When creating a cash flow plan, planning your spending using annual numbers makes a huge difference and allows you to easily compare different expenses. Often little expenses are equal to or greater than larger expenses that you really want (and to often give up on).
$3 twice a day at the coffee shop is $2190. This can buy a nice vacation every year. It is amazing how often I hear that someone can’t afford to do something they really want, when the truth is they are spending enough money on small things that don’t really matter to them instead.
I looked at two sport utility vehicles, one would cost me $60 a tank for 800 km, another was $120 for 400 km. Each tank is not a big deal, but over a year the prices are estimated at $1560 and $6240. Now there are many more things to consider when buying a car, but the savings in fuel between these two made my choice easy. The difference was enough to pay for a trailer behind it.
When comparing these expenses, viewing them as annual totals helps demonstrate the impact that large expenses and small expenses both have on your plan, and by comparing these impacts against your priorities it is much easier to build the life you desire.
To make this step easier take the list of expenses already created in an earlier step and add a column for an annual total. (If daily *365, if weekly *52, if monthly *12).
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