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
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:
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.
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.
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.
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.
Enter your monthly costs in the columns where they fall due, e.g. power, phone, etc.
Enter your expected annual costs in the columns where they fall due, e.g. vehicle registration, firewood, etc.
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.
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.
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.
I may not be there yet,
but I'm closer than I was yesterday - Quote
Clarify & Adjust:
The basic principles of budgeting are to:
Spend less than your income
Account for everything