How to Close Out Your Spending Plan Every Month

You have built your 15-Second Spending Plan, implemented your payday routine, and created your one-page monthly spending tracker template. Now it is time to close out your spending plan to track your monthly spending.

Today, I will show you how to update your one-page monthly spending tracker template with your actual spending during the month. This procedure tracks all the activity in your secondary checking account during the month. Doing so helps you understand where your money went and how prepared you are for paying next month’s bills.

So please print out your one-page monthly spending tracker template, grab a cup of coffee, and let’s close out your spending plan.

Step-by-Step Instructions to Close out Your Spending Plan

• Close out your spending plan by doing the following:
  • Build your one-page monthly spending tracker
  • Zero-based budgeting approach
  • Step #1 – Assign your beginning bank balance to your categories
  • Step #2 – Highlight the categories’ beginning balance status
  • Step #3 – Enter your deposits and assign them to each category
  • Step #4 – Enter your outgoing payments
  • Step #5 – Transfer amounts between categories as needed
  • Step #6 – Total and tie out your ending bank balance
  • Step #7 – Highlight the categories’ ending balance status
  • Conclusion

Build your one-page monthly spending tracker template

Before completing the steps below, ensure you have set up your 15-Second Spending Plan, set up your payday routine with a secondary checking account, and built your one-page monthly spending plan tracker template.

Zero-Based Budgeting Approach

Your secondary checking account is managed on a zero-based budget. Money in your secondary checking account is there for specific expenses or a purpose. Your beginning balance, deposits, and withdrawals from your secondary checking account must be assigned to a specific category in your one-page monthly spending tracker.

Step #1 – Assign your beginning bank balance to your categories

The total beginning balance on your one-page monthly spending tracker must match the beginning balance of your secondary checking account. In the example below your beginning balance total of $2,923.33 matches the online balance of your secondary checking account.

Typically, you transfer the ending balances, by category, from the previous month’s tracker to the beginning balance of the current month’s tracker.

If this is your first time using the one-page monthly spending tracker, you must assign your secondary checking account’s starting balance or initial deposit to as many categories as your balance allows.

Step #2 – Highlight the status of the category’s beginning balances

Now that you have assigned every dollar of your beginning balance to a category, you need to see if there is enough money to pay the upcoming bills for the month.

Red, Yellow, and Green status will help you visualize the ability to pay the upcoming due amounts.

Red—If the beginning balance plus two or more paycheck deposits is needed to cover the upcoming bill, highlight the cell as Red. In the example below, the car payment of $250.00 and the student loan payment of $200 will require two paycheck deposits to cover the amounts due on the 17th and 22nd.

Yellow—If the beginning balance plus one paycheck deposit is needed to cover the upcoming bill, highlight the cell as yellow. In the example below, the rent, cell phone, Netflix, Cable, pet insurance, electricity, heat, and water bills will require a paycheck deposit before they can be paid.

Green – if the beginning balance can pay the upcoming bill without any deposits highlight the cell green. The items highlighted in green below are all on target to meet upcoming payments. In the example below, the car insurance and professional fee periodic payments are on track to meet the upcoming payments in June.

Also, track the status of your sinking funds. Since the beginning balances of the sinking funds are below the full targeted amounts, those cells have been highlighted in yellow.

Step# 3 – Enter your deposits and assign them to each category

In the example below, your paycheck is deposited into your primary checking account twice a month on the 15th and last day of the month. Per your payday routine, you have automatic transfers set up to move $1,200.00 from your primary checking account to your secondary checking account the day after you are paid. Thus, the deposits of $1,200 on 5/1 and 5/16 are from your paychecks on 4/30 and 5/15, respectively.

Every dollar deposited in your secondary bank must be assigned to a category!
The $1,200.00 deposit is then assigned to each category based on the information in column 3 of the spending tracker. For more on how these amounts were determined, see the post on how to build your spending tracker template.

On May 18th, you deposited a tax refund of $1,300.00 into your secondary checking account and assigned it to various categories as needed.

Step #4 – Enter your outgoing payments

Enter the outgoing payments from your secondary checking account against the appropriate category.

Before making payments from your secondary checking account, you must ensure you have the money available to make the payment. The beginning balances highlighted in red require the deposits of 5/1 and 5/16 to be made before the loan payments can be made. The beginning balances highlighted in yellow require the deposit of 5/1 to be posted before the recurring expenses can be paid. Lastly, the sinking fund items are not fully funded yet. So, although you are setting aside $1,200 for car repairs, your sinking fund only has $300 as of the beginning of May.

Step #5 – Transfer amounts between categories as needed

I don’t believe you should constantly update your budget month after month. Your estimates will not be perfect and can cause you to overfund some categories and underfund others. To fix this you can use the transfer column to move money between categories as needed. In the example below $30.00 is moved from the miscellaneous category to the beauty/personal care category to cover overspending year to date.

Step #6 – Total and tie out your ending bank balance

Now that you have made all the entries for the month, it is time to reconcile your spending tracker.

For each category, total the beginning balance plus deposits, less outgoing payments, and plus or minus any transfers to arrive at the ending balance.

Next, add up all the ending balances to arrive at the total ending balance in your secondary checking account. In the example below, the ending balance is $4,194.14.

Lastly, confirm that the ending balance of your secondary checking account is also $4,194.14. Make corrections as needed until the balance matches.

Step #7 – Highlight the status of the category’s ending balances

Now that your month is closed out, it is time to assess how things are looking heading into next month. The status of Red, Yellow, and Green will help visualize the ability to pay the amounts coming due in the future.

Red—If the beginning balance plus two or more paycheck deposits is needed to cover the upcoming bill, highlight the cell as Red. Due to the tax refund deposit, the car and student loan payments are no longer red as they were at the beginning of the month.

Yellow—If the beginning balance plus one paycheck deposit is needed to cover the upcoming bill, highlight the cell as yellow. Once again, the tax refund deposit has fully funded the periodic payments that are due next month!

Green – if the beginning balance can pay the upcoming bill without any deposits, then highlight the cell green. The items highlighted below are all on target to meet any upcoming payments. In the example below, all recurring and loan payments will be fully funded for the next month.

Also, track the status of your sinking funds. Since the beginning balances of the sinking funds are still below the full targeted amounts, the cells have been highlighted in yellow.

Conclusion

Congratulations! You have completed the process of closing out your spending plan and have a true picture of your actual spending. You can continue to update your 15-Second Spending Plan, adjust your payday routine, and modify your one-page monthly spending tracker template based on the analysis of your actual spending.