When an amount like tax is marked “E”, it means the amount is excluded as burn rate.
When an amount like 1.9k to wife is marked “I”, the amount is included as burn rate.
| Exclusion/Inclusion table | |||||||||
| tax | mtgP | mtgI | 1.9k}wife | $x}wifeFSM | ⬐ For what purpose? | ||||
| E | E | I | I | E | FullerWealth #long term | ||||
| E | e or i | I | E | E | core brbr #short term | ||||
| i[2] | i[2] | I | I | E | brbrX #short term. 12k/M presentation to wife++ | ||||
Among the various goals, the priority is
- AA: accurate burn rate recon
- BB: brbr estimate over take-home base salary. Brbr is an informal, workman’s tool (like C++), not an economist’s tool, not sound, consistent, vigorous, not even logical. Not designed for longitudinal or peer-comparison.
- BB1: core burn rate ..
- BB2: brbrX .. burn rate near-horizon forecast to share with family members, ex-classmates or advisors
- .. [2] My “presentation” includes tax and mtg-P as special outlays. In contrast, brbr and FullerWealth excludes tax and mtg-P
- BB3: FullerWealth forecasting .. requires precision.
- CC1: burn rate trend analysis, comparing to past years
- CC2: burn rate fair comparison with peers .. comparison with official CPI basket composition (economics theory)
As of 2022, here’s my exclusion/inclusion criteria primarily for BB:
- [x=should be “excluded” for CC, using the spreadsheet technique]
- BB2/BB3 to exclude IRAS installment or prepayment. (
Prepayment actually complicates BB1, though it helps cash flow mgmt.) - loans .. see separate section. Complicated.
- BB to include major medical
- BB to include [x] college fees
- BB to include annual insurance premiums
- (all purposes) include amount transferred to wife and spent, about $2k/M
- .. How about any amount wife spent out of her savings? Invisible and excluded for AA/BB/CC, but this amount is low in most months.
- .. [x] How about any amount transferred to wife’s FSM account, not spent (like bonus sharing)? excluded for AA/BB/CC
| — Mtg P+I .. Similarly to PRP, if the annual P+I payment is 88% principal repayment and 12% interest “ This ratio changes over time, so your burn rate trend line can be skewed. (Is that a problem? Well, IRAS payment is a similar problem.) mtg-P is non-discretionary investment, excluded for AA/CC1/BB1/BB3. For BB2, see note [2]. Mtg-p is like buying an investment property by monthly instalment — How about mtg /paydown/PRP/? More like a discretionary investment outlay, excluded for all. If I put $10k salary into an annuity (FLI2), it increases my net asset. Same effect if I use the same to pay down a debt. If the debt is a car loan or student loan, then the paydown amount might be considered burn i.e. expenses, but I never take such loans. My debt is always investment. — How about RBBT loans? Accrued int is usually small. Monthly P+I is considered investment, and excluded.. simplicity. |
— Income (not property) tax deduction
Sugg: If a monthly deduction is $2500, then record it as a negative income or “payroll deduction” like withholding or CPF contribution, so my monthly income is reduced by this amount.
This new practice would improve quality and usefulness of the burn rate in my recon s/s.
What about lump-sum prepayment? I would say same treatment.
— CC: As a consequence, even with a stable family size, annual burn rate would fluctuate year to year due to these items
Nevertheless, I want to follow a consistent definition of burn rate, to support 20Y trend analysis. Covid case trend becomes meaningless when a new counting method is adopted, the entire data set has to be retrospectively adjusted to follow the same methodology.