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Be careful calculating your expenses
Old 07-31-2010, 05:42 PM   #1
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Be careful calculating your expenses

DW impulsively ran a canned Quicken report to check our YTD expenses.

At first glance it was a shocker, way higher than I thought. After a moment of panic, we dug into it and realized that the report included savings for retirement as an expense (i.e. transfers to our portfolio accounts - an expense ("outflow") to quicken); it failed to include refunds which would reduce our expenses; and it included a few major purchases including a cheap car, a $2000 dinghy tow hitch setup for the RV, and a not-cheap king bed and headboard (we plan to handle major purchases from a separate acct after ESR turns into full FIRE). It also covered two semiannual big insurance premiums paid in Jan and July which won't repeat until next year, hence misleading for a 7 month snapshot. This 7 month slice came to a tidy sum when annualized.

There were a few other flukey, quickenesque issues but finally we whittled it down significantly. In the end, it was very close to our assumptions. Phew!

Just a word of caution especially for those who are not fully retired - go over those expense reports very carefully and match them with real world sanity checks. We'd have been blown away if the original report above were the basis of our planning.
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Old 07-31-2010, 05:53 PM   #2
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Whaddya do all day? - I mean other than change your shorts after running a Quicken expense report...
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Old 07-31-2010, 06:08 PM   #3
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Whaddya do all day? - I mean other than change your shorts after running a Quicken expense report...
Get off my lawn.
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Old 07-31-2010, 06:12 PM   #4
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Get off my lawn.
An old retired curmudgeon already.
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Old 07-31-2010, 06:12 PM   #5
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I know what you mean Rich. You really have to check what Quicken includes (and doesn't include) in the generated expense report. I've set Quicken to ignore internal transfers.
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Old 07-31-2010, 06:19 PM   #6
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I haven't been able to make Quicken tailor its reports very well-- those "internal transfers" really screw up my attempts to compare expenses vs budgeted amounts.
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Old 07-31-2010, 07:57 PM   #7
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Just a word of caution especially for those who are not fully retired - go over those expense reports very carefully and match them with real world sanity checks. We'd have been blown away if the original report above were the basis of our planning.
Fully understand. Generally I use "Last 12 Months" time frame for expense reports. It levels out those once(or twice)-a-year expenses that can skew the report a lot depending on when you run it.

BTW: sometimes we pay property taxes in December and other times we pay them in January. I usually record the January payments in Quicken with a December date and a memo that says something like "actually paid mm/dd/yy", so that a YTD Quicken report would be closer to reality, for the purposes of understanding YTD expenses.

Sanity checks -- good advice.
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Old 07-31-2010, 08:25 PM   #8
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Old 07-31-2010, 08:29 PM   #9
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In Quicken - if you categorize those internal transfers as TXFR instead of EXP - does that fix the reporting?

I realize it does not address all of the things one must analyze.
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Old 07-31-2010, 09:02 PM   #10
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I haven't been able to make Quicken tailor its reports very well-- those "internal transfers" really screw up my attempts to compare expenses vs budgeted amounts.
Turns out you can customize and then memorize a report to do exactly as you want, but it takes a while to figure out what Quicken wants. Ultimately we included obvious expense categories, then created one called Major Purchases and excluded that from the report (cars, etc.).
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Old 07-31-2010, 09:04 PM   #11
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In Quicken - if you categorize those internal transfers as TXFR instead of EXP - does that fix the reporting?

I realize it does not address all of the things one must analyze.
You can just unselect them when setting up a customized report, then memorize that report once and for all.
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Old 07-31-2010, 09:21 PM   #12
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In Quicken - if you categorize those internal transfers as TXFR instead of EXP - does that fix the reporting?
I realize it does not address all of the things one must analyze.
I have approximately 150,000 transactions in over two dozen accounts stretching back to 1992. Recategorizing is not an option.

Part of the problem appears to be the type of report, but I haven't yet had the patience to get through a complete troubleshooting procedure. I usually line out the irrelevant data and pen & ink the corrected results.

In the eighth year of ER, we're not really doing that much budgeting anymore either. Our use of Quicken has become more of a "When did we buy that?" database than a financial-management tool.
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Old 07-31-2010, 09:36 PM   #13
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In the eighth year of ER, we're not really doing that much budgeting anymore either. Our use of Quicken has become more of a "When did we buy that?" database than a financial-management tool.
I can see that happening, definitely.

Seems to me the most vulnerable to this kind of expense miscalculation are those in the pre-retirement phase setting up call and balances assuming you need $40K to meet expenses only to find out that because of the way the program works, you really need $60k. Talk about your "just one more year" syndrome...
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Old 07-31-2010, 09:46 PM   #14
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Yes...I agree.

My spreadsheets are unique as they are my own and suit my needs. Now, no one else would be able to figure them out, but that's ok.....
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Old 08-01-2010, 07:29 AM   #15
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One word, Excel !

I agree, been using Excel for many years to keep track of my investments and budget. It works well and it's cheap!
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Old 08-01-2010, 07:55 AM   #16
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I also vote with the self-created spreadsheet crowd. Since I created it, I know exactly what goes where and how each component affects the whole. I never got a warm feeling from the somewhat "black box" nature of canned programs like Quicken.
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Old 08-01-2010, 08:57 AM   #17
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Same here for creating homemade spreadsheets for monitoring expenses, both current and projected. They were valuable for figuring out if/when I could ER back in 2008.
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Old 08-01-2010, 09:15 AM   #18
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What I like about Excel as opposed to a cookie cutter program is you can customize it, anytime and in any you see fit. Easy to graph as well if you like pictures.
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Old 08-01-2010, 10:23 AM   #19
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What I like about Excel as opposed to a cookie cutter program is you can customize it, anytime and in any you see fit. Easy to graph as well if you like pictures.
Agree. Also, for me it is simple to keep everything in a spreadsheet. Most of our expenses are on 2 credit cards and they both make it easy to download the transactions into a spreadsheet. All I have to do is add a handful of direct debits (like utilities, cable), an occasional check and ATM transaction. I can do a quarter's worth of expenses in about 30 minutes. Since some categories (insurance, prop taxes) are one a year, I customize my rolling averages to adjust for these being 12 month expenses. The rest is noise.
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Old 08-01-2010, 11:46 AM   #20
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I agree, been using Excel for many years to keep track of my investments and budget. It works well and it's cheap!
One other word: OpenOffice. It works well and is free!

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