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TedM
New Member
USA
12 Posts |
 Posted - Jun 06 2010 : 7:46:35 PM
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My wife and I are doing the YMOYL steps (actually, we're leading a study group of the book and could use some help before our next meeting).
Everything has made sense up to the month-end balancing part where you tally up your income, expenses, and bank accounts. We balanced our bank statement and all, but our monthly error is so big (about $500) that I'm wondering what I've done wrong. We kept track of all our expenses and income and our bank accounts are in order, but we're still off. The month of May was the first that we started the process of getting things in balance, and it's a little daunting.
One thing: We treat our credit card purchases as expenses that happen on the day of the purchase, not when we pay the credit card bill (we don't write down the monthly cc payment, so there is no double posting on our monthly form). I don't think this is the whole problem as our purchases for the month were not that much.
Any suggestions are appreciated.
Ted |
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loosechickens
Moderator
5807 Posts |
Posted - Jun 06 2010 : 11:37:32 PM
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Are you sure you kept track of ALL your expenses, and not just the ones that show up on a bank statement? Because it's the little tiny expenses that we hardly notice, the fifty cents for the paper, a cup of coffee, a buck given to a homeless person, etc. that adds up to a LOT of money over a month's time.
Other than that, if you KNOW you've written down every expense, you've probably got an arithmetic error somewhere. Hope someone more knowledgeable comes along to help, or you are able to articulate more clearly what the problem is. |
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Wisteria84
Junior Member
USA
54 Posts |
Posted - Jun 07 2010 : 03:35:33 AM
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quote:
Originally posted by TedM
My wife and I are doing the YMOYL steps (actually, we're leading a study group of the book and could use some help before our next meeting).
Everything has made sense up to the month-end balancing part where you tally up your income, expenses, and bank accounts. We balanced our bank statement and all, but our monthly error is so big (about $500) that I'm wondering what I've done wrong. We kept track of all our expenses and income and our bank accounts are in order, but we're still off. The month of May was the first that we started the process of getting things in balance, and it's a little daunting.
One thing: We treat our credit card purchases as expenses that happen on the day of the purchase, not when we pay the credit card bill (we don't write down the monthly cc payment, so there is no double posting on our monthly form). I don't think this is the whole problem as our purchases for the month were not that much.
Any suggestions are appreciated.
Ted
When you balance your checking account... does it balance perfectly except for the monthly credit card payment?
Do you pay exactly what you spent on the credit card every month?
Do you have any accounts other than your checking and this credit card?
OK. Now I don't know if this could be your problem, but I just set up quickbooks and I had to do the following to make sure my accounts balanced perfectly. If it doesn't help you it may help someone else struggling with setting this up, so I will try to explain how to do this:
For Credit Card
1.) Go back to the date on your credit card when you started tracking and see how much you owed on that date, if possible. Call it your "credit card opening balance".
2.)Look at transactions that posted AFTER the date you started writing them down, but that were made BEFORE you started writing them down. Find these by comparing your statement with your book and making sure you just didn't accidentally miss one. Add the total of all these previous purchases to your total "credit card opening balance." You now have a revised opening balance.
EX:
May 1st: Started tracking. CC balance = $0, because you pay it off each month.
Purchases actually MADE on CC May 1st: $20 pizza hut, $30 Ace hardware. (So you wrote this in your book and kept track.)
Purchases made on May 2nd: Starbucks $5.00 (wrote that down, too)
You make NO purchases May 3rd, May 4th, or May 5th.
However on your CC statement for May 1st-May 5th, you see:
May 1st: Mcdonalds, $10.00
May 2nd: Pizza Hut $20, Chevron Gas $40
May 3rd: Ace Hardware $30
May 4th: Safeway $30
May 5th: Starbucks $5.00
So you say, I know we went to Pizza Hut, Ace Hardware and Starbucks after May 1st, but we shopped at these other places prior to May 1st.
So you add on those other places to your opening balance of $0.
Mcdonalds $10
Chevron $40
Safeway $30
Opening Bal $ 0 (you paid it all off in April)
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New opening balance = $80.00
You would obviously continue to add on whatever posts after May 1st but was purchased before May 1st.
3.) Now, all month long, add on what you purchase, to the penny, to your revised opening balance, until you are done for the month and get the monthly statement.
4.) Take the credit card interest that was tacked onto your bill at the end of the month (if it isn't paid in full) and now add on that to the total balance you have going.
EX:
Opening Credit Card Balance $ 80
Total Purchases for May $500
Interest on Credit Card $20
BALANCE AT END OF STATEMENT PERIOD = $600
Now when you add up all the credit card purchases for the month + interest, they WILL add up to what your statement says.
