What Is Burn Rate (Br)?
Burn Rate (Br) is the percentage of a client’s annual gross income being spent for personal living expenses.
How Is Burn Rate (Br) Calculated?
Why Is Burn rate (Br) Important?
Spending habits affect clients’ ability to save and pay down debt. It affects their ability to make work optional and the amount of insurance they should apply for. It affects the risk they should take in their investments. And in Elements, it’s one of the main inputs into several other Elements scores (the “Term” scores).
So, tracking spending is an essential part of a client’s financial health, and accurately knowing a client’s spending habits could be the single most important piece of financial data. At the same time, we know it can be difficult for clients to provide an accurate spending number.
How can we resolve this?
What’s important here is simply awareness of spending habits, be it the absolute dollar amount or where the money is going.
Clients often conflate budgeting and tracking. “Budgeting” is a specific spending plan, whereas “Tracking” is awareness.