There are a few people who meticulously account their income and expenses. There are a few who don’t bother to do so. Some people call the first category of people as misers! This is being unfair to them because it is their prerogative. So leave them free as long as they don’t force it on others.
I see a lot of merits in accounting one’s income and expenses in one’s successful journey towards excellence in Personal Finance and Financial Freedom. Let me narrate a few of those:
- At the end of any month or week, you can review and check whether you are going in the right direction. Now with the frequent usage of credit cards, this becomes very important. You don’t have to worry whether you are spending too much or too little.
- Another big advantage with the presently available and inexpensive accounting software is that it will remind you of the various due dates such as credit card payments, insurance premium, housing loan dues etc. How many times people miss the due dates and pay penal interest in the absence of such reminders!
- Now you can make summaries at the end of each month and have a meaningful review with your Financial Mentor. In fact, even your family members will begin to participate with you and your mentor and it will be lovely!
- Based on such reviews, you can fine-tune some of the expenses and improve your savings. There is nothing like a continuous improvement on this count and you will be right on your ‘Path to Prosperity’.
- There is a common problem with most of us which is the time lag between your savings and investments. The accounting will reveal your idle cash and bank balances so that you can make your investments as discussed with your Financial Planner.
- You will set the right example for your children. After all, unless you walk your talk, your advice to them on financial prudence will fall on deaf hears.
- There is an esoteric aspect we discuss in our ‘Path to Prosperity’ programs. With the example of ice cream and a child, we discuss how the uncanny Universal Intelligence seems to reward you with more money when you handle what is given to you properly. The accounting of your income and expenses will be very much in the direction of properly handling your current resources.
One can add more to this list. The most important point is that accounting is only a tool in your Personal Finance. What is more vital is whether you follow your Financial Plan drawn up with your Financial Planner or not. Without a shadow of doubt, accounting will help but that is not ultimate. Like in many aspects of life, you need guidance but your focus on your goal is the most important aspect. Use accounting or any other tool that helps you. If you know other tools, do let us know.
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