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FOR Checking Account
Now do this exact same thing with your checking account, except for step 4, you are obviously adding on any interest you earned from your bank-- if any. You have to do this for EVERY account you have that you are trying to track.
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Now when it comes to paying the credit card with money from your checking account... it can really throw things off- if you didn't figure out the TRUE opening balances of both accounts and if you aren't keeping track of what you paid on the credit card.
To continue the example:
When the CC bill comes due, it will say you owe them all $600. BUT, for the month of May, your little book where you tracked all your CC purchases says you only SPENT $500 with your credit card for the whole month. That other $100 was $80 for prior purchases + $20 for interest. If you pay your bill in full, using cash from your checking account- your checking account balance goes down by $600. Then, when you add up all the expenses... if you don't count that credit card bill you paid (and you say you aren't.)... it will look like you are missing $100. But you are not.
(As you might see, this scenario of not accounting for things purchased before can also play out with your checking account, and then you really will feel like you miscalculated.)
EX:
Your opening balances (before you fixed them)-- You just looked in your checking account or at the statement and saw a balance and you just looked at your CC statement and saw a balance.
May 1st Opening Balances
Checking Opening Bal $2000 CC Opening Balance $0
When your credit card statement comes, you pay the $600 on your credit card because that is what the credit card company said you owed...but you didn't account for it in checking because you "know" you must have spent $600 since your opening balance was $0 on May 1st.
(I realize the May credit card statement might not come until mid-June, but either way, if you are paying anything on your credit card- even if it is expenses from only April, you definitely have to account for that. You would call it "Expense: Credit Card Payment", especially if you don't pay the balance off in full each month. You can deduct what you paid that month from the TOTAL BALANCE you currently owe on your credit card... But unless you pay your balance in full each month, you must consider that payment a true expense. That payment is not only for purchases but all the interest they tack on.)
Now you add up every expense in the little book you are tracking in and it says you spent $1000 from checking this month and $500 on the credit card.
So now you realize that you only spent $500 this month on the credit card and wonder where the heck that extra $100 came from.
To make matters worse, the same things happened with the checking account (things posting after May 1st but purchased before May 1st...lets say... $200 worth of things went through AFTER May 1st that you bought at the end of April.) You don't know this, though. All you know is that your beginning balance for May 1st was $2000.
Now, you expect your balance to look like this: $2000-$1000= $1000 in checking and $0 on your credit card which you paid an extra mysterious $100 on, that is IF you paid attention to what you paid to the credit card company. Otherwise you won't even realize you paid an extra $100.
What you expect:
Checking Closing Balance $1000 CC Balance $0
Now what you REALLY see in your account is:
Checking Closing Balance $700 CC Balance $0
You didn't account for the additional $200 in purchases in your checking, and you also didn't account for that extra $100 you ended up sending to the credit card company, because you didn't track the payment in your book.
So you can't figure out where that $300 got to!
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If you have extra money in your accounts:
1.) You may have missed a bill you paid and failed to account for it.
2.) You paid less on your credit card bill than you spent for the month on your credit card and your credit card is now carrying a higher balance than last month. If you ignore what you paid on the card, you end up with more money in your checking account than your book says is possible, given your expenses for the month.
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I hope all that helps you, or if it doesn't apply to you, I hope it can help someone who is having difficulties, too!
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Edited by - Wisteria84 on Jun 07 2010 04:12:19 AM |
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TedM
New Member
USA
12 Posts |
Posted - Jun 07 2010 : 05:29:36 AM
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quote:
Originally posted by loosechickens
Are you sure you kept track of ALL your expenses, and not just the ones that show up on a bank statement? Because it's the little tiny expenses that we hardly notice, the fifty cents for the paper, a cup of coffee, a buck given to a homeless person, etc. that adds up to a LOT of money over a month's time.
Other than that, if you KNOW you've written down every expense, you've probably got an arithmetic error somewhere. Hope someone more knowledgeable comes along to help, or you are able to articulate more clearly what the problem is.
Thanks for you reply, loosechickens (like the handle).
Yes, we've been very careful to track every penny. We actually carry little notebooks and enter every expense in them. All our income (other than money found, which goes into the notebooks) goes right into our monthly tabulation form.
As far as an arithmetic error - it may be, but I doubt it would be that large. I've gone over everything at least twice. I'll keep plugging away. |
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TedM
New Member
USA
12 Posts |
Posted - Jun 07 2010 : 05:48:17 AM
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quote:
Originally posted by Wisteria84
When you balance your checking account... does it balance perfectly except for the monthly credit card payment?
