michael harr, mba
update forecast
updating your forecast is the most important time you'll spend with your money each week - make it count

the process

The most important rhythm you can develop in managing your money is consistently updating your cash flow forecast. In doing so, you keep in touch with your income and expenses, leading you to make better spending decisions over time. Try to update your forecast at least once each week, and if money is tight, a daily rhythm will yield the best results. So, how do you update your forecast? Here's the process:
  1. Open your cash flow spreadsheet in one window
  2. Open your checking account transactions in another window (side-by-side view is best)
  3. Delete cleared transactions 
  4. Add new transactions, as needed 
  5. Edit existing transactions, as needed 
  6. 'Bank Sort' the spreadsheet 
  7. View lowest balance, adjust as necessary (see below) 

managing deficits

When your lowest balance is negative, you have a cash flow deficit and run the risk of being late on payments and/or paying fees to your bank. To avoid these unsavory outcomes, it's important to rearrange your cash flow to maintain a positive balance. To accomplish this, try some of these tactics:
  • Delay expenses. Often, the easiest way to erase a deficit is to move a payment date back a few days. To do this, edit an upcoming expense's date, then do a Bank Sort. And, remember to change the actual payment date with your bank.
  • Eliminate expenses. Another easy adjustment to eliminate a deficit is to simply eliminate an upcoming expense. As you comb through your cash flow forecast, you'll likely find some spending that can be eliminated - temporarily or permanently.
  • Reduce expenses. Most of your expenses are relatively fixed, but some can be reduced without much trouble. When you examine your expenses, look for items that can be reduced. The most commonly reduced expenses involve food - whether dining out or at the grocery store.
  • Increase income. If you have the ability to work a little more and get paid a little more - in your regular job or a side hustle - this can be an option. Note, however, that increasing income often takes a little more lead time than delaying, eliminating, or reducing expenses.
The above strategies will work to close the vast majority of small deficits that you'll encounter. If you find yourself with persistent deficits or have a major deficit that can't be fixed quickly using these strategies, you need some professional guidance. Send me an email using the contact form below, and we'll work the problem together. Having objective, experienced eyes reviewing your cash flow nearly always produces better outcomes.

utilizing surpluses, your wish list

When your lowest balance is positive, you have a cash flow surplus and have the ability to put this extra money to use. Your cash flow spreadsheet also has a 'Wish List' tab where you can record all of your competing financial goals. This list should contain common, important financial goals such as paying off debt, setting aside money for a rainy day, paying college tuition, or boosting your retirement savings.

In addition to these common and worthy financial goals, you may have some expenses that you've put off or that you'd like to add to your life. These might include home improvements, vacations, etc. All of these financial goals should be recorded on the 'Wish List' tab of your cash flow spreadsheet. The key, of course, is to prioritize your list in such a way that the accomplishment of these goals has the greatest positive impact on your life.

Here's an example that I'm living right now (February 2016):  On my wish list are goals that include adding to our emergency fund, paying my son's college tuition for the Summer and Fall semesters, funding a ski vacation for my son's national championship races, and paying for a couples vacation to St. John. Of these, our highest priority item is the ski vacation because it's an important shared family experience.

The lesson here is to constantly rank your Wish List by asking yourself, "Which of these goals, when accomplished, will have the greatest positive impact?" Then, when surpluses become available, you'll be able to confidently put that money to its best use.

comments, questions, suggestions

​​If you have any comments, questions, or suggestions, please use the form below to email me directly. I reply to most emails within one business day.