Accounting

Why Accounting is Important in Handling Your Finances

Financial accounting is the method of handling your financial transactions. It will show you your cash flow, assets, liabilities, net worth and other pertinent information. It is your balance sheet that will show you a summary of your financial standing. This is an important aspect that you need in order for you to keep the path clear towards your financial growth and success.

Accounting will also apply to your investments. You should receive reports regarding the status of your investments. It will show you how each of your investment perform so you can put your money where there is more growth potential.

Personal Accounting

If you are budget conscious, you would need to have an accounting of your daily expenses. This will allow you to monitor your budget more easily. It will give you an overall view of where you are spending your money so you don’t go over the amount you have allotted for each of the expenses. This will also develop the habit of not spending more on your wants but on your needs. Your wants are those little luxuries in life that you give yourself as a pat on the back for surviving the office work for the month. Your needs are those that are truly necessary for you to survive daily allowing you to go to work and earn money.

Keeping track of your expenses will get you a long way in your financial success. This is also the type of thinking that you would want your children to learn from you. You can use your personal accounting report and show them how much money is spent on daily necessities such as food, clothing and shelter. You can use the report to show them why they cannot have the toy they want just yet. It will also teach them at an early age to appreciate the value of money and the importance of budget allocation.

Investment Accounting

When it comes to your investments, the type of accounting required is much more complex than monitoring your daily expenses against your allocated budget. Investment accounting assures the legality of each of your investments. This may also include strategic management to increase the growth potential of your investment capital. Preparation of tax data is included as well in this type of accounting.

Business Accounting

If you are a business owner, maintaining transactions in your business is recorded through the accounting process. This will give you a summary, a financial statement, of the performance of your business. It will give you the overall picture of how well you have used your resources and capital to maximize profit for your business.

Both investment and business accounting should be done by a professional accountant. Investment accountant can also be financial advisers as they can offer you strategies that you may need to increase your wealth. Business accountants can also offer good advice when it comes to making your business more profitable.

Financial accounting will show you how you are doing financially. You need to know where you are in your financial goals and accounting will definitely provide you the necessary information. Knowing where you stand financially will help you make better decisions in order for you to reach your goals. Recording your expenses, savings, transactions, investments and any activity related to your finances will surely help you become successful. It will also help if you will start your children early on how to do simple accounting of their income and expenses so that they can become better decision makers when it comes to handling their own finances. This practice started early in life will bring great financial rewards later.

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Bankruptcy

Should You Declare Bankruptcy? Here’s How Not To

Bankruptcy is an option you might consider taking when your debt is larger than you can handle. It’s your only option when you find yourself in an overwhelming financial distress. This is a kind of plan to repay your debts and get a chance to start over again in handling your finances well. Filing for a bankruptcy can really affect your financial plans and goals. It negatively impacts your credit score and will take years before it is taken off the record. This will greatly lower or even void your chances of getting that much needed loan so that you can start all over again.

Taking out loans is often needed in order to help you meet all your financial obligations. Paying them off on time should be taken as a priority. Most of the time, bankruptcy should be your last resort when you can no longer afford to pay your debts. Before you finally succumb to your financial demise, here are some suggestions that will help you avoid filing for bankruptcy.

Explore your options to pay off debts before filing for bankruptcy

One way to avoid filing for bankruptcy is to be aware of the slightest difficulty you may be having in paying your debts so that you can take immediate action. This may mean selling some of your assets to cover for the payment. Always take the route where you can immediately finish off a loan or debt so you have one less worry. Do not wait for that time when you are already behind on most of the payments before you take action. It will be too late and you may end up selling most if not all of your assets to make those payments.

Negotiate with your creditors

Try talking to your creditors to have them lower down your payment. You should stress your willingness to pay off your debt and you can only afford to pay this much amount to them. Most financial institutions offer hardship programs that you can avail. Ask your financial institution about their guidelines and how you can avail of such program. Your creditors will prefer that their debtors will be paying them at a more reasonable rate based on their capacity to pay than having them declare bankruptcy where there is a chance that the court will clear out their debts because of insolvency.

Consider a debt consolidation program

Debt consolidation may help you think clearly by having only to pay one company instead of numerous ones. Debt consolidation companies will pay off all your debts from different creditors and you pay only through them. This may sound like an easy option but this can also mean a higher interest rate or longer payment period where you end up paying a much higher amount. The major advantage of debt consolidation is you only pay to one company. Sometimes, this is the best route so you can have some peace of mind than having numerous creditors calling you every day. That feeling of financial calmness however does not necessarily translate to actual savings. But it is a good option to avoid bankruptcy altogether.

