same sheet, spacing them out horizontally so I can delete months as they end.
If you wanted, you could also just hide the columns of a month as it ends so you always have something to look back on.
Next is the hard part. All good budgeting systems require that you put the work in to comb through your bank account, debit/credit cards, and all other expenses to ensure you are 100% aware of all cash inflows and outflows.
Once we understand each type of inflow and outflow, we name the columns each category. For example, “Rent” or, “Utilities”.
We then, in reviewing the reoccurring expenses, enter each cash flow on the date that it most often occurs. This system also works great in tandem with another budget method so you know how much to plan for in the miscellaneous column. Personally, I like to have both my miscellaneous and saving (investing) outflows come out on the same day I get paid. That keeps things regular, plus paying yourself first is always best.
Once you have all of your cash flows listed, you can simply highlight a given portion of your sheet to understand the bare minimum amount you need to keep in your checking account to handle all cash flows!
Another personal preference, I like to keep a cushion here in the event that my math was off or something comes out at an unexpected time.
The overarching goal here is to avoid wasting any cash that could be better used paying down debt or investing!
Do you have a regular savings account? Give this a read to find out why they are pointless!
Additionally, to get a better picture of my spending habits, I like to sum up the columns below the cash flow rows so I have visibility to the amounts being spent in each category. This can actually flow quite well into a full picture budget. Because of this, I created another video further expanding on the one above:
All of this can also flow into other sheets, other budget templates, and other calculators!
Taking the time to build sheets like this might not be something that you enjoy. I fully believe, however, that these are worth their weight in gold and that understanding your full financial picture is the ultimate way to ensure financial success.
You can learn all you want about finance, investing and the like. If you never take the time, though, to understand your own situation you will never find financial success.
As always, I cannot thank you enough for taking the time out of your day to read this article! Please do not hesitate to reach out to me with any questions, comments, or suggestions!