Month-End Reconciliation

calendarAs a Money for Life Coach I often get asked about what needs to be done at the end of each month before starting the next one.  There really isn’t anything that needs to be done before moving into the next month.  The only thing you may want to do at the end of the month is sweep some money into savings.  If there are balances left in your monthly discretionary envelopes at the end of the month, this is a great opportunity to sweep those funds into savings. One of the key principles to building wealth using an envelope system is that anything left over at the end of the month is savings.

If you are funding 30-days in advance, you would obviously want to fund your envelopes on the first of the month.  If you are funding paycheck by paycheck, than you will often go into a new month before funding your envelopes again, depending on your pay schedule.

Over the course of a few months, you should be able to fine-tune your spending plan so that each envelope is being funded with the proper amount for your monthly and periodic spending. Your periodic envelopes will carry a balance from month to month so that you can build up the funds needed for your periodic expenses (i.e. auto repairs, home maintenance, annual tax payments, vacation, etc.). Your monthly required envelopes should have the same amount funded into them as your monthly bill amount. For most envelopes of this type you will zero out the envelope with one transaction each month – i.e. if you fund the mortgage envelope with the exact amount of your payment, when you assign the payment transaction to the mortgage envelope the new balance will be zero.

The exception to this may be your utilities envelopes if your payments are variable. Usually the best way to handle this is to look over your bills from the last 12 months and come up with an average bill amount.  Fund the envelopes each month with that average amount.  You will then carry a small balance over from month to month so that the funds are on hand during the months when your bills are higher.

– Jennifer, Money for Life Coach