Originally Posted by

**ebaines** The problem is that the "size" of a budget is not the net plus-or-minus cash flow, but rather should be based on either the amount of income or the amount of expenses. Let me give you an example: suppose a household has a budget of income = $10,000 and expenses = $9,999, for P = +$1, and suppose in reality it turns out that R= $5; being accurate to $5 on income and expenses of this magnitude is quite good, but your criterion would claim the budget to be false, as (R-P)/R = (5-1)/5 = 0.8. On the other hand if on that same income of $10,000 they planned expenses of only $5,000 then P = $5000, and if R turned out to be $6,000 (off by $1,000) your criterion yields (6000-5000)/6000 = 0.167. So the budget with the much larger error passes as true. In effect yuo reward prople whose budget has either a large surplus or a large deficit, and penalize those who predict close to $0 deficit or surplus. I would suggest that rather than looking at just P and R, consider P/I and R/I, where I is income before expenses, and if |(R-P)/I| is less than, say, 5% then they had a budget that you can say was true.