How to see what your balance will be in six months
The most expensive months of your year are the ones you have not looked at yet.
A budget and a forecast answer different questions. A budget asks: what should a normal month cost? A forecast asks: how much will actually be in my account on 30 June?
The second question is the one that worries people. It is also the one a monthly budget cannot answer.
Here is why. The costs that break a plan do not come every month. Insurance arrives once a year. The car needs a service. A holiday is paid for in one month but saved for over twelve. A view that starts again every 30 days never shows any of it.
What you need to build one
Three things, and only one of them is a guess:
- How much you have today - the money in your accounts right now. This is a fact, not a plan.
- Your repeating amounts - salary, rent, loan payments, subscriptions, insurance. Each with its real date and how often it comes, including the yearly and three-monthly ones.
- A guess for the rest - food, fuel, going out. One number per category per month is enough. Being exact here does not help.
Then you carry the money forward. What you have left at the end of one month is what you start the next month with. That running total is the forecast.
Six months, worked out
Say you have €1,200 in the bank, €2,000 coming in and €1,700 of normal monthly costs. That is a comfortable €300 spare each month.
Except for three things: insurance in March (€320), a car service in May (€180), and the summer holiday paid for in June (€700).
| Month | Money in | Money out | Left over | In the bank |
|---|---|---|---|---|
| January | €2,000 | €1,700 | +€300 | €1,500 |
| February | €2,000 | €1,700 | +€300 | €1,800 |
| March | €2,000 | €2,020 | -€20 | €1,780 |
| April | €2,000 | €1,700 | +€300 | €2,080 |
| May | €2,000 | €1,880 | +€120 | €2,200 |
| June | €2,000 | €2,400 | -€400 | €1,800 |
Now look at what this shows. A budget that says +€300 a month suggests you will save €1,800 over six months. The real gain is €600, which is a third of that.
Nothing went wrong. Nobody overspent. The three big one-off costs simply used up €1,200 that the monthly view never showed.
This is the most useful thing a forecast does. It turns "I should be saving €300 a month" into "I will have €1,800 in June". Those are very different numbers to plan around.
Two questions only a forecast answers
Which month will be tight? In the table above it is June, and you can see it coming in January. Five months of warning is enough to move the holiday payment, spread the insurance, or set aside €140 a month for it. One week of warning is not.
What can I really afford? Before signing up for something at €60 a month, the question is not whether June's €300 covers it. The question is whether your balance stays healthy in every month of the year. The running total answers that at a glance.
How far ahead, and how often
Twelve months. Anything shorter misses at least one yearly cost, which is the whole reason to do this. Anything longer is guessing about income you cannot predict.
Each month, update how much you have and adjust your guesses. Leave the repeating items alone until something really changes. Once it is set up it is a ten-minute job, because the repeating items carry themselves forward.
Three mistakes to avoid
- Forecasting the wrong date. A cost you have agreed to but not paid yet still leaves your account on the day it leaves. Use the date the money moves.
- Being optimistic about income. Only count income you are sure about. If a bonus arrives, that is a nice surprise. If you count on it and it is late, every month after that is wrong.
- Never checking back. Compare last month's forecast with what really happened. Do that two or three times and your guesses get properly accurate.
If you have not set up a budget yet, start with how to make a budget. The forecast is what you build on top of it.
Common questions
What is the difference between a budget and a forecast?
A budget sets limits for a typical month. A forecast carries your real balance forward through many months, including the odd costs a typical month does not have. You need the budget to get the numbers, and the forecast to see what they add up to.
How far ahead should I look?
Twelve months. That is the shortest period that includes every yearly cost, such as insurance, road tax and subscriptions that renew once a year. Those are exactly the costs a shorter view hides.
How do I forecast income that changes?
Use the amount you are sure about, usually the lowest of your recent months. Keep anything extra as a separate line you add when it actually arrives. A forecast built on your best month shows what could happen, not what will.
Should I include money I have already agreed to spend?
Yes. Include everything that will leave your account in the period you are looking at, even if you have not paid it yet. What matters is the date the money moves.