How to Forecast Your Bank Balance: A Simple Personal Cash Flow Forecast

A personal cash flow forecast tells you how much will be in your checking account on each day of the month, not only at the end of it. You build one by starting from the money that's actually in your account today, adding each paycheck on the day it lands, subtracting each bill on the day it's due, and keeping a running total. The lowest number in that running total is the one to watch.

A budget and a forecast answer different questions

A budget is a plan for how much you want to spend in each category. Groceries get $500, dining out gets $150, and so on. It's useful, but it doesn't care about timing. You can be perfectly on budget for the month and still come up $80 short on the 12th because rent, the car insurance and the card payment all hit before your paycheck did.

A forecast is about timing. It answers "how much money will I have left on Thursday?" and "what will my projected balance be on the last day of the month?" It just lines up what's coming in and what's going out, in order, so you can see the tight spots before you're standing in them.

You don't need a budget to build a forecast, and you don't need to give up your budget to use one.

A forecast is also different from a personal cash flow statement. A statement looks back: here's what came in and went out last month. A forecast looks ahead using the same kind of list. If you already keep a statement, you have most of what you need, because last month's list is a good first draft of this month's.

Start with today's actual balance

Open your bank app and find the balance that has actually cleared. Banks often show two numbers, something like a current balance and an available balance, and the labels vary. What you want is the money that's truly there, not counting deposits that are still on hold.

Then look at anything pending:

• Pending charges (a purchase from yesterday, a gas station hold) will come out. If they haven't been subtracted yet, add them as the first lines of your forecast, dated today.
• Pending deposits should only count once they've cleared. If a deposit is on hold until Friday, put it on Friday.
• Checks you've written that haven't been cashed yet still belong to someone else. List them as if they'll clear tomorrow.

A forecast that starts from the wrong number is wrong on every line after it. Starting from cleared money keeps the whole thing honest.

List your income and bills by date

Next, make two lists for the rest of the month. Every item gets a date and an amount.

Income

Write down each paycheck and the day it usually lands. If you're paid every two weeks, some months have three paydays, so count them on the calendar rather than assuming two. Add anything else that arrives on a known day: child support, a side job that pays on the 1st, a transfer from a partner.

If your income varies, use a number you're confident about, not the one you hope for.

Bills and recurring charges

This list is where most forecasts go wrong, because it's easy to remember rent and forget the small stuff. Go through:

• Housing, utilities, phone and internet
• Car payment, insurance and any loan payments
• Credit card payments (the amount you plan to pay, on the day you plan to pay it)
• Subscriptions and memberships
• Insurance or fees billed quarterly, every six months or yearly that happen to fall this month
• Transfers you make on purpose, like moving money to savings

The irregular ones cause the most trouble. A yearly membership renewal or a quarterly insurance bill doesn't show up often enough to feel routine, so it catches people off guard. Scroll back through the last 12 months of your bank and card statements and note anything that doesn't happen monthly. For subscriptions billed through your phone, you can check iPhone Settings > your name > Subscriptions, or the Google Play Store app > profile icon > Payments & subscriptions > Subscriptions.

Finally, set a weekly amount for everyday spending such as groceries and gas. You can't know the exact figure, so pick a reasonable estimate and put it on the day you usually shop.

Walk the month day by day

Now put everything in date order and keep a running total. Start with today's balance, then for each line, add income or subtract the expense, and write the new balance next to it.

Here's a fictional October. The person has $2,100 cleared on the 1st, gets paid $1,900 every two weeks starting the 15th, and shops for about $120 of groceries each week.

Two things stand out. The projected end of the month is $3,445, which looks comfortable. But from October 12 to October 14, the balance sits at $40. One forgotten charge or one bigger grocery run during those three days, and this account goes negative.

A month-end total hides the low point. The running total shows it.

Also notice that the $3,445 on October 31 isn't all free money. Rent is due again on November 1. When you read the end-of-month number, glance at the first few days of next month before you decide any of it is spare.

Find your lowest-balance day and plan around it

Scan the balance column for the smallest number. That's your lowest-balance day, and it's the one that decides whether the month is safe. In the example, it's $40 on October 12.

If the low point is uncomfortably close to zero, or below it, you have a few options, none of which require earning more:

• Move a due date. Some lenders and utilities will let you change the day a bill is due if you ask. In the example, moving the $175 card payment from the 10th to the 16th lifts the low point from $40 to $215 without changing a single dollar of spending.
• Pay part now and part later. If you usually pay extra on a card, pay the minimum before payday and the rest after. Just make sure the minimum is paid on time.
• Shift a transfer. If you move money to savings on the 1st, try moving it the day after payday instead. The savings still happen, just a few days later.
• Hold off on the flexible stuff. A purchase that can wait until the 16th should wait until the 16th.

Keep a buffer and keep the forecast current

Even a careful forecast misses things. A charge posts a day early, a bill is a little higher than last month, or you forget the school fundraiser. A buffer is a floor you decide your balance should never drop below, and it absorbs those small misses.

Pick a number that would cover one or two of your normal surprises. Then change the question you ask the forecast. Instead of "does my balance stay above zero?", ask "does my balance stay above my buffer?" If the lowest day dips under the buffer, treat it as a problem worth fixing now, while it's still just a row in a table.

A forecast is only as good as its last update. Once a week is enough for most people. Pick a day, check your cleared balance, mark what has actually happened, and adjust the rest. Update it sooner if:

• A bill comes in higher or lower than you expected
• A paycheck amount or date changes
• You make a bigger purchase that wasn't on the list
• You add or cancel a subscription

The spreadsheet way and the automatic way

You can do all of this in a spreadsheet. Make four columns (date, what, amount, balance), put your starting balance in the first row, and write a formula in the balance column that takes the row above and adds the amount on this row. Copy the formula down. When you enter an expense as a negative number, the running total takes care of itself. Sort by date whenever you add something.

The spreadsheet works well and costs nothing. Its weak spots are the ones you'd expect: you have to remember to type in every recurring bill each month, the yearly and quarterly ones are easy to leave out, and it only knows your bank balance when you copy it in.

An automatic forecast does the same arithmetic from things you've already set up once. You enter a recurring bill a single time with its schedule, and it shows up on the right date every month, quarter or year after that. The method is identical to the table above. You just stop retyping it.