In addition to comparing your actual spending with your spending budget for the previous year, it may be helpful to determine how much of your spending was for the following expense types:
- essential non-health related expenses,
- essential health related expenses,
- non-essential expenses and
- unexpected expenses
If you don’t use the Actuarial Budget Calculator (ABC) workbook with recommended assumptions to develop your spending budget, you may want to track the difference over time between your spending budget and the budget developed under the ABC with recommended assumptions. If your history shows a widening of the gap between your calculated spending budget and the ABC amount, you may wish to revisit how you develop your spending budget.
Do you need to track your spending exactly? While it may be helpful to do so, particularly if you develop your spending budget as the sum of several different categories, it probably isn't necessary. If you know all of the items in the equation below other than your spending, you can solve for the amount you spent during the year.
Regarding the other important assumptions used in developing your spending budget, you can also track how well you did on your investments vs. your assumed rate of return, and actual inflation vs. assumed inflation. Of course, every year that you and your significant other (if you have one) survive to work on a new year's spending budget should be considered a good year.
Happy budgeting and wishing you all the best in 2017.