From unexpected bills to fluctuating interest rates or just an extra night out, there are many things that can throw a budget off course. Developing the bookkeeping habit however, will keep you on track so you always know what your money is up to and can act accordingly.
Easy Bookkeeping
All you need to get started with simple bookkeeping is an Excel workbook, a physical ledger bought from a high street stationer, or even just an exercise book you can draw columns in.
You’ll need two main columns, one for income and one for outgoings. List everything, right down to top-up grocery costs and coffee with friends, not just the bigger payments such as mortgage and loan payments. Often, it’s the multiple little things that make the biggest dents in a budget. You could start by ticking payments off on your bank or credit card statement, then work down to cash payments for smaller items. What you need to end up with is an accurate record of where you’re spending money, balanced by an equally accurate record of what’s coming in and where from.
Managing Daily Transactions
Every day, there is some activity in your personal finances, either inwards or out. So it follows that some bookkeeping activity is also a daily practice. This doesn’t mean you have to sit down with piles of ledgers every day, but it does mean you need to control receipts and monitor bank activity.
- Know direct debit payment dates
- Know the exact day wage payments become available
- Make note of when and how much you withdraw via ATM
- Remember all the small purchases you pay cash for
Recording daily transactions in a notebook or app is easy. When you pay for something, take a moment to jot it down, and save your receipt. Doing this jogs your memory about the transaction when you transfer the receipt details into your bookkeeping journal or spreadsheet.
After just a few weeks of noting down all the small daily expenses, you’ll have an overall view of the bigger picture and see exactly where money is going.
Until you start taking control in this micro-managed way, money trickles out of bank accounts in a steady stream. So to start with, when you withdraw £20 from the cash point, don’t just note down the full amount, also note down exactly what you spend that £20 on. Once you get a firm grip on every single thing you open your wallet for, you may find you no longer need to be as strict about where money is going, and can concentrate on the bigger picture of instead.
When to Call in the Professionals
If you’re running a business or looking after an investment portfolio, have multiple streams of income or more complicated tax concerns, going it alone can lead to lost income or higher tax bills.
Get an accountant to look over your books and ask for their advice on money management. If you’re not confident you can keep accurate books on your own, hire the services of a professional bookkeeper. You may only need a couple of hours or less a week to keep everything up to date and current. Bookkeepers can also advise you on a system that suits your needs, and prevent you devising something that’s either too complicated or too simple. Erring on either side can lead to lost income or wasted effort.
Personal finance is just that — personal. Everyone has unique circumstances and some are better at managing money than others. Honesty is a good place to start. If you need to micro-manage your money for a while, do so. If you’re fully aware of how your money works, maybe you just need a better way of maximising allowances or making money work harder.
A simple bookkeeping system, and dedication to keeping it up to date, solves both problems.
