Do-It-Yourself Financial Planning - Understand your projected expenses over your lifetime
Increased savings through conscious expenditure reduction is the largest and most controllable factor in long-term personal finance success.
Anyone interested in improving personal financial planning must understand that tracking expenses accurately and comprehensively is very important. Exactly how your expenses are tracked is not so important, as long as the results are relatively accurate. Greater savings through better expenditure control and/or increased income are not abstractions. Whether you will achieve your expenditure and savings goals depends upon your commitment to stay within your budget and upon your accurate measurement of your income, expenditures, and savings.
Along with your efforts to increase earned income, the savings factor largely determines your lifelong financial success or failure by steadily and more substantially feeding a rational investment program. Cleverness in the selection of particular investments is a far, far less reliable, less important, and most often negative factor in long-run personal financial success. (See these three categories of related articles on The Skilled Investor website: Selecting Investment Funds, Financial Decision Rules, and Financial Planning Process)
VeriPlan’s EXPENSES graphic for a professional couple with children
To develop your own highly customized personal financial plan, you can project your lifetime expenditures using VeriPlan. Below is an example of VeriPlan’s EXPENSES graphic, which is automatically and instantly generated for every projection that you make. This particular graphic comes from VeriPlan’s “Sue and Sam Saver” tutorial. This graphic shows Sue and Sam’s projected expenses across their lifecycle in a variety of expense categories, including ordinary living expenses, major planned expenses, and taxes.
Your expenses in VeriPlan will also reflect any projected adjustments that you make. In this case, Sue and Sam are automatically projecting the costs of buying a home in the near term and the costs of sending their two children to college when Sue and Sam are in their early 40’s. Using marginal tax rates, VeriPlan automatically projects federal, state, and local income taxes plus Social Security, Medicare, self-employment, and property taxes.

Demonstrating a comprehensive projection for a professional couple with children, the VeriPlan tutorial can help you to understand what VeriPlan can do. Use this link to download a free copy of the VeriPlan tutorial file:
VeriPlan’s EXPENSES graphic projects your expenses related to living expenses and the taxes that are related primarily to non-asset earned and retirement income. The graphic includes:
* Ordinary living expenses with your real dollar growth rates adjustments
* Major planned expenses with your real dollar growth rates adjustments
* Your federal income taxes, state income taxes, and local income taxes related to earned income and retirement income
* Your federal, state, and local ordinary income taxes on asset income (reinvested interest and short-term capital gains)
* Your tax payments related to FICA (Social Security), Medicare, self-employment, property, real estate, and other non-capital gains taxes
Because ordinary earned income and ordinary asset income tax treatments are similar, VeriPlan combines both earned income and asset income sources here for taxation purposes. Generally, most asset income taxes will be from current interest and dividend payments on cash and bond/fixed income assets. [This graphic excludes investment expenses related to their asset portfolio, which are presented elsewhere on VeriPlan’s asset-related investment efficiency graphics.]
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