Lessons

Why one month lies

What it is

The habit of taking a recent good month and treating it as normal.

Why it matters

It is the single most common error in this whole exercise. It runs in your favour, which is why it survives. Plan a year on a remembered month and you plan on a number that never existed.

The method

Take twelve months. Add every payment. Divide by twelve. That first figure is the truth. Now divide the same total by the number of months that actually paid you. That second figure is what a working month feels like. You need both. The first pays the rent in a quiet month. The second tells you what a busy one is worth.

Example

PKR 2,400,000 across a year is PKR 200,000 a month. Across the eight months that actually paid, it is PKR 300,000. Danish quoted the second figure and budgeted as though it were the first.