How to forecast your cash flow for the next thirty days

A thirty-day cash flow forecast is a list of dates with a running balance, and its purpose is to find the lowest point the balance will reach before it happens. Start from today's checking balance, add each paycheck on the day it lands, subtract each bill on the day it is due and the card statement on the day it is paid, subtract the variable spending at its daily rate, and read the minimum. The balance today is not the answer; the minimum is, because the month is safe only if the minimum stays above zero. The worked example starts the month with $3,700 and looks comfortable, and the forecast shows it going $190 negative on the 30th, which one transfer from a sinking fund fixes ten days in advance.

Why the balance today misleads

A checking balance on the 1st includes the paycheck that just landed and none of the bills that are about to leave, so it reads as its high point for the month. A balance on the 14th reads as its low point, just before the next paycheck. Neither says whether the month works. What says so is the path between them, and the path has a shape that depends on which days the bills fall on, which days the paychecks fall on, and how fast the variable spending runs in between.

The forecast draws the path. It takes twenty minutes the first time and five minutes each month after, and it turns "will we make it to the 15th" from a feeling into a number with a date.

Build the forecast

1. Write today's checking balance on the first line.
2. List every expected paycheck with its date and take-home amount.
3. List every bill with its due date and amount, from the bill calendar, including the card statement on its payment date and the non-monthly bills that fall in the window; see How to make a bill calendar you'll actually look at.
4. Set a daily rate for the variable spending, the month's groceries, fuel, dining, and the rest divided by thirty, and subtract it for every day.
5. Run the balance forward date by date, and mark the lowest figure.
6. If the minimum is below zero, or below the cushion you want, act now: move a due date, transfer from a sinking fund, or trim the daily rate for the days before the dip.

A worked example, thirty days from the 1st

Checking holds $3,700 on the 1st after the paycheck, the variable spending runs at $70 a day from checking, and the card statement of $640 is paid on the 28th.

Each balance includes the $70 a day of variable spending since the previous line. The month that looked comfortable on the 1st touches $105 on the 14th and goes negative on the 28th, ending at −$190. The cause is the $720 premium on the 10th, which was known a year ago and has $720 waiting in a sinking fund. A transfer of $720 from savings on the 9th lifts every later figure by $720: the 14th reads $825 and the 30th $530, and the month's minimum is $530 on the 30th. Ten days' notice, one transfer, no fee.

Read the minimum, then the cushion

The minimum is the number the forecast exists for. Above zero by a comfortable margin, the month is safe. Above zero by less than a week's variable spending, it is safe only if nothing moves, and the forecast is re-run when anything does. Below zero, it is a problem with a date, and a problem with a date can be solved: a due date moved past the paycheck, a sinking fund transfer, a card statement paid a few days later inside its grace period, or the daily rate trimmed for the days before the dip.

The forecast also shows the cushion the household is carrying. A month whose minimum is $1,200 is carrying more in checking than it needs, and $800 of it could be somewhere that earns interest; see How to get one month ahead on your bills for the version of the cushion that removes the forecast's dips entirely.

Re-run it when something changes

The forecast is re-run on the 1st, and whenever a paycheck moves, a bill changes, or an unplanned expense lands. A $400 repair on the 6th lowers every later figure by $400, and the household wants to know on the 6th that the 28th is now a problem, not on the 28th. The re-run takes a minute because the list already exists.

Common mistakes

• Reading the balance today as the answer. It is the high point on the 1st and the low point on the 14th; the minimum is in between.
• Forgetting the card statement. It is the largest outflow in the second half for many households, and it is the one that turns the example negative.
• Leaving out the non-monthly bills. The annual premium is the dip.
• Setting the daily rate at zero for the days after the bills. Variable spending happens every day, and the forecast subtracts it every day.
• Counting the paycheck before it lands. A paycheck on the 15th is worth nothing on the 14th.
• Running the forecast once. It is a monthly habit and a re-run after every surprise.

Common questions

How do I forecast my cash flow for the month? List today's balance, each paycheck on its date, each bill on its due date, the card statement on its payment date, and a daily rate for variable spending, and run the balance forward day by day. The lowest figure is the forecast's answer; if it is below zero or below your cushion, act before that date.

What daily rate should I use for variable spending? Last month's variable spending divided by the days in the month, or the budget's variable total divided by thirty. Use the higher of the two if they differ, since the forecast's job is to find the dip, not to flatter it.

What if the forecast goes negative? Find the date, then choose the fix that costs least: a due date moved past the next paycheck, a transfer from the sinking fund that was built for that bill, a card statement paid a few days later inside its grace period, or a lower daily rate for the days before the dip. A negative forecast with two weeks' notice is a task; the same balance discovered on the day is a fee.

Should the forecast include savings transfers? Yes, on their dates, as outflows from checking, because they lower the checking balance even though they are not spending. A savings transfer that lands on the 1st can be the reason the 14th is thin, and the forecast should show it.

How is this different from a budget? The budget says how much each category gets for the month; the forecast says whether the account can pay for it on each day. A budget that fits the income can still produce a negative forecast on the 28th if the bills cluster, and the forecast is what catches that.

How Zypper handles this

Zypper supplies the forecast's inputs from your accounts. Every bill is a recurring group with its next expected date and amount, so the bill list with its dates is read from the recurring page rather than assembled, and a paycheck identified as recurring income shows its next expected date too. On the budget page, the pace chart draws cumulative spending through today against a dashed pace guide that steps up by each bill on the day it is expected, which is the shape of the month's outflows, and the Upcoming payment expected notification emails you when a recurring bill is due soon. The checking and savings balances the forecast starts from are on the accounts page, updated daily, and the sinking fund's balance is a category that carries its balance forward. See Recurring transactions and bill tracking, Tracking your spending pace, and Rolling over unspent budget for the details, or get started with Zypper to see your bills' dates before you run the numbers.