Manage your personal finances

While financial institutions can offer you other ways to help you avoid filing for bankruptcy, the best way is to start managing your finances early. You don’t need to be an expert in finance to be able to monitor your budget and expenses. You just need to make the habit of living beneath your means. Getting loans and paying through credit cards has been the current lifestyle that you would want to avoid early. You may have student loans that still need to be paid as soon as you land your first job and that should be enough reason for you not to make another one until you have paid it off. But sometimes, you really need to have the car loan and housing loan even though you are still paying off your student loan. You may decide to go ahead with those additional loans but make sure you keep an accounting of all your obligations or expenses so you won’t overspend on the unimportant things.

Understand about sound financial management

A sound financial plan doesn’t mean avoiding loans and credits. It simply means that you are able to make the payment and still save some money for emergency purposes. You must maintain your savings for urgent matters like sudden illness or accident that you may experience unexpectedly. Avoid purchasing things on credit that you can survive without. Take only what’s really necessary for you to survive. Start early in investing your money to grow your wealth. Aside from having a savings account, start having an investment portfolio. Financial institutions can offer you great solutions on how to effectively manage your finances. Doing this early in your life will help you avoid filing for bankruptcy later on.

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Investing

Early Investment Undertaking for the Young

Investment is the strategy of making your money work for you.  But this doesn’t mean that you have to stop working to earn money.  Earning a monthly income from whatever work you have is where you would take your expenses from to satisfy your basic needs of food, shelter and clothing.  The concept of investing is taking some amount of your earnings and making it grow for your future needs.

What is the Difference between Investing and Saving?

It is the best strategy of teaching your children early in saving their pennies for the rainy days.  You can start them really young in making sure that they put a penny or two in their piggy bank on a regular basis and have them break it every year during the Holiday season.  This will not only create excitement on how much they are able to save for Christmas but it will also make them appreciate the value of being able to put some amount away as savings.  When your children reach the legal age when they can sign and enter into a contract then that is also the time when you can introduce them to the concept of investing money.  You might also have them start investing as soon as they receive their salary from their first job.  The point is to start them young.

Savings will make your money earn annual interest from the bank that will not be enough to make your money really grow into something that you can benefit from.  Investing is the only way that you can make your money grow to reach that point where you are already reaping the benefits in order to support the lifestyle that you want.  While it is still necessary that you have savings put aside for the rainy days as emergency funds, having investments is making your money move and utilized so it can earn more money.  This is the concept of making your money work for you.

Why Start Young When Investing?

Teaching your children the concept of investing at a young age will be a much rewarding experience for them because they will have time on their side.  They are not pressured to put aside a big amount of money every payday in order for them to enjoy the benefits of investing by the time they retire.  The older you get, the shorter time that you have in growing your money because this is not a get-rich-quick scheme that will make you a millionaire overnight.  Having your children start investing at an early age will help them to realize that this is for the long term and will give them the chance to learn about the financial world at a slow but steady pace.  They will be able to develop deep understanding of the financial market and make informed decisions on where they want to invest their money instead of just relying on banks or financial institutions to tell them where to go.

Should You Invest or Put Up a Business?

Putting up a business can mean pursuing your passion but this is also a type of work with you as your own boss.  You will still have to work most of the day just like when you’re going to the office but this time, it is your own business that you are running.  It can definitely give you a sense of fulfillment that you are working in your dream business instead of working for somebody else’s dream.  While this is considered an investment, you should not put all your eggs in one basket.  You should still invest in other types such as bonds, stocks, mutual funds, options, foreign exchange and many others.  The idea is to widen your investment portfolio so that you have many opportunities for your money to grow.

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Planning

Why Planning is Important for Your Financial Health

Financial planning is a layout that will help you reach your goals on how you want to live your life when you retire.  The current funds and assets that you have are used as variables in order to predict your financial future.  Planning will definitely assist you in making your money work for you in such a way that it will give you enough rewards or benefits to maintain the kind of life you want to live after your retirement.

 How Do You Start Planning?

