The benefit of doing this is seeing exactly where my money is going as I track my expenses. So why am I so far off in so many different areas? The first reason is that I have chosen to be very granular in splitting my budget across 48 different accounts. Let’s hold off on succumbing to that conclusion just yet. In fact, it would be fairly logical to question whether there is a benefit to budgeting at all with such significant misses. On first blush, it looks like this whole budgeting process isn’t working out so well. In fact, 15 of 48 accounts have variances in excess of 50% in one direction or the other. I overspent on 17 accounts, underspent on 21 accounts. What you will notice immediately is that my variances are all over the board. Here is how my results varied across all 48 accounts: I use this level of granularity because it helps me see where my money is going in a very detailed way. Last year, I estimated my expenses across 48 different budget accounts (i.e. To illustrate this, I have mapped out my actual 2019 budget results below. Some areas are very close, some are way higher, and some are way lower. But at a granular level, I am all over the board. At the highest level, my expenses in total almost always come in very close to what I projected the year before. Then, I repeat the exercise by studying the trends and predicting the upcoming year.Įvery year, I notice an almost magical dynamic that appears over and over. It provides a feeling of accomplishment, helps me understand what is happening with my money, and enables me to forecast my financial position later in life.Īs much as I enjoy doing this for the first 11 months of the year, my favorite is the last one of the calendar year because I get to see how the scoreboard looks vs what I had estimated one year earlier. If I am being honest, it is actually something I look forward to each month because I get to see the progress I am making in my net worth over time. This process is one of the most important disciplines I adhere to in managing my personal finances. In fact, I have kept track of my income, expenses, and investments from the time I landed my first job out of college 15 years ago.Īt the end of every month, I update my custom-built financial model to see how I am tracking against my budget.
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March 2023
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