Do you pay exactly what you spent on the credit card every month?
Do you have any accounts other than your checking and this credit card?
Whoa! Now that's a response!!
Thanks, Wisteria84. I'm going to print your reply and go over it all with my papers in front of me. I have a feeling it may have something to do with the fact that May was the first month that we started balancing everything and we had some carryovers from the previous month. Dunno, but that's my feeling.
To answer your questions:
- Our checking account does balance perfectly (the more mathematically inclined one [my wife] balances the checkbook). The credit card payment really doesn't affect how our checking account balances as it's just another check to balance on the statement.
- We pay off our credit card balance every month (and we're moving more to using our debit card).
- We have two savings accounts - one regular and one for our quarterly and semi-annual bills (insurance, property tax, etc.).
Thanks again for your detailed response - I'll look it over. It's probably something so simple that I'll slap myself on my forehead when I realize it. When that happens, I'll let you all know.
Ted |
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catccc
Junior Member
USA
72 Posts |
Posted - Jun 08 2010 : 06:51:33 AM
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I'm a CPA and I'm used to doing complex reconciliations (to the tune o over 65,000 transactions a day) but for some reason the month end balancing was driving me crazy. (I have posted on this forum about it- see the topics in Feb 2009 called "not sure if monthly tab is worth it" and "your first monthly tab- how did it work out?"
It was a pain in the butt and I ended up allowing myself a fudge factor of sorts. I just use yodlee now, and try my best to minimize and categorize the cash transactions. I let the CC transactions alone and let the go to the expense on the posting date. After all, the month end is as arbitrary a cutoff as the 2nd of each following month. Things are much easier and I still think I am getting a good idea of where everything is going.
This might be a little tough for you, I'm sure there is pressure to get things right to the penny since you are leading a group.
Good luck!
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Start where you are. Use what you have. Do what you can. -Arthur Ashe |
Edited by - catccc on Jun 08 2010 06:54:26 AM |
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janharker
Senior Member
756 Posts |
Posted - Jun 08 2010 : 2:53:20 PM
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I have my records set up on Excel spread sheets. Once I got the formulas correct, the spreadsheet does all the math for me, so there are no errors. All I have to do is go into each cell and enter what I spent. I also only enter what I spent on the day I spent it, not the day I paid the credit card.
Go back and make sure you didn't enter items from your credit card and check book that happened just before the month you started keeping records. |
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~kib~
Moderator
USA
8804 Posts |
Posted - Jun 08 2010 : 10:13:40 PM
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quote:
Originally posted by janharker
Go back and make sure you didn't enter items from your credit card and check book that happened just before the month you started keeping records.
I was thinking the same thing. The month before, or the month after. The credit card statement is a pain in the neck, because it can take a week or potentially even longer before charges show up, which means if you're looking at an online balance you can be looking at bills that aren't due til next month or purchases that you made before you even started tracking. Did you reconcile the cc statement line by line? |
Eventually, Ecology trumps Economy. |
Edited by - ~kib~ on Jun 08 2010 10:14:40 PM |
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jrb3
Moderator
USA
2399 Posts |
Posted - Jun 09 2010 : 1:51:20 PM
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quote:
Originally posted by TedM
I have a feeling it may have something to do with the fact that May was the first month that we started balancing everything and we had some carryovers from the previous month. Dunno, but that's my feeling.
Come to think of it, when I started ten+ years ago with the monthly tabulation, I had errors the first month or two from carry-overs I'd not taken into account.
I have an expense category "Unknown". I've found that most months everything balances except for my wife's cash-on-hand. (She still doesn't write down cash expenses, and some of the credit card charges are hers but she can't remember what it was for.) So the difference balances into that category. Kinda a good news / bad news circumstance -- good news is that it's visible and relatively predictable, bad news is that it's still there and noticeable and not going into investments.
C'est la vie, as the French say.
Joseph |
Joseph Beckenbach
From each *voluntarily* according to their ability, to each *unimposed-upon* according to their need.
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TedM
New Member
USA
12 Posts |
Posted - Jun 10 2010 : 6:17:42 PM
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Thanks all for your responses.
I have a feeling that since this was our first month trying to reconcile everything, things just haven't caught up with where they should be.
I know our daily and monthly record keeping isn't that bad. It may not be perfect, but we've been pretty careful to record all expenses and income. I even went through out checkbook and made sure that all expenditures were recorded. And, all our entries in our daily notebooks were recorded. So, this naturally leaves our credit cards. While our expenditures with our card wasn't that much the last two months, I still have a feeling that it's the culprit. Time will tell as I'm not going to lose any sleep over why things appear so far off.
