Accounting is not just for people who own businesses or corporations. Accounting is a practical set of methodologies that any person can find sensible use for. This is called home accounting or personal accounting, as other people may call it. The debits and credits do not just apply to small or big businesses; this is also applicable to the daily income and expenditures of a person. But, is accounting really necessary for regular folks?
Definitely, regular people like you and me need to know the basics of personal accounting. However, you might want to know for what purpose. People may not be aware of this, but every person does accounting every single day, from budgeting a school allowance to knowing how much will be allocated for grocery and bills. Simply paying a cab fare and knowing how much money must be left in order to suffice for a person’s need during that day is already accounting.
People need to know the basics of accounting in order to make better decisions when it comes to budgeting money and knowing about the risks involved after spending money. Home accounting is definitely a need for everybody to bring order and organization when it comes to the management of financial resources within the home or for a family.
There are five steps in planning for home or personal finance or accounting.
• The first step is ‘Assessment’. In analogy to scientific method, this can be regarded as the identification of the problem. In order to fix a problem a person must know what the problem is through the gathering of data. Compiling information is one way of assessment. Gathering supporting papers like receipts and bank statements, pay slips and bonus checks are great ways to know how much your income is and to know where the money is going to be able to budget and use money wisely.
• The second step is ‘Goal setting’. Now that you know what your problem is, you must be able to know what your options are. You must set a goal to know your priorities. Setting goals this means you know what you want. It helps if you have a physical illustration of what your goals are. For example, if you want to buy a car and you intend to use an auto loan from a bank, you must make sure that your income can both pay for the monthly amortization and support a decent lifestyle. You must make sure that you have enough to pay for everything.
• ‘Creating a Plan’ to achieve the goals that you have set is also one way of doing effective home accounting. Having a plan can easily help in reducing unnecessary expenses to make the plan doable.
• The fourth step is ‘Execution’. This is when you put into work all the strategies and activities to make all the preparations necessary to undertake the details of the plan. At this stage, the help of a professional can still be crucial in order to attain the set goals.
• The last step is ‘Monitoring and Assessment’. In this stage, a person must determine whether the goals are appropriate and attainable. This continuing process attempts to unravel errors and oversights and to rectify them as they are identified.
Individual or home accounting may seem to be easy; using these five steps can make the entire thing even easier. The proof is reflected in successful in budgeting and accounting in the home. When things are organized, success will surely be at hand. So, for people who want their homes and personal finances running smoothly, take time to try these sensible tips.