Could guessing improve your finances?

Take a Guess!

by Joel Fink


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Fail to plan, plan to fail, right? Well, if you don't have a financial plan, there is something you can do. Guess.

Guess what your bank balance will be at the end of the month. When you get to the end of the month, compare your guess to your actual balance. Simple, huh?

I hear you saying, "So what? What good does that do?"

Well, how close was your guess? If you were close, then it shows you have at least some grasp on your finances. If you weren't close, then you don't.

Let's make your "guess" a little more useful:

  • Take your current bank balance
  • Guess how much you'll deposit this month and add that amount
  • Guess how much you'll withdraw this month and subtract that amount
  • The result is your "more useful guess"

When you get to the end of the month, compare your "more useful guess" to your actual bank balance again.

How close were you this time? If you were close, then you're doing a good job. If not, why not? Was your deposit guess, your withdrawal guess, or maybe both wrong?


Of course, even if you guessed right, that doesn't mean you're in good shape. You could have guessed that you would have a zero bank balance, and sure enough, you did. So what good is guessing?

The power of guessing (a.k.a. "forecasting") is in its ability to change your behavior. The better you get at "guessing" your future balance, the better you'll understand how you got there in the first place. Then you can start asking yourself some questions.

Would you like to
pay off your credit cards
in less time
for less money?

  • Can I increase the amount I deposit? Maybe not, but maybe so.
  • Can I reduce the amount I withdraw? Here again, it might be difficult, but you probably have more control over your spending than your income.

This may not sound like much of a plan. How beneficial can it be to guess your end of month bank balance? It can do more than you would think.

First, it gets you looking forward, instead of backward. You could go through all your transactions for a month and plug them into a spreadsheet (and that can be helpful), but that only tells you about the past. A financial plan is about the future.

Second, it encourages you to set financial goals. It's a short step from guessing your bank balance to setting a goal of what you want your bank balance to be.

Third, it encourages financial discipline. You'll need to make good decisions, especially about spending, to achieve that desired bank balance.

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This simple guessing approach can be expanded. You can guess your bank balance for the next few months, for the next six months, or even for the whole year. You can expand your guess of deposits and withdrawals into more detail.

Of course, the more you expand the plan, the more time consuming and complex your plan becomes. A more complex plan might be even more useful to you, but the danger is that many people get overwhelmed. They either give up or they build a plan so complex that they don't actually use it.

The important thing is to have a plan that works for you. Have a plan that you can use every month to set financial goals and to achieve them. And if you don't have a plan, guess.


Joel Fink is a retired CPA and financial services executive living in Dallas, Texas. He enjoys writing articles that help real people with simple ideas to manage their money and build financial security.

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