The difference between balance and available money

In a nutshell

Your balance is the amount your bank account shows today. Part of that money, though, is already spoken for: the electricity bill due next week, the credit card statement, the installment on the fridge. Available money is the balance minus all of that. It tells you how much you can really use.

Why the balance fools you

The balance only shows the past: what came in and what already went out. It does not know what will go out tomorrow. That is why a high balance right after payday gives the false idea that a lot is left.

Credit cards make the illusion worse. When you buy on a card, your balance does not change right away. The purchase only hits on the day the statement is due. Until then the money looks free, but it is already committed. "Committed" means set aside for a payment you have already agreed to make.

Installment purchases do the same, only over several months. In Brazil it is very common to split purchases into monthly installments on the card. Each installment lands on a future statement, even if you no longer remember the purchase.

What counts in available money

To get to your available money, subtract from the balance:

• Bills due before money comes in again: electricity, water, rent, school, internet.
• The card statement due before your next income. Purchases made after the closing date go on the following statement; if that one is also due before your next income, subtract it too.
• Installments of purchases and loans that fall in that period.

Example

Dona Lúcia is retired ("Dona" is a respectful Brazilian way to address an older woman). On the 10th, she opens her bank app and sees a balance of R$ 2,000 (R$ is the Brazilian real). She thinks about replacing her sofa.

First, she checks what is already spoken for before her next pension payment:

• Electricity bill: R$ 180, due on the 15th.
• Card statement: R$ 900, due on the 20th. It includes the R$ 150 installment on the fridge she bought in 6 installments.

Already committed: R$ 180 + R$ 900 = R$ 1,080.

Available money: R$ 2,000 − R$ 1,080 = R$ 920.

So Dona Lúcia does not have R$ 2,000 to spend. She has R$ 920 for the rest of the month, groceries and pharmacy included. The sofa can wait. She also remembers that the R$ 150 installment will show up again on the next statements.

Step by step

1. Write down your account balance today.
2. List the bills due before money comes in again, with the amount of each.
3. Check the card statement due before your next income, with the purchases already on it.
4. Add up everything committed and subtract it from the balance. The result is your available money.
5. In Meu Gasto, register your bills with due dates and your cards with closing and due dates. Then the home screen shows your account balance and how much should be left at month end after the bills and statements you registered. The Calendar shows what is due on each day.
6. Before an unplanned purchase, look at available money, not the balance.

Common mistakes

• Looking only at the bank balance. The balance does not subtract what is about to fall due. Take out bills and the statement before deciding on a purchase.
• Forgetting the card statement. A card purchase does not leave your balance right away, but it does on the due date. Add the statement to what is committed.
• Thinking an installment "is already paid". Only this month's installment is paid. The next ones keep committing the following months.
• Counting on money that has not arrived. A promised payment only goes into available money once it actually lands.