Burn rate
How much money you are spending per day or per month, on average.
Burn rate is the pace at which you are spending — usually expressed per day or per month. In a business it says how long your cash lasts; in a household it says whether the current period is tracking to finish inside its limits. It is a rate rather than a total, which is what makes it useful partway through a period when the total is not yet meaningful.
Worked example
Twelve days into a 30-day month you have spent $1,560. That is a burn rate of $130 a day, which extends to about $3,900 for the month. Against a $3,600 budget you are running roughly $300 hot with 18 days to adjust — while adjusting is still possible.
Common mistake
Projecting from too little of the period. Three days in, one large purchase can imply a monthly total that is pure fiction. A projection is only worth acting on once enough of the period has elapsed for the daily average to mean something.
Related terms
Zero-based budgeting
Assigning every dollar of income a job until nothing is left unassigned.
Sinking fund
Saving a little each period for a known expense that is not due yet.
Envelope budgeting
Setting aside a fixed amount per category, where what is left carries forward.
← Back to the full glossary.
Questions about this term
Burn rate: common questions
- How do I calculate my burn rate?
- Divide what you have spent by the days elapsed. Twelve days into a 30-day month with $1,560 spent, the burn rate is $130 a day. Multiply by the days in the period and you get the projected total — about $3,900 — which is the figure to compare against your budget.
- Why is burn rate more useful than my total spend mid-month?
- Because it is a rate, and a rate can be compared before the period ends. Halfway through, the total only says what has gone; the rate says where you are heading. Running $130 a day against a $3,600 budget shows you about $300 hot with 18 days left — while adjusting is still possible.
- How early in the month is a burn-rate projection reliable?
- Not in the first few days. Three days in, one large purchase can imply a monthly total that is pure fiction. A projection is only worth acting on once enough of the period has elapsed for the daily average to mean something.
- Does burn rate mean the same thing for a business and a household?
- The arithmetic is the same; the question it answers differs. In a business, burn rate says how long your cash lasts. In a household, it says whether the current period is tracking to finish inside its limits. Either way it is a rate rather than a total.
Let Fin handle the jargon for you
Connect your bank and Fin sorts your income, expenses and GST automatically — so terms like this just become numbers that are already worked out. Free to start, no card needed.
Get 2Fin free →