Accountants are those people who handle money and budgets at large corporations. They’re also professionals who offer to handle your tax returns once a year. Otherwise however, it’s not something you think about much, unless you actually train to become an accountant yourself. But the fact is that knowing some accounting basics can help you make a balanced budget, stay on top of your own finances, and stay out of debts.
Being indebted is something millions of people suffer from. Whether that’s credit card debts or mortgages, many people owe money, sometimes more than they can afford. If that’s your case, then here’s how knowing some accounting basics can help you out. The first rule of accounting is writing down amounts as they truly are. To make a budget, you need to create a spreadsheet with two pages, or two columns. In each section of the budget you need to write down your income and your spending. When simplified, that’s really all accounting is for, counting income amounts and spending amounts. Of course, in an actual business, it’s a lot more complex than that, since you have people who also owe you money and haven’t paid yet, there’s recurring costs to stay in business, and so on. But in the case of most people, it can be as simple as two columns, one in and one out.
Once your budget is done, then you’re already well on your way to financial stability. Here, stability means that your income must be the same or higher than your spending. For many people, that’s a hard task to achieve, but it’s impossible without at least a good budget done. That’s why this is the first step, and what any accountant would do. Once you truly know how much you earn, not only from your job but from any source, including gifts and tax breaks, along with everything you spend, then you can see exactly how much money you need to balance your own budget. Then, it’s time to start cutting on your spending, or adding to your income. A lot of those terms are actually the same you hear on the news about the government and how they try to balance the country’s budget, but the fact is accounting basics are the same everywhere. In essence, they are doing the same thing you are, just on a much larger scale, and they too can’t figure out how to get the income column to be bigger than the spending one.
Overall, it’s not that hard to make a good budget and then balance it. It can require a strong will to go through with it afterward and make it happen, like prevent yourself from buying needless gadgets or going out every evening, but sometimes that’s what’s needed to have a stable financial life, and reduce the stress from being indebted. It’s all possible thanks to accounting basics.
More information at: Accounting Basics