Planning Ahead

Spending or Cashflow Planning

Ever had that sinking feeling of receiving the car registration reminder but you know there is no money put aside to pay it?

Or, have you ever had to put off buying someone special a birthday present because you needed to pay the bills first?

Or, have you deliberately ignored a bill because you know there’s not enough left in your account to cover it?

Don’t worry you’re not alone. Many people get caught out like this. Read on to find out how to make a plan to minimise the impact of those weeks when the money just doesn’t go far enough…

What is a Spending Plan?

A Spending Plan or Cashflow is a visual record of all your income and spending over time. It’s most effective to plan over a 12 month period but it can be used over shorter periods. Moni Ora worksheets have been made for 12-week periods as a starter.  

The cashflow spreadsheet shows you at a glance where your financial highs and lows are. You can then use it to smooth these out during the year, making payments easier to manage, and reducing unnecessary stress!

The cashflow is an important part of your overall budget plan. It takes a bit of time to set one up, but once it is up and running it can be quickly and easily adjusted to suit your situation. By learning to use this spreadsheet you will begin to see the light at the end of the tunnel – it might be a long tunnel but this spreadsheet gives you the roadmap to get through it.

it always seems impossible

until it is done 

Nelson Mandela 

Dates
Income
Expenses
Opening Balance
The Bottom Line

How do I Prepare a Spending Plan?

The first thing to do is to list all of your items of income and spending. We suggest using the Moni Ora budget worksheet for this – it is set out as a type of checklist to account for everything needed over the course of a full year.

 

HINT: Checking income and expenses on bank statements or online banking is a useful exercise. This is a useful way to highlight spending habits, it can be surprising how small things add up over time.

The budget worksheet gives you an overview or a summary of your income and expenses. It includes monthly and annual expenses that we don’t pay weekly, but need to make provision for. A completed budget worksheet is a snapshot of our current financial position. 

The cashflow takes the static information from the budget worksheet and brings it to life as a flexible weekly planner. It predicts hard times in advance and allows us to deal with them. The cashflow is about consequences. 

Start by entering:

  1. Enter your actual pay dates (weekly or fortnightly) at the top of each column, (row 2 – DATE). HINT: Many people receive wages fortnightly but if you also receive Family Tax Credits or supplementary assistance from WINZ that is paid weekly it will result in thin and fat weeks. In this case, a weekly cashflow will make it easier to plan for the variations.

  2. Check how much cash you actually have in your bank account(s) and add that as the Opening Balance (column B, row 5) on your cashflow.

  3. Enter your regular income for each period. HINT: Column A is populated with suggestions and not all will apply to you. Simply overtype the fields to suit yourself and delete the ones that don’t apply to you.

  4. Now enter all of your essential and regular expenses such as rent, power, and groceries. HINT: It is ok to lump similar expenses together like personal cash and cigarettes for instance, BUT recording payments separately lets you see where the money is actually going and makes it easier to make adjustments.

  5. Enter your monthly costs in the columns where they fall due, e.g. power, phone, etc.

  6. Enter your expected annual costs in the columns where they fall due, e.g. vehicle registration, firewood, etc. 

  7. Enter your predicted irregular spending and income in the columns where you guess they will occur, e.g. presents, clothing, medical, etc. These expenses that come up occasionally should be entered onto the cashflow in the same way because the cashflow sets out to predict, as accurately as possible, your actual income and expenditure. 

       Note: not all expenses will fall due and be included in a 12-week planner; i.e. if your car registration is due in June but your cashflow ends in March/April you won't enter the registration expense on this planner. Adding more columns is an option but we suggest you start small and build it up once things are running smoothly.  

 

HINT: Sometimes the process date of payments at the bank can be affected by weekends or public holidays etc. If you are unsure of the exact date an automatic payment or direct debit will be processed it is safer to enter it in a column earlier than you might normally, that way the payment will be covered and you can make the adjustment to the cashflow planner later. An early AP and a late deposit within a week period in the cashflow may cause the account to go into overdraft, therefore causing payments to be dishonoured and bank fees charged.

Your cashflow is NOT connected to your bank account.

therefore the alterations you make to your cashflow will need a corresponding adjustment in your bank account. 

