Pay To The Order Of You

Implementing a Checking Account Budget

Executive Summary:

• This article is designed to share ideas on how to improve your personal finance budgeting skills for your checkbook account.
• If you feel that your budgeting skills are beyond fixing, find a sponsor to check in with as you work through the new method.
• You will need a spreadsheet program. This article does not help you fix your issue with 3rd party software tools like Quicken, You Need a Budget, Mint.com, etc.
• The thoughts here are my personal thoughts and do not reflect those of my employer

I have worked with several people that have tried to manage their money using third-party software. They have spent years entering data in Quicken, You Need a Budget, YNAB, Mint.com, and Personal Capital.com. These tools work for many, but due to the automated nature of the tool, the user does not see the power of the data. Users that have used these tools are also engaged in a subscription and if you are struggling with your budget, you want to eliminate all subscriptions! Speaking of subscriptions, you should reduce these. See Maya Kosoff This is not a personal finance advice column. In the end, the formula that has worked for many of my friends includes: Sharing their full checkbook and credit card statements with their significant other or very close friend, i.e. (Sponsor), obtaining an existing budget spreadsheet, using it daily, and checking in with the “Sponsor” to keep it up to date.

Engaging with a sponsor will increase savings, avoid late fees and reduce expenses.

Category Management:

The first step in this methodology is to define all of your categories and create the budget. If you are struggling to find all of your categories, add the list below into a spreadsheet as a start. You should also perform a complete download from your bank account of all transactions for the previous 12 months and painstakingly go through each one and assign it to a category. After you have categorized them, you should work with your sponsor to see if they see any other categories that you have overlooked. A key component of this strategy includes the transparency you need to share with your sponsor. Once the categories are entered, you need to total how much you spent in each category for the previous year. Enter this amount in the yearly column. The monthly column will take your yearly amount and divide it by 12. Enter the dollar amount for each month. You now have your budget worksheet.

Your Budget Tab Needs To Have All Of Your Categories

Recurring Categories and Amounts

Adding the budget categories to one worksheet, now you need to build another worksheet with all of your recurring categories and amounts. The task to create a list of the recurring expenses is accurately depicted in the article by Maya Kosoff, This is not a personal finance advice column. Once you have the list of recurring expenses, you need to put them into a spreadsheet with the following headings: Activities, Category, Amount, Frequency, Paid By. (Paid by lists what account you use to pay for the event. This could be a checking or credit card entry.)

List of recurring expenses. Painful to collect but worth it in the end

Transaction Data

Armed with the categories in the budget worksheet and recurring expenses, you can now build a worksheet that lists all of your transactions that take place in your checkbook. This worksheet will be your “Checking account spreadsheet”. This spreadsheet will take the transactions in your checkbook and manually enter them into this worksheet on a daily basis. Now one may think: “Why would I do build a worksheet where I copy the transactions from my bank account to the spreadsheet since they are all online with the bank?” Executing a manual entry of your transactions daily to your checking account spreadsheet will help you to see where your spending is going daily. If the task is automated to import it to the spreadsheet, then you don’t see the charge and it means nothing. Once you start typing in “Coffee Shop, $13.25” daily, this will subconsciously change your spending behavior. After all, do you want to sit down every day and type in another entry to the “Coffee Shop?” This manual entry combined with the daily sponsor check-in is the power of this worksheet model and must be done daily.

The transaction data worksheet has the following columns:

• Column A includes your categories separated by Income and Cost (Expense)
• Column B is the lookup of the amount to your budget worksheet
• Column C will be a formula of columns F and G
• Column D is a formula of the number of months
• Column E is blank by design
• Column F has 2 parts. The green section is the opening balance that you enter. The rest of the column is the formula that is going to look up the category and amount from columns M and N
• Column G is another formula for the forecast

Your input to the budget spreadsheet is all based on the data that YOU ENTER in columns J,K,L,M,N, and O.

• Column J is the date. Keep this format the same!
• Column K is the type of transactions, the choices could be:
• WITHDRAW
  DEPOSIT
  TRANSFER TO Another account
  Debit
• Column L is the description. You can enter anything you want here. You may want to copy the description from your bank account.
• Column M is the amount. Notice that these are done in accounting formats with ( ) to denote negative balances.
• Column N is VERY IMPORTANT. This is the column that must match the category in Column A so it can put in the amounts. (Review the formula in Column F) if you want to see it.
• Column O is the month when the transaction occurred.

The spreadsheet image is as follows:

Checking Account Worksheet

After entering the transactions in the worksheet, the final amount in your worksheet should match the amount on your checking account balance. You may now let your sponsor know that the entries on your worksheet match the bank account entries and the balance on your worksheet matches your bank account balance. This check-in must be done daily, seven days a week. The manual entry and daily check in is a key component of the success of this program.

Using this program, you should start to see how “painful” it is to enter in the non-discretionary expense items. Therefore, as you walk by somewhere and consider purchasing something, ask yourself if you want to spend time adding data to your checking account spreadsheet?” It will be easier to avoid the purchase of the non-discretionary item and avoid the entry into the spreadsheet.

Now, if you have read this far, you deserve a reward. A link to a spreadsheet template in Google Drive is here. Please note, this author can’t provide financial advice. The spreadsheet is provided as an example and best effort.

Personal budgeting is difficult. If it were easy, then a multitude of software products would not exist to address the issue. Using a spreadsheet and a sponsor will help you create a daily routine to watch your spending and does not require a subscription.