Income versus Expenses

Income versus expenses – which one do you think about most? Income represents money that is credited to you and expenses signify the financial obligations you are responsible for paying. Income is typically provided as a result of your own hard work and expenses are usually created by your decision to purchase certain products and/or services. 

Are you more concerned with earning more money, or with having less debt? Have you been trying to figure out what to do with the finances you make, or have you been working on a plan to properly allocate funds to cover your present expenses? What do your income and expenses look like when weighed on the scale of your financial reality? Are you presently earning more income than you are shelling out cash to cover your expenses, or are you trapped in the juggle game because you have more household bills than dollar bills? Do you even keep track of your finances to know exactly what you have and what you need to take care of this week or this month?

Tracking your income and expenses is a key foundational principle to establishing, maintaining, and improving your personal budget. So, before I ask you to track your finances or inquire about how you are currently track them, I’d like to encourage you to take a stab at a short financial resource I have created and use with my clients. It may look extensive but it is really just a short game that will allow you to see if your tracking skills are at their prime, or if you need to dust off that blank checkbook register you have sitting idly on your desk.

THE CHECKBOOK REGISTER GAME

Instructions:
Morgan and Michelle are twins who have had identical financial experiences. However, one of the girls has properly recorded her financial transactions while her sister’s checkbook register reveals errors that are causing inaccuracies in her account balance. Your job is to find out which sister’s register is correct, as well as the four errors in her sister’s register.

Summary:
Morgan and Michelle began with an opening balance of $50.00. On April 15, 2009, the girls both received and deposited their weekly paychecks from Macy’s in the amount of $213.00. On that same day, they transferred $100.00 to their savings accounts. On April 18^th, the girls used their debit cards to purchase sneakers from Footlocker for $54.99. On April 25^th, an automatic payment in the amount of $65.00 was deducted from their accounts from State Farm for their automobile insurance. Finally, the girls wrote check# 500 in the amount of $20.00 on April 28^th to give to their cousin, Ann Smith for her birthday.

Morgan

D-Deposit   AP-Automatic Payment   ATM-Cash Withdrawal   DC-Debit Cards   FT-Funds Transfer   SC-Service Charge   TD-Tax Deductible    BP-Bill Payments

NUMBER OR CODE	DATE	TRANSACTION DESCRIPTION	PAYMENT FEE WITHDRAWAL (-)		DEPOSITS CREDITS(+)	$ BALANCE
						.00
D	4/15/09	Macy’s			$213.00	$213.00
		payroll deposit				$213.00
FT	4/15/09	SunTrust (Savings Account)	$100.00			$100.00
		transfer to savings				$313.00
DC	4/18/09	Footlocker	$59.94			$59.94
		new sneakers				$253.06
AP	4/25/09	State Farm Insurance	$65.00			$65.00
		automobile insurance				$188.06
500	4/29/09	Ann Smith	$20.00			$20.00
		birthday gift				$168.06

Michelle 

D-Deposit   AP-Automatic Payment   ATM-Cash Withdrawal   DC-Debit Cards   FT-Funds Transfer   SC-Service Charge   TD-Tax Deductible    BP-Bill Payments

NUMBER OR CODE	DATE	TRANSACTION DESCRIPTION	PAYMENT FEE WITHDRAWAL (-)		DEPOSITS CREDITS(+)	$ BALANCE
						$50.00
D	4/15/09	Macy’s			$213.00	$213.00
		payroll deposit				$263.00
FT	4/15/09	SunTrust (Savings Account)	$100.00			$100.00
		transfer to savings				$163.00
DC	4/18/09	Footlocker	$54.99			$54.99
		new sneakers				$108.01
AP	4/25/09	State Farm Insurance	$65.00			$65.00
		automobile insurance				$43.01
500	4/28/09	Ann Smith	$20.00			$20.00
		birthday gift				$23.01

So, how did you do? Did you immediately recognize that the transactions in Michelle’s checkbook register were properly recorded? Were you able to locate the four errors in Morgan’s checkbook register? They were:

1.       Morgan forgot to record $50.00 in her opening balance.

2.       She recorded the funds transfer to her savings account as a credit instead of as a deduction from her account balance.

3.       Morgan deducted $59.94 instead of $54.99 from her account to record her purchase of sneakers from Footlocker.

4.       Morgan recorded the wrong date for check# 500. She wrote 4/28/09 instead of 4/29/09.

Morgan's checkbook register provided her the false security of thinking she had $168.06 available for her use when the reality was that her account had been reduced to $23.01. Can you see how small discrepancies can make all the difference in your financial world? Good! Now, allow this short exercise to move you into action.