You Need to Do Your Personal Bookkeeping

It's not just companies that need to be good with their finances; people and families also need to keep their books. Many people don't find it fun to track their spending, pay their bills, and stick to their budgets, but these things are necessary to avoid debt and build wealth. Want to get better at managing your own money? This is the right place for you. In the following paragraphs, we will look at some of the most important things that good personal bookkeepers should know.

Tips to Doing your Personal Bookkeeping like a PRO

It's not just companies that need to be good with their finances; people and families also need to keep their books. Many people don't find it fun to track their spending, pay their bills, and stick to their budgets, but these things are necessary to avoid debt and build wealth. Want to get better at managing your own money? This is the right place for you. In the following paragraphs, we will look at some of the most important things that good personal bookkeepers should know.

1. Get started

Make a plan to start. Every day, take five to ten minutes to organise your books. Make sure you write down all your deals, even the small ones. This will make things easier for you at the end of the month and let you always keep an eye on your business's finances. By doing things every day, you will cut down on mistakes and shocks.

2. Learn how to make budgets

Making a budget can be challenging, but it's a great way to control your spending and make sure you can pay your bills. Knowing how much money you make is helpful if you've never made a budget. This will be easier to do if you have a paid job. As a rough guide, figure out how much money you must work with by adding up your normal hourly wage or tip income over a few months. You can figure out how much of your income you should spend on regular bills, savings, or fun based on how much you make on average.

Setting priorities for important things like rent, monthly bills, savings, and food is the key to making a budget that works. Be honest with yourself about what you want. If you don't cook, tell yourself how much you can spend each month on takeaways or places. Create a small goal to help you get used to cooking more. This will help you make the change more slowly. Say you want to cut back on pizza only twice a month, but you always eat it on Fridays. Try skipping one week for the first month and then two weeks for the next. If you're struggling with the habit, looking at your goals and changing your spending is okay. You need to find what works for you. Make small monthly budget changes until you find one that works for you and your obligations.

3. Use a spreadsheet to keep track of your spending and income

A simple spreadsheet program like Microsoft Excel or Google Sheets can make tracking your spending easy and quick. It can also make graphs that will help you better understand how much you are paying. Start by making a weekly or monthly budget for yourself. Next, start entering your information into the tracking system you made. There should be sections for amounts, types of expenses, dates of transactions, and other information.

To make a personal budget, write down your expected monthly income and any set monthly costs, like rent and utilities. This should be done on the first of every month. Then, as needed during the week or month, take away or add other incomes or costs. Don't worry if you don't want to make your chart! Type "financial tracker spreadsheet template" into a search engine to get the needed spreadsheet.

4. Get out of debt

A lot of people have a lot of debt. They borrow money to keep up because they never have enough. Find a way to pay off your loans, mortgages, and other debt first. That's the nicest thing you can do for yourself. You can get your debt under control quickly if you use some of your earnings to pay off your debt. And in case you really need to borrow, get an amount that won't be difficult to pay back.

5. Set up a fund for "rainy days"

You should have both an emergency fund and a bad-day fund. You can use the emergency fund for different things. Generally, you should save enough for three to six months' living costs in an emergency fund. You should save anywhere from $500 to $5,000 for a rainy day fund. A rainy day fund can be used for smaller problems in your life, like major car repairs, home appliance repairs, or unexpected medical treatments. On the other hand, an emergency fund should only be used for big problems, like losing your job or having your life turned upside down.

Setting up a fund for "rainy days" is one of the best ways to get your finances off to a good start. It also gives you confidence as you work towards other financial goals. Figure out how much you need to save first, and then put money into that account every time you get paid until you hit your goal. Use a high-yield savings account that doesn't charge fees to take money out to prepare you for life's unexpected costs.

6. Investing

Investing means buying things, like stocks and bonds, to get money back. Investing aims to make a person richer than the money they put in. Investing involves risks because not all things go up in value and can go down in value. If you don't know much about investing, it can be hard. It can help to spend some time reading and learning to get more insights. If you don't have time, it might be best to get help investing your money from a professional.