One positive thing that this has led to is that we've decided to use our debit card instead of credit (unless credit is necessary). This should make it easier to track things. At least, I hope so.
It's amazing how little we really know about what comes in and goes out of our financial lives. Of course, this is one of the main points of this system, so in that regard, it's been a great learning moment. |
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flywaysuzy
Advanced Member
1051 Posts |
Posted - Jun 21 2010 : 11:08:02 AM
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My hydro bill is the funny one, it covers two months and the cutoff is in the middle of the month. I just divide in two and back it up. My credit cards used to come in 4-5 days before the end of the month, which was goofy, but I just phoned and asked them to make them from the first to the end of the month (or I would move my business elsewhere...)and voila-the billing was fixed! Now I just get the one bill with everything on it and that is pretty easy.
Good luck finding your missing expenses!
Suzy |
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rozie
New Member
USA
25 Posts |
Posted - Jun 28 2010 : 10:31:42 PM
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quote:
It's amazing how little we really know about what comes in and goes out of our financial lives. Of course, this is one of the main points of this system, so in that regard, it's been a great learning moment.
You got the MAIN point, Ted. This is all about becoming more and more aware of that flow, and what your resources really are. There's no perfection. I'm with jrb3 in that I have an "uncategorized" category, and that's where the discrepancies went after I'd done all Wisteria84's processes and wanted to pull my hair out because I still couldn't figure it out. This is the cool thing: that "uncategorized" amount just kept getting smaller each month, as my mindfulness expanded, and now on the rare occasion when there's actually some amount falling in there, I know it means I'm moving too fast in terms of the rest of my life -- time to regroup, reorganize, and/or SLOW down. The adjustment needed usually is not actually a monetary one. As a group leader, we're also participants, progressing along with everyone else. You can model how to keep your eye on the grand goal, not let the small stuff become an obstacle to progress. Sure $500 isn't small, but obviously it's not so big for you that it's obvious! :-) And next month will be easier. Cheers! |
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janharker
Senior Member
756 Posts |
Posted - Jun 29 2010 : 2:09:37 PM
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| For instance: my DH is building a gate to put at the top of the stairs to keep his 10 m.o. grandson from toppling down. He doesn't visit for more than a few days a year. What category do I put the expenses for such an item? House supplies? House repairs? Gifts? Something else? |
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jrb3
Moderator
USA
2399 Posts |
Posted - Jul 01 2010 : 2:08:53 PM
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quote:
Originally posted by janharker
For instance: my DH is building a gate to put at the top of the stairs to keep his 10 m.o. grandson from toppling down. He doesn't visit for more than a few days a year. What category do I put the expenses for such an item? House supplies? House repairs? Gifts? Something else?
Whatever makes sense for you. Sometimes one recognizes a new category. (This happens quite a bit when setting up systems, or going through some life transition. These are prime times for losing track of things, by the way ....  )
Were we to have a surprise addition to the family and need to install a new gate at the top of the stairs, its cost would go into our existing "Housing" category. The gate we'd use screws into the walls, so I think of it as becoming part of the house. Everything which becomes part of the house goes under "Housing" for us, so this would too.
Joseph |
Joseph Beckenbach
From each *voluntarily* according to their ability, to each *unimposed-upon* according to their need.
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Dugar
Junior Member
USA
54 Posts |
Posted - Jul 01 2010 : 5:58:31 PM
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| I agree with the new category idea. When my wife was her mother's caregiver for 18 months, our expenditures went way up to help cover costs. These expenses all went into the newly minted "mother-in-law" category. In the case of the gate for the grandson, perhaps a new category entitled "grandson" or "grandchildren" would work. |
"I believe in the fundamental interconnectedness of all things." Dirk Gently |
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janharker
Senior Member
756 Posts |
Posted - Jul 04 2010 : 5:56:13 PM
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That might be a good idea, a new category for grandson. It means that most of the gifts category would be moved into the new one. Problem is, the kid is pushing 10 months old now and I don't think I can go back and identify what is what. I think I'll just put it under house supplies. I doesn't attached to the wall; it has a bracket that bolts around the stair railing pillar with spring loaded hinges and a pole that holds it closed on the wall side. He'll only visit a few days a year and damaging the wall is not in the cards.
I plan to not track next year's expenses beyond food. The DH doesn't seem to care, and I learned what I wanted from the year's project. My year of keeping track will end Aug. 31.
If I change my mind, I'll put in the grandson category. |
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Month-end balancing
