Thursday, February 22, 2018
Lessons with an Accountant – Forecasting
Welcome back to my new monthly series “Lessons with an Accountant”
Today’s lesson is “Forecasting”
Disclaimer: I am an Accountant but not a CPA, please consult your CPA before making any financial decisions.
One role of an Accountant is to forecast for their client/company
What is Forecasting?
Financial planning that assist in the decision-making process
I don’t know about you but I want to live my life not just exist in it. I want to travel and do nice things. This requires forecasting! We have our budget set up and had a month to use it and learn from it. Remember your budget is a LIVE look at your finances. It is ever changing based on what is going on in your life. Forecasting is important for fun things you want to do.
So lets take a look at planning for a trip!
I always start with the date, then location, finally I set a realistic budget after I look at the pricing.
Location: Myrtle Beach
Guests: Just us
Rental Resources: Airbnb, Realtor, or Friend/Family home
Now let’s set a budget!
Based on the location and time of year I can rent a condo on the beach for $120 / night.
Since we want to go for 5 nights, that will be $600 for the rental.
It’s February and we want to go in May. We have to lock in the rental rate by April. So we have 2 months to save $600. I recommend having a separate bank account for things like this. A different bank account will allow you to set money aside that won’t go toward your day to day expenses. You will also be able to pay for the trip right out of this account.
Now we have the location and place secured in our budget we need to consider money for transportation, food, and a fun event while there.
Do you plan to eat out? Can you cook some meals and eat in? Will drinking be involved?
What fun things will be done? Beach Chair Rental? Boat Ride?
When my husband and I went to Savannah I left all money at home accept 1 credit card,which was paid off, and cash for the beach chair rental. This way we could have fun, with a limit, and not worry about paying bills when we got back home. I made sure the card was paid off, then I started saving the maximum available credit amount in a separate account. This way the credit card can be paid off when the trip is complete. Also, by using a credit card my funds are secure. I can call the credit card company if my card is lost, stolen, or something happens all together. No one will have direct access to my money.
Credit Card balance $700 – 3 1/2 months to save
Let’s open our trusty excel sheet and create a tab called Myrtle Beach (or where ever you are going).
Once we establish what months we need to save what we can plug this into our budget and adjust as necessary.