7. Using bookkeeping tools

Automated tools for managing money aren't just for businesses. Many personal budgeting apps and software programs let users scan and share receipts, import data, and keep track of multiple financial accounts. These are popular with people who like to stay organised on their phones. People and companies can mail checks whenever needed with online check printing, a cheap option.

8. Cut unimportant costs  

Spending money you don't need can sneak up on you, especially if you're trying to save it. Making a list of all the services and things you buy but don't use very often can help you stick to your budget and save extra cash when needed. It may seem like a small amount of extra money to spend on streaming services, apps, or regular shipments of products you forgot you signed up for, but they can add up quickly.

Knowing how you spend your money can help you form good habits and save more for a trip or something special. Spending money that isn't needed is up to each person. Look at your hobbies and the things you like to do with your time and money to figure out what you can give up and what you want to keep spending your money on.

9. Check your monthly expenses

No matter what method you use to keep track of your money, looking over your earnings and spending habits at the end of each month can help you make a budget for the next month. Most of your money was spent where? Did you make less money or save more? Change your budget and how you spend your money for the next month based on what you learn.

First, add up all your monthly costs and compare them to how much you make each month. Find out where your extra spending comes from if you spend more than you're getting. To determine where your money is going, add your spending by category. That is, add up all the money you spent in each category and compare it to the total amount you spent on all of your monthly costs, or reduce the total amount you spent in each category by the total amount you spent on all of your monthly costs to get a percentage of your total category costs.

10. Spending less

Spending money is just as important as saving it. You should make saving money a bigger part of your life. The 50-30-20 rule is a good place to start. This means you spend 50% of your money on things you need, 30% on things you want, and 20% on things you save. You will always have money saved monthly if you put away 20% of your income. You can set a savings plan to keep yourself going. For example, you could save for a new purpose or retirement.

Conclusion

Personal bookkeeping is all about managing your money to pay your bills and save for the future. This subject includes many different areas, such as handling money and debt, saving and spending, and preparing for retirement. It can also include ways to get insurance to protect yourself, get rich, and ensure your money goes to the people you want it to go to. Handling your money well is an important part of planning your future and can help you avoid debt. Knowing how to handle your money, you can avoid stress and prepare for life's unexpected costs. If you need help with your personal bookkeeping, having a professional can be of help. Get in touch with The Kalculators today; we can help you plan your personal bookkeeping and improve your overall finances. 

Frequently Asked Questions

What is personal bookkeeping?

Personal bookkeeping systematically records and organises financial transactions and activities related to an individual's finances. It involves tracking income, expenses, assets, liabilities, and investments to understand one's financial situation.

Is personal bookkeeping only for people with complex financial situations?

No, personal bookkeeping benefits everyone, regardless of the complexity of their financial situation. Even individuals with relatively simple finances can benefit from tracking their income and expenses to gain better control over their money and make informed financial decisions.

Can I outsource my bookkeeping tasks?

If you find personal bookkeeping overwhelming or lack the time or expertise to manage it, you can consider outsourcing it to a professional bookkeeper or accountant. They can help you maintain accurate records, provide financial advice, and ensure compliance with tax regulations. However, outsourcing may incur additional costs, so weighing the benefits against the expenses is essential. Read more on Do you really need a bookkeeper?

How can personal bookkeeping help with financial goals?

Personal bookkeeping provides valuable insights into your financial habits and lets you track your progress towards achieving financial goals. By analysing your income, expenses, and savings, you can identify areas where you can cut costs or increase income to accelerate your progress towards your goals. Additionally, seeing your financial situation clearly can motivate you to stay on track and make necessary adjustments to achieve your objectives.

What are some common mistakes to avoid in personal bookkeeping?

• Neglecting receipts: Failing to keep and record receipts can lead to inaccurate financial records.
• Ignoring small expenses: Even minor expenses can add up over time, so tracking them diligently is essential.
• Forgetting to reconcile: Failure to reconcile bank and credit card statements with your records can result in unnoticed errors or fraudulent activities.
• Not budgeting for irregular expenses: Forgetting to budget for irregular expenses, such as car repairs or medical bills, can lead to financial strain when they arise.
• Overlooking financial goals: Without clear financial goals, staying motivated and focused on improving your financial health is challenging.