The annual financial planning process is one of my annual rituals that I really enjoy, and this year is no exception. I firmly believe that good execution starts at good planning, and it is always beneficial to take a step back from time to time to examine the big picture.
It may look like an act of procrastination that I only make public this annual plan in mid February. The reality is, the harder I think about the new year, the more uncertainties I see:
First, like you already noticed from our recent monthly reports, investment gains or losses have been among the top drivers of our month-to-month net worth changes -- they will continue to do now that we have over $400,000 in investment accounts.
Second, the high-paying job I have right now, while secure, has a larger portion in variable compensation. In other words, my job income can swing in five figures in either direction.
Third, my wife's choices for her personal fulfillment (full time job, family business or back to school) has its financial consequences that cannot be underestimated either.
On top of that, as we are settling in Asia, cost control has its unique challenges -- our recent experience indicates we will probably spend as much as we did in the US to maintain a good lifestyle.
Long story short, let me share the final plan. The following table encapsulates the output of the ground work to plan for our household income, expenses and taxes. For reasons I discussed before, I grayed out details of our earned income streams.
For the first time, I'm presenting the annual plan in different scenarios. Scenario analysis appears to be the only tool I can really deploy to highlight the uncertainties lying ahead.
P.S. This follow-up post includes the details behind the numbers.