The bottom line on the cashflow should be monitored to ensure that the balance doesn’t go below a certain amount to ensure there are funds available when required. If there is a minus symbol (-) it means you have a deficit (i.e. your spending is greater than your income) you will need to look at your spending in this column and make adjustments.

I may not be there yet,

but I'm closer than I was yesterday - Quote

Clarify & Adjust:

The basic principles of budgeting are to:

  1. Spend less than your income

  2. Account for everything

  3. Plan ahead

With this in mind, a cashflow spreadsheet is a tool that shows our bottom line in advance so we can make adjustments to ensure we are living within our means.  Columns show when expenses exceed income by a simple calculation; income - expenditure = surplus or deficit.   

A surplus means we have money left in our account and is carried over to the next column. A deficit means we have spent more than we have and we need to make an adjustment to avoid payment defaults and unnecessary fees. One mistake people make is thinking that a surplus means they have money to spend when the reality might be that the surplus is money needed for future bills and/or expenses. 

By looking along the bottom line we can see that sometimes overspending of one week can have a negative effect for weeks to come. The deficit may not even show up for a few weeks but can drain funds that were meant to pay next month's bills. Double-checking and adjusting entries especially the entries that have estimated is how we make the cashflow work for us. 

The bottom line of the cashflow will reflect the result of the budget worksheet. If your budget is in deficit your cashflow will be too. If your cashflow needs constant adjustment and you can't make the income and spending entries balance, don't give up - talk to a Moni Ora Financial Mentor who is trained to look at people's budgets and identify realistic options. 

If you have balanced your cashflow, congratulations! You are, of course still welcome to come in for a free session to see if there is anything you've missed or help you set up a Financial Plan of Action to work toward your goals. 

Keeping good records of all your actual income and spending over time will help you when making new cashflow plans. By using this method you will discover items you may have forgotten and items you may have under or over-estimated.

Plan better Live Better

Adjust & Monitor:

Once the cashflow is set up and you've had a go at recording all of your income and spending you should begin to see just how useful a personal cashflow can be at showing you your spending habits. 

As you think about the items you're spending your money on, you will begin to start thinking about your priorities (i.e. needs and wants). Not meeting some payments will create more problems than others, so you will need to consider the consequences of this as you go. 

In fact, considering these consequences is a tried and true way of deciding on your priorities. And remember, your priorities may be quite different from someone else's and that's Ok.

Seeing into the Future:

Another benefit of a personal cashflow is that it gives you a clear picture of the amount of money you will need for routine weekly bills (i.e. living expenses) and the amount that you need to accumulate for irregular or unexpected costs (i.e. car maintenance). 

Knowing this can really help with decision making about how to handle unexpected costs that pop up from time to time. In fact, the more you use your cashflow planner you might find that there are fewer 'unexpected' costs because you will get better at predicting life's twists and turns. 

Also having this financial forecast makes it easier to make decisions around what payment options will work for you and what type of bank accounts will best meet your needs etc... These may seem like basic things but you might be paying unnecessary charges if your payments and accounts are not set up in a way that suits you personally. 

A Living Document:

Once established your personal cashflow planner will bring your budget alive! This is not a static document that you make and stick in the drawer somewhere and forget about. You will need to regularly monitor it, check it against your bank account, and tick off the income and spending as it happens, remembering to amend any amounts that are different from your estimates which gives you a record of actuals and also keeps the bottom line reliable. 

 

HINT: As a way of ticking off the entries I suggest changing the colour of the font or field on your spreadsheet (e.g. light grey) to show which payments have been processed through your banking account. 

 

EXAMPLE: I predicted I'd need $100 for groceries this week, but only spent $91.50 so I amended the amount in my cashflow - Now I have $8.50 more in my week's surplus than I thought I would. 

I also estimated my power bill was going to be $150 but it was $180! If I don't amend this entry my cashflow will wrongly show that I have $30 more than I actually have - and that could result in overspending. 

Make appropriate changes to predicted spending so that the cashflow continues to be a practical guide that allows you to see quickly and easily into the future and work towards your goals. 

Give it a go!

...& let us know how you get on.

Kia manahau! nā, Moni Ora

Plan better Live Better

Budgeting made easy

Nau mai ki te kōrero

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admin@moniora.org.nz

 

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