In Lesson 2: A Map of Personal Finance Processes, you were introduced to the processes for managing personal finances. In this lesson, you will explore the process of getting ready to track your current status and plan your future.
The effort to gather information about your financial commitments might seem obvious. However, it’s easy to overlook commitments so please give the following some serious thought. Savings account balance
- Financial commitments and due dates
- Loan and credit card payoff balances
- Income deposit dates
- Savings account balance
- Current checking account balance
- Outstanding transactions
Financial Commitments and Due Dates
In this step, you are looking for commitments (required or volunteered) that occur throughout a full year. There are three angles of attack you can use to ensure you have a complete list.
As you research, look for a 12 month activity with repeating commitments. Are there wide or narrow swings from month to month. In the end, you will need a number you can use throughout the year. If necessary, establish two averages, perhaps one for cold weather and one for warm as some bills can vary by the season.
By Frequency
This angle of attack looks at periods of time. Daily and weekly purchases can add up quickly. Monthly bills are easier to predict. It’s the commitments that occur less often that can catch us off guard.
- Daily Examples
- Parking
- Tolls
- Subway or train passes
- Uber/Lift/Cabs
- Daily coffee run and lunch
- Friday night entertainment
- Doctor appointment
- Vaping or smoking habit
- Weekly Examples
- Grocery purchases
- Filling your car’s gas tank
- Lawn mowing service
- Dry cleaning
- Cash withdrawal
- Childcare
- Vaping or smoking habit
- Monthly Examples
- Rent or mortgage
- Electric and/or Natural Gas bills
- Wi-Fi and/or Streaming subscriptions
- Subscriptions such as Apple data storage or Google email.
- Phones: land lines and mobile
- Car payments
- Credit card payments
Note: You can change your statement end date to better fit a monthly cycle, if that’s not already the case.
- Prescriptions
- Haircuts and/or nails
- Insurance premiums – either outside of that deducted from a paycheck or a future paycheck deduction
- Retirement – a future paycheck reduction for a 401k contribution
- Quarterly Examples
- Long term care insurance premiums
- Self-employed income taxes
- Water and Sewage
- Clothing allowance
- Semi-annually and/or Annually Examples
- School Tuition
- Personal property taxes
- Real estate taxes
- Subscriptions such as Amazon and Nintendo
By Source
In addition to thinking about time increments, you also need to consider the way you pay. Automatic payments tend to disappear from our everyday thoughts.
- Paper or digital bills – If you keep the stubs from your paper bills or download bills from your email or a website, this step is easy.
- Electronic bank checks – Perhaps you have set up automatic payments for services that don’t send bills. If so, review the list of checks that the bank sent out for you.
- Credit cards – If your credit card company offers a tool to analyze your spending (e.g, grocery stores, gas stations), run a report. This is also a place to find auto payments that don’t send bills.
- Cash withdraws – If you don’t use credit cards, then write down what you buy with cash. It doesn’t have to be perfect but you need to understand your past spending habits in order to predict them, and change them if necessary.
By Fixed and Variable
Planning is easier when commitments are a fixed amount, like a car payment. Fixed amounts are also easier to remember. The commitments that vary can introduce challenges, therefore knowing the highs and lows will help.
As you dig through each form of payment, look for the following.
- Fixed amounts – Commitments with costs that don’t change at all or little from year to year such as
- Car payments
- Rent
- Mortgage payments
- Regular childcare
- Personal property taxes
- Real estate taxes.
- Variable amounts – Commitments that vary depending on usage or need. For instance, knowing that your electric bill is high in the summer and low in the winter can help ensure you have enough budgeted when you need it. Examples include:
- Utilities
- Gasoline purchases
- Grocery store visits
- Clothing purchases
- Occasional childcare
- Doctor visits
- Car repairs
Gathering together all financial commitments is a crucial step in the planning process. It’s about anticipating expenses so that you have enough money to pay them when the need arises. The fixed payments and some of the variable payments will be more straightforward to predict. Other commitments will require estimating and allotting for a commitment, such as medical and clothing needs, even if you don’t plan on needing them.
Loan and Credit Card Balances
The digital tracker and planner is a tool that can help you payoff off debt. It will tell you when you have extra funds that can be used to reduce a credit card balance or build your savings.
Make a list of all debt, including those that you can’t possibly payoff right away (e.g., a new car or a home loan) and the current balance. Depending on the debt, current balance and payoff aren’t necessarily the same amount, but you can worry about an actual payoff amount when the time comes.
Why do you need to know this? The answer should be obvious, but the best way to allow debt to get out of control is to ignore it, to let your shopping desires to grab hold.
