Having a goal is great, but that it’s ultimately useless if there is no way to track the progress made towards reaching that goal.This is a spreadsheet that I borrowed from the blogger at nomoreharvarddebt.com, and it will guide financial decisions and keep everything in perspective. Essentially, his story is what motivated me, and I modified his income/expense workbook to fit our situation. Putting this together over several mornings of waking up before work at 4am was not my idea of fun, but the hard part is over and all I have to do from here on out is plug in numbers each month.
How to Read the Income Statement
The income statement basically shows my starting cash and starting debt in May, followed by expected monthly income and expenses for every month until May 2014. The blue section is a summary of the month’s activity: it shows my overall spending for the month, cash before debt, required cash cushion ($200), potential cash for debt, actual cash paid to debt, and the next line assumes only 70% of my regular monthly debt payments goes to the debt principal. Debt less actual cash paid to debt less 70% of regular monthly debt payments results in ending debt for the month, and the $200 cash cushion is my ending cash for the month. Essentially, my bank account should start and end in the same place every month.
On the left side of the spreadsheet, I show what my former budget was for expenses (“Old Bdgt”), and what my new budget is (“New Bdgt”). This doesn’t affect the rest of the spreadsheet, it’s just for me to compare what progress we’ve made in cutting expenses.
On the very bottom, I provided a summary of the total progress. It show how much debt was actually paid off in a month, and then it calculates our current net worth by taking our total assets less our total liabilities.
A box around a cell denotes a cumulative expense. For example, “entertainment” will be several expenses added together, as opposed to the internet bill, which is a single payment.
Exp = Expected income or expenses to pay
Actual = Actual income or expenses paid
Var = Variance to goal
% = % variance to goal
The yellow highlighted cells are points at which I expect to pay off the next debt. It’s the point at which a recurring monthly expense is taken away and added to the cumulative monthly debt payment.
My hope is that this clean pro-forma income statement will make it easier for you and I to follow my progress. At the end of each month, I’ll post a status update which will include the updated income statement as well as a review of successes and failures to meet our goals for that month.