Managing your finances should be your top priority in order for you to grow your investments and secure your financial future.  Planning is a process that you will be doing for as long as you are investing because your goals will change from time to time depending on many factors involved.  This is why it’s best that you have a layout of what you want to achieve and make sure that you are not spending beyond what you can actually afford.

If you are an employee, you should not solely rely on your employment as a long-term source of income.  This is due to the fact that your employer can lay you off at any time due to business needs or economic crisis.  Most people will invest more than they could actually afford without putting aside an amount in case an emergency arises.  This is why having savings is important just in case something happens that your source of income suddenly halts. If you have a financial plan, you would have a clear picture of what you can and cannot afford.  This will help you reach your goals faster.

Start planning by having a savings account first.  Make sure that every payday, you will commit an amount that you will deposit so that your savings will grow.  Put aside some amount that you can invest in like mutual funds or T-bills as a start, based on the amount left after you have deposited in your savings account. Then spend the rest of whatever amount is left for your basic needs or for your rest and recreation.  Do this on a regular basis and you will start to create a path towards a bright financial future.

 How Can a Professional Financial Planner Help?

When you have created that habit of saving and spending within your means, that is the time that you need to get a pen and paper and write down your goals.  This is when you might want to seek the assistance of a professional financial planner.  You can show your financial planner your goals and what you want to achieve in life and you will get a professional advice on how you can go about achieving your dreams.  You may want to ask the bank where you deposit your savings if they can refer any financial planner for you.  Please note that a financial planner will help you make a map towards your financial future while a financial adviser will help you make sound investments.  Start with the financial planner first to create your road map then with the financial adviser when it’s time to make or widen your investment portfolio.

Financial planning can start at any age but it is always best to start young.  This way you have more time by your side in learning the financial market and you are not in any way pressured to put aside big amounts of your salary to achieve your goals in life.  A financial plan will guide you every step of the way towards your financial goals.  Your goals may change as you go along but the steps you will be taking will all contribute to its realization.

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Saving

The Benefits of Saving for Financial Growth

Saving for the rainy day is a phrase that you will usually hear from people who have financial goals.  They know the importance of saving and having enough money that can be used for emergencies that life can throw.  Emergencies are not confined in the area of health where you will suddenly get sick keeping you from making your daily earnings.  You should also take into consideration the uncertainty of your employment or even your own business.

 Why Is Saving Important?

Even if you are working for a stable company that can give you long-term employment, crisis can happen.  Even if you have a booming business, crisis can happen.  When you have that clean bill of health and you exercise regularly to keep your body in top condition, accidents can happen.  These unwelcome events in life come unexpectedly.  As the saying goes, nothing in this world is certain except death and taxes.  This is why you should take every opportunity to deposit some amount in your savings monthly or weekly so that it will grow enough to cover you for at least 6 months in case life surprises you and pushes you off your track.  Your savings will be your cushion when that happens and all you have to worry about is recovering from your accident or looking for a new job.  Your savings should be able to cover your basic needs until you can find a new earning opportunity.

 Is it Good To Have Only One Savings Account?

You can start saving using only one account.  But as your savings grow, it is best to open a new one in the same bank or in a different one.  Multiple accounts will let you have different sources of funds for different needs.  One savings account can be allocated for medical or dental needs, another for the house or car purchase and another for your children’s education fund.  You may also have another account that will cover for your vacations or travels abroad.  Having multiple accounts will let you control spending by allocating funds for each and every emergency or goal that you have.  If you have only one account, you will have the tendency to overspend on your vacation and not have enough left for your medical and dental needs.  You should keep the funds set aside for education and medical or dental emergencies intact and having an account for each one will be to your advantage.

The bank’s insurance for your deposit is fixed at a certain rate.  You would not want to have a deposit more than what the insurance can cover as you will lose anything higher than that amount.  While it is true that the higher amount you have in your deposit, the higher returns you will have based on the bank’s interest rate.  But when the bank suffers a crisis, only the insurance amount will be paid.  This is another advantage if you have multiple accounts but make sure that your bank will have a separate insurance for each account.  Always ask for the maximum amount of the insurance for your deposits so that you will know when it’s time to open up a new one.

The savings account is your cushion but should not be your only source of funds for your retirement.  A savings account can only grow so much but may not be enough to have you maintain the lifestyle that you want when you retire.  Make sure that you grow your investment portfolio as you grow your savings.  This way, you may even retire at an early age when you have already reached your financial goals.  A sound financial plan will help you towards a brighter financial future.

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