Personal Finance

Getting to financial freedom is one of the hardest things to do. We have found one practice that leads to domestic harmony in the domain of money, and that is to maintain a household budget.

If you've ever done the exercise of tracking where every dollar goes for a month, this is like that exercise.

Except that you do it every month.

That may seem like an unconscionable amount of work. In fact it takes us only an hour and a half each month to do it for a dozen personal and business accounts. And as a result, we know where all our money is spent. But that's only part of the picture. We also do an exercise at the beginning of the year of setting the budget for each of the 70 or so categories that we track spending in. At the end of each month we can see how good our prediction were. As a result of having done this process for the last eight years, in 2009 our predictions for combined business, personal, and tax expenditures and income were within 1% of the final figures.

I'll have more to say about how to do this process and the data visualization tools that can get the most out of the results in another section.