Accounting for your personal Finances

As an earning member of the family, the first thing that you would need to do is keep an account of the expenses and the income that you earn. This is essential because you need to be sure that you would have enough money for any future emergencies. The best way to do it is by following the accounting principles that are followed by all companies. You may wonder that your income is not as huge as the companies to actually keep accounting books, but it would definitely help you plan better and also give you an idea about the balance between your earnings, savings and expenditures.

In fact, you do not have to follow the entire accounting process followed by the companies. All you would have to do is use the basic principles of accounting for your personal finances. There are 3 such basic principles. The first would be the cost principle where you would record any asset that you have acquired at the cost that you have bought it at and not the present market value. This way, you would be able to keep a reliable means of recording your purchases.

The second is the accrual principle where you are only allowed to record an income only after you actually receive it. This way, you would only plan for that income that you have and not the income that you expect in future. It would ensure that you do not spend more than you actually have in your hand. The third is the matching principle where you would match the expenses that you had with the income that you have earned. If you follow the above principles, it would actually help you ensure that you are always in control of your personal finances.

In fact, you would not have to worry about keeping an account of all these manually. It would take too much of your time and you may get irritated with having to do all the work. Instead, you can get yourself accounting software that can keep track of your income and expenses. By using this software, you would know where you have made your investments, where your resources are and how much expenditure you incur. By doing so, you would be helping yourself manage your finances better. You would no longer worry about having to spend money without knowing whether you can afford to or not.

By ensuring that you do this personal finance accounting, you would be giving yourself a platform from which you can plan your future. You would know the trend of your expenses over a period of time and you would also know about how much income you have made during a particular period. By matching these two aspects, you would know your financial position. You would also get to know which investments are making you money and which investments are giving you a loss. All this information would help you in managing your finances in a better way.