Reconciling your Savings

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Last week, we discussed how to reconcile your checking account based on your projections.  This week, we will begin reconciling the savings account as well.

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In our projections example, the first month we transfer to the savings account is April.  To reconcile this transaction, begin by reconciling the checking account the same as previous months.

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When you get to the ‘Transfer’ line, C37 in our example, we will use an equation to get the total amount to transfer.  You could also grab the transfer amount from the Projections page but I prefer to use the equation because it acts as an extra check point.

Because we want to keep $1500 in the checking account at all times, we want to transfer everything over $1500 to the checking account.

To do this, subtract $1500 from the running total.  This is the amount that you want to transfer.  Make sure to put this amount in as a negative amount since we will be taking it out of the account.

Here’s the equation:

  • =-(D36-1500)

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Add a tab titled ‘Savings’ and create the same header as we did for the checking account.  Add the Transfer as the first transaction.  Continue adding on for following months.

 

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Reconciling Your Monthly Expenses

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Last week, we learned how to use our spreadsheet to build a savings account or rainy day fund.  This week, we will use our spreadsheet to reconcile our monthly balance of the new checking account.

Let’s begin by labeling our tabs.  I’ve labeled our current worksheet ‘Projections’ and then labeled a new worksheet ‘Checking’.

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Open the Checking account tab and begin by building the headers.  I started my labels in cell A1 and used the following labels:
A1: Date
B1: Transactions
C1: Amount
D1: Running Total

I also made my row 1 Bold because I find it easier to read the table if my headers are bold.

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From there, we will add the information from our ‘Projections’ tab into our checking account.  It is assumed that all transactions that occur throughout the month are done through the checking account.

The order of the transactions here doesn’t need to match the order of the transactions in the projection’s tab.  Use the transaction date to create the order for your transactions.

To enter the amounts, I use a function rather than entering them by hand to avoid errors in typing.  For income, I type the equals sign, click on the projections tab, then click the cell I want.

  • For Paycheck 1, the equation would look like this:  =Projections!B3

For expenses, I use the same process but add a negative before clicking projections so the amounts will be debited from the account

  • For January’s Rent, the equation would look like this: =-Projections!B8
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To fill in the running total (I made all of column D bold), we need to start by pulling our first transaction.  To do this, type the equals sign, then click on C2 in the same tab. You can also type the equation =C2.  This is the only cell you will use this equation.

In cell D3, type =D2+C3 or click on the cells to add the cell numbers to the equation.  This will take the previous balance in the checking account and the new transaction.  Fill down using the methods discussed earlier in the excel budgeting series to complete your running totals.

Make sure that your end balance for the month is the same as the end balance for the month in the Projections tab.  (This example’s end balance is $475.20).  If they are not the same, your account does not balance and the transactions need to be double checked for accuracy.
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Use the same process to add additional months, making sure to double check your totals. In the above example, I added February and March.  Next week, I will show how to include the transfer to the savings account that happens in April of our example.

Side Note:  I also like to use colors to separate my months so I can quickly glance and see the entire month.

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Using Your Excel Spreadsheet to Build Rainy Day Savings

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Now that we have our savings account created and have determined our saving schedule, we can use our spreadsheet to predict how long it will take to build a Rainy Day Savings.

It is good practice to always have six months worth of expenses in your savings account just in case something unexpected happens.  We could also include the money in the checking account, but I would always prefer to air on the side of caution because my motto is ‘better safe than sorry’.  Because of this, I will only include the savings account total.

In our example, we know that the monthly expenses are roughly $1050.  Six months of expenses would be $6300.  By looking at the savings account total in column M: December, we see that the total amount in the savings account is $3900.  This is not enough to last six months.

To project further, we will need to add another year to our example.

Using the techniques from before, we will highlight all of the the December column (M1:M21) and drag across to column Y.  Highlight all cells in the sheet by pressing the Triangle in the top left corner then double click on  line between the column headers to widen the fields and remove the pound signs.  *If you have trouble with this step, please refer to the first tutorial’s video.

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Next, add a column between December and January to separate the years.  You can add the year in this column if you would like.  Example: 2016.

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Now that we have our projections extended for another year, we can see that the savings account will reach $6300 in June of year two.

If we were including the checking account, the savings account will reach $6300 in February.  None the less, the more savings the better because you never know what will happen next.

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