“I used to think, ‘It’s just $85. That’s not that much. Besides, I need it for work.’ Trust me. I know that way of thinking. I know what it can do. Have you experienced this yourself?”
me, the creator of this series
Income Deposits and Dates
When it comes to income, there are two perspectives that can influence the planning process: when and how much.
| Fixed income amount | Variable income amount | |
| Monthly paycheck deposit | Easiest to predict and therefore manage | If your pay doesn’t have a minimum, planning becomes more difficult |
| Multi-monthly paycheck deposits | Can create issues if expenses are due before the next paycheck | This is the most unpredictable scenario and can limit financial stability |
No matter your payment interval or amount, make a list with the minimum amount expected and the dates you expect the deposit in the future. If you receive a paper check, assuming you deposit your pay the next day, make a note and add two to four days (depending on your bank) to allow for when the money will actually be available. You will need this date.
There are ways short interval paychecks can be managed. It might require more up front planning when it comes to having money available when a commitment comes due.
Savings Account Balance
Savings accounts come in various shapes and sizes. Money that you are contributing to a 401K will not be considered for this process except to say, “Keep it up.” The savings information is for money set aside for emergencies or that new car you are hoping for.
A savings balance can also help pay commitments when income varies or if you want to use the Front Load strategy discussed in Lesson 5d: Front Loaded Paycheck Plan.
Current Checking Account Balance
Once you know what your future holds, you need to examine your present. For starters, your current checking account balance. As this amount might be a moving target from day-to-day, this will be one of the last numbers you collect.
Another consideration is your comfort level. I know someone who struggled with the idea of balancing their checkbook at a time that was not the end date on their paper statement. Therefore, pick a starting point based on one of the following.
- First of the month – This strategy has your plan starting at the first of the month. The lessons in this series assumes this strategy.
- Bank Statement – The span of dates covered in the statement. My statement runs from the 18th of one month to the 17th of the next. For me, that’s not convenient.
- As soon as possible – This strategy is perfectly acceptable, especially if you have a tracking process already in place and simply want to improve.
You don’t need to decide now, but you will need your balance when you transition from your paper-based check register (assuming you keep one) and your new digital tracker and planner.
“If you are used to working with your paper bank statement, and the bank’s start and end dates, you will benefit from learning to login and check your balance online. Frequent balance checks will be important to your financial management processes.”
me, the creator of this series
Outstanding Transactions
Like we saw in Lesson 1: Checkbook Duh! Factors, your account balance might not indicate the money you actually have. List all transactions that haven’t been processed by the bank. Depending on when you complete the digital tracker and planner, the checks that haven’t cleared when you make your list might change so be prepared to double check.
“As I worked the process, I discovered auto payments I didn’t know I was making. This caused the balance I was expecting to be lower than I needed.”
29 year old learning a lesson
Sample List
The lessons in this series will use the following sample list of commitments, income, and savings. It might be missing a few items, as yours might when starting out. Later, the list might get updated as financial processes are conducted and time reveals new impacts from life.
| Due Date | Commitment / Income | Note | Amount |
|---|---|---|---|
| 1/1/2021 | Rent | $800.00 | |
| 1/1/2021 | Cash card | Weekly Food/Gas/Misc | $200.00 |
| 1/5/2021 | Car payment | $350.00 | |
| 1/8/2021 | Electric | Budget plan with electric company | $100.00 |
| 1/8/2021 | Gas | Average: $40/summer, $80/winter | $60.00 |
| 1/8/2021 | Cash card | Weekly Food/Gas/Misc | $200.00 |
| 1/15/2021 | Water | Quarterly | $40.00 |
| 1/15/2021 | Cash card | Weekly Food/Gas/Misc | $200.00 |
| 1/20/2021 | Cable / wifi | Auto payment via website | $100.00 |
| 1/21/2021 | Mobile phone | Shared account. Pay by money transfer. | $75.00 |
| 1/22/2021 | Cash card | Weekly Food/Gas/Misc | $200.00 |
| 1/29/2021 | Cash card | Weekly Food/Gas/Misc | $200.00 |
| Daily/Monthly/Quarterly commitments -> | $2,525.00 | ||
| 1/21/2021 | Tuition | Semester – 3 credits | $685.00 |
| 8/1/2021 | Tuition | Semester – 3 credits | $685.00 |
| 4/10/2021 | Taxes | Federal | $1,000.00 |
| 4/10/2021 | Taxes | State | $300.00 |
| 12/5/2021 | Taxes | Car | $152.00 |
| Savings | Cash – job loss emergency fund (1.5 months so far) | $3,680.00 | |
| Savings | 401K | $23,500.00 | |
| 8/1/2024 | Debt | Car loan balance | $11,996.00 |
| Income | Annual income after deductions | $30,000.00 |
Next Lesson …
Lesson 4: Set Up a Spreadsheet will set the stage for the data entry to follow.
Cindy McCourt 
8 thoughts on “Lesson 3: Get Ready”