Question

How can you use accounting to manage your personal finances?

What are the benefits of keeping track of personal transactions – income and expenses – in an organized manner?  

What are some of the possible risks if you don’t keep track of personal transactions?

Answer 1

Accounting not only use by firms, companies and business entity but also a individual can use to manage his personal finance. A person perform so main personal financial transactions during a year like he earn income, he spend his income on his needs and reaming money he save for future uncertainty. An individual should records these transaction in his personal books of account and keep these records in safeguard, so we can easily access these records when we require in future.

Benefits of keeping systematic accounting records- If we maintain accounting records of our personal finance in systematic manner than –

•             We will not face any document related problem in future. Like we want to knew how much money deposited in our life insurance policy last year, than through life insurance account and payment receipts kept in our personal records, we can get this easily.

•             We have all records of our incomes and expanses, than we can verify our saving .

•             We can take every decision very quickly and accurately relating to our personal saving,    investments, lending, budget etc.

If we not prepare and maintain records of our personal finance than we can face so many risks & problems like:-

•             We will not able to know accurate data our income, expenses, saving, and other financial data.

•             We cannot take right and quick decision relating to our investments, lending, saving, expenses, budget etc.

•             We will not get important document relates to our investments, finance, succession, wills, expenses, saving etc.