Lesson 6: Tracking Actual Commitments

You planned that your electric bill in January would be $100. The odds that a utility bill is an even $100 are low so this is a perfect example of a planned commitment that needs to be updated with the actual cost.

Updating your digital tracker with actual costs should be done with each transaction (e.g., written check, online payment, automatic bank check, cash card used at an ATM, etc.). However, sometimes you are in a hurry and you forget to do it when you get home. I’ve been there and done that, so I get it. That’s why tracking commitments against the bank is a critical process.

Recall from Lesson 1: Checkbook Duh! Factors that a bank balance doesn’t always mean you have that much money available to spend. The same could apply to your digital tracker and planner if you’ve forgotten to record a transaction or if the bank has made a donation to your account such as an interest deposit.

Bottom line, you need to keep your tracker in sync with the bank. Let’s see what that looks like by using the tweaked front load plan created in Lesson 5d: Front Loaded Paycheck Plan. In order to track actual commitments, the following will be used.

• Bank statement
• Digital tracker updated with bank information
• Pending payments

“Until working with Cindy, I didn’t have paper checks. If I needed one, I went to the bank and got a cashier check. And, I didn’t use a check register to track my transactions. I used my bank app to show me how much money I had. So, when Cindy told me I had to track my transactions and compare it to the bank, I felt overwhelmed. It’s a long story but I understand now. I can see the tracker helping us buy our first home.”

29 year old that learned a valuable lesson

Bank Statement

Figure 2 below is a screenshot of the transaction history for a bank account. Okay. It’s a mock up, but you get the idea. Right? You log in and check which transactions have cleared and which haven’t. That’s what we are about to do.

Digital Tracker Updated with Bank Information

Using the Front Loaded Plan from Lesson 5d, figure 3 illustrates an updated tracker based on the bank transactions.

Let’s look at the changes made to the tracker.

• Date field – It’s been updated to reflect when the transaction cleared the bank. Notice that the date order is not chronological. The assumption is, with the front loaded plan, your account has enough funds to pay a month’s worth of commitments. And, if you are recording the transactions in the tracker, you will see when you run out of money. Therefore, non-chronological dates aren’t an issue.
• Different commitment values
  • Electric – $100 was planned. The actual bill was $94.24.
  • Gas – $60 was planned. The actual bill was close at $59.32.
  • Cash card – At the end of Lesson 5d, a strategy to lower cash card spending helped bring the predicted balance out of the red. Therefore, all but one of the cash card transfer was under $200, meeting the reduced spending goal.
• X – Each transaction that has cleared the bank shows an X. In a paper check register you might use a checkmark. Figure 4 shows how a 29 year old uses Google’s checkmark feature instead of an X. It is kinda cool. If you want to do the same, click in the X field, click Insert in the Google sheet menu, and select Checkmark. Duplicate the formatting for the entire column.

• Chk # Column – Now-a-days, not every transaction has a check number or you might not know the check number.
  • “Paid check 0000000396” is a check your bank sent because you used their payment service. The bank doesn’t know the check numbers in your paper checkbook.
  • “transfer” is the same as “ACH transaction: Paypal.” You know what transfer means. Add whatever notes you want.
  • This column can also be used to track when the transaction cleared the bank. In other plan formats, the due date was insert in the Date field. That is helpful information. If you aren’t concerned with a check number, you can use the field for a date the transaction cleared the bank.
• Unexpected Expense – Check 1258 for an oil change was not in the plan. That brought your balance down lower than you expected.
• Unexpected Deposits – Instead of a gift, you got a check from your mom for your birthday. Keeping deposits together in the front loaded approach, you enter the $50 check that needs to be scanned by your bank app and deposited to your account.
• Bank deposits – If you are lucky enough to earn interest on your account, you need to add it into the tracker. In this scenario, $0.29 was earned.
• Balance difference – The bank shows you have $2,639.55, a lot more than the $53.31 in your tracker. Lesson 7. Balancing Against the Bank shows you how to reconcile the difference between the tracker and the bank balance.

Pending Payments

Pending payments can show up on your online bank transactions. It is also seen in the tracker. In this example, we didn’t have one. But, they can be for deposits and withdrawals.

Another way to view the idea of pending is an entry in the tracker with actual costs and a check number. In our example tracker, the electric and gas bills show actual cost however they haven’t been cashed.

“After setting up a digital tracker and planner, I went back to my old ways. I wrote two checks because the bank showed I had the money. After updating the digital tracker and planner, I saw a negative balance. I got lucky. Had my landlord cashed his check before the other checks cleared, I would have bounced two I sent out.”

29 year old that learned a valuable lesson

Next Lesson …

It’s one thing to check off that a transaction cleared, it’s another to confirm that your digital tracker balance is consistent with the bank. Lesson 7. Balancing Against the Bank is a step that includes math that some find confusing. However, the digital tracker helps make it easy.