Where to start your personal accounting

    Tell me, did you try to keep your personal records?

    How many attempts have you made, and how many times have you quit this activity?

    How many tools and methods have you tried?

    I will be a champion among you. I can’t even tell you the exact figure of how many times, since the beginning of the 90s, I tried to keep my personal records. You can appreciate the zeal and enormous inspiration with which it all begins, and passive disappointment when you realize that you have once again abandoned this lesson. After a while, inspiration comes again, but every time it’s more frightening to start. This is akin to trying to manage your affairs and time.

    For me, every attempt was a step in finding a solution.

    We continue to ask questions:

    Can you say exactly how much your condition is worth? How much did it cost a year ago, and when and what size of your condition do you want to achieve? (a negative state is also a state that needs to be evaluated and constantly monitored more than positive)

    You may ask, what does accounting have to do with it?

    We are used to taking into account the record of our income and expenses. But judge for yourself, all income and expenses change our condition, increase or decrease accordingly .

    Usually in an urge to start personal accounting, we want to find out where and how much we spend, where and how much we earn. The goal is to understand where you can save.

    But why save?

    We all want to live better. Better housing, recreation, entertainment, food and more.We want to spend more.

    Spend or save? Some kind of nonsense is obtained.

    I propose to look at this problem from a different perspective. The more our condition (the richer we are), the better we live (the more we can spend). Axiom, isn't it? At some point, passive income appears: stocks, leasing of assets, funds, deposits, business, MMM ... (Whoever likes it more). At some point, this income begins to be enough not to work, but to do what you love. In the end, making this world a better place (well, or worse, to whom what).

    So the point is not in income and expenses, but in the amount of our condition.

    Although, as I said, these things are interconnected.

    You want to buy an apartment. For this, money is needed. You are trying to keep track of income and expenses in order to understand where you can save, to collect the necessary amount to buy an apartment (in a modern credit society it is still much more difficult, but more about that another time).

    In fact, the future apartment is part of your future condition. In fact, you need to understand, first of all, the size of this state in order to realize this desire in life. It is better to set a time frame, for example, in two years. And control the growth of their condition. There are only two ways to ensure growth:

    1. Spend less.

    2. Make more money.

    This is understandable to a fool. If in a month you do not fit into the planned growth, then you need to cut costs, or look for new sources of income.

    As a result, the focus is not on income expenses, but on personal status.

    It's funny, but in contrast to accounting for income and expenses, it is much easier to control and take into account your condition.

    Take a piece of paper today. Count and write down the following things sequentially:

    1. All money (cash, on accounts and deposits, in any currencies), bring them into a single expression at the current rate, for example, in rubles or dollars.

    2. All their values ​​(apartments, cars, securities , jewelry, etc. all that can be sold for money). Appreciate in the same expression as money, for example, rubles or dollars. Use some very simple principle to evaluate. For example, how much money I will receive, offhand, if I decide to sell this thing within a month.

    3. Also, in a single expression, all debts that someone owes you. I recommend to record time deposits here. And do not be fooled, consider only real debts that can be repaid with money in a reasonable time.

    4. Also in a single expression all the debts that you owe.

    Then add the first three values ​​and subtract the last, get your condition. In other words, how much you are worth .

    • Personal state = Money + Values ​​+ Debts to us - Our debts.

    Put this piece of paper in a safe place.

    For example, in a month do this operation again. You will get another number. The difference between the first and second will be your profit, which is calculated exactly, i.e. income minus expenses.

    • State 2 - State 1 = Income and Expenses (for a given period)

    You can draw a graph. The point of the goal, and the point of the existing state. By setting new points on the chart, current calculations, you will control the progress towards the goal of buying an apartment. Accordingly, it is necessary to decide whether to save or not.

    To be honest, each of us, without taking into account income and expenses, knows what, he can save.

    You can set global life goals. For example. What should be my condition at the age of 60 in order not to work and not to deny myself nothing?

    I ask you to pay attention. We did not use any accounting software., no complicated schemes, and didn’t spend a lot of time collecting daily numbers into the system, and then collecting them from the system into reports, and trying to understand what, where, from where. We only once a month live counted their condition. But, at the same time, the general state of affairs has been taken under control!

    In fact, we came to the conclusion that periodic live monitoring is an initial and mandatory accounting function (and not just a personal one). You have to start with it. And if this is enough, and everything suits, then stop here.
    Well, if you want to understand and analyze in detail where you spend, and where you earn, and whyit is by this amount that you have become poorer or richer for a certain period of time, then you need to carefully and daily record all your income and expenses.

    Here are just some nuances. Revenues and expenses - this is not the receipt and payment of money. Often we do not realize that the income or expense is as good as in the case of the movement of money, when it is obvious.

    A simple example:

    You are an employee and get paid. When do you get income? Not at all when you receive money, but daily, when you work, your employer becomes more and more obliged to you until he compensates this debt by paying money.

    We must try to understand that the movement of money on the one hand, as well as income and expenses on the other, form mutual debts that are part of your financial condition.

    A simple example:

    you worked half a month, and quit. The employer must pay you for the time that you worked. So? At any given moment, it is so whether you quit or not.

    Accounting for cash flows is quite simple. All existing personal accounting programs (home accounting) are based on this. But taking into account income and expenses correctly is not an easy task. A lot of income and expenses are hidden from our eyes, and we must somehow understand that they are occurring. This requires not just adequate computer programs, but the right methodologies, and most importantly, their good understanding.

    Therefore, I recommend starting with the first step. Control your condition live. Set your goals measurable financially and in time. Monitor progress towards these goals. And if you are engaged in entrepreneurship, then you need to understand taking into account income and expenses. But this will already be a secondary function.

    In the last articlewe said that the business owner should control his business from the big picture to the details. An analogy was drawn with the natural way of control, which does not need to be studied. To some extent, each person personally is a business, a family is a business, if measured financially. And to control your financial condition is likewise necessary from the overall picture to the details. The general picture will be just your well-being, which is usually not difficult to count live. The results for the time interval are not difficult to assess by the difference in state. And then, if necessary, you can do the details. Then, when it is needed and where it is needed.

    Many people to whom I spoke about this approach today have taken control of their well-being and clearly understand what they want in the future. Personal accounting is not a specificity of our company’s activities, but the methods and approaches created by us can be useful for each person personally. Therefore, I decided to write this article. The more people understand this approach and take their prosperity under digital control, the more happy and wealthy people there will be.

    I wish you all a good growth in prosperity!

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