Do you have a personal financial forecast? It’s a monthly personal budget that allows you to get an early glimpse into how next month will look.
Monthly budgeting is one of the best ways to buffer against financial mishaps. In fact, it can help you survive a personal financial crisis like a large medical bill, auto accident, or job loss. By forecasting, you can be more prepared for whatever comes next month.
Here’s a tried-and-true method of forecasting your next month’s finances.
Select a Financial Management Method
The first step is to choose a way of tracking your personal finances. There are lots of options, including apps, web tools, software, spreadsheets, and even hand-drawn lists. Choose the method that feels comfortable to you.
Your credit union’s online banking program can be used as a very effective method of financial management because it shows your account totals and expenses. It’s also easy to see the details of your monthly spending at a glance.
The key here is to be organized in your financial planning. When you have a structured way of tracking your day-to-day spending, you can make more accurate forecasts.
Dig Into Your History
Your deeper spending history is also important in forecasting the upcoming month. Dig into your bank account statements and pay close attention to the past few months.
Which monthly bills recur each month? What were your restaurant and grocery bills in the past 90 days? Were there any big variances that probably won’t happen again next month? These are all great questions to ask.
Remember to look back at 12 months ago, too. This will remind you of annual costs, like buying presents during the holidays and taking vacations.
Be Realistic About Your Spending
Personal financial planning requires a bit of self-reflection. You have to get real about where your money is going.
For example, if you look through last month’s spending and are surprised to see that you spent $70 at coffee shops, take that into account for the coming month and budget for it. Do the same for things like entertainment, travel, and personal care services.
Notice any expenses that are higher or lower than you realized. This allows you to make choices here and there that will control next month’s finances.
Factor in All Streams of Spending
Make sure you’re calculating all forms of spending. One of the biggest mistakes people make is forgetting expenses like charges put on a debit/credit card, purchases made on a store credit card, things bought with cash, bills paid automatically through a utility company, or amounts of cash verbally promised to be paid back later.
Don’t forget about membership services, like streaming TV, package delivery, and gym memberships. Re-evaluate all of these expenses monthly and decide whether you want to continue paying them the following month.
Expect the Unexpected
As you spend time looking over your finances, you’ll be reminded of all those sudden expenses that threw off your budget in previous months: car repairs, broken appliances, medical bills, a pet’s illness, unplanned travel. How much did these things cost?
If possible, set aside an emergency fund that could cover this kind of expense in the future. This gives you a buffer against all the unexpected things that can happen in life, and it will help to stabilize your finances.
Put Technology to Good Use
Finally, we encourage you to reap the benefits of all the modern technology that allows you to manage your finances more easily.
- Automatic payments keep your monthly budget on track.
- Mobile banking and deposits can be done from anywhere in the world.
- E-statements streamline how you keep an eye on your money.
- Using a variety of accounts helps you save and direct your money to the right places.
At WEOKIE, we’re updating our technology and we invite you to check out our free checklist to see what to expect starting Friday, August 30th. Download the checklist below.