Bookkeeping is not only for Business
Bookkeeping is not only for Business by Jacqueline Williams
Financial Strategist
The term bookkeeping is enough to send people running for cover. Why is it that, of all the business tasks to perform, this one is the most popular when it comes to procrastination?
We all know the importance of having a clear financial picture of our business activities. But what about our personal lives?
In terms of bookkeeping from a personal perspective, many consider this to be simply “budgeting”. Actually this is not the case. Budgeting involves determining how much money you have, and where to spend it.
Bookkeeping in a sense involves the same however it’s more complex because it’s also about creating a system or process for managing the flow of your financial data.
For instance, a simple household budget would not typically go any further than a spreadsheet consisting of “income in and income out”.
Bookkeeping on the other hand shows the details behind what’s coming in, from where, so that you’ll be able to create trends and make decisions based on the cumulative data. Bookkeeping involves the process of not only the input of data but the manipulation and placement of that data.
So, the next question is how would you set up an effective bookkeeping system for your household? Well, I’ll show you.
First, let’s start with the beginning, which is the source of this data. For instance, our major source of household income is from salaries or business revenue.
A good bookkeeping system would have separate bank accounts to receive the income. Any expenses associated with the earnings would also flow through this account. It may seem a bit redundant; however, it makes for a cleaner process when it comes to tracking your sources.
Next, any information from these sources should be kept in their own files or folders. Items received in the mail should be immediately sorted and filed according to their categories. Thus far, you can already see the importance of an efficient filing system.
Once the data has been received, next you must enter this information into a spreadsheet. Today, most people use financial software to accomplish this task.
I often refer to QuickBooks, because it’s my software choice for both business and personal. QuickBooks has a line of software products geared towards your specific need. Even on the most basic of levels, the software is easy to maneuver.
For personal financial software, there is no need to understand debits and credits. This is where most folks get confused. You will work directly from your bank account.
The software even has features to track other items such as investments, property, and retirement accounts. The biggest task here is making sure than you keep your files updated.
Rule of thumb is to update based on the number of transactions you produce on a monthly basis. 0-100 transactions, you can update your files monthly. 100-250, you should update your files more often, probably weekly.
After you have organized all your information, from receipt to recording, now is the time to analyze your data to make some key decisions.
Streamlining your household finances is an important process and must be handled with the same focus and energy as if you were conducting business. After all, your financial picture is the framework of your family.
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Common Cents (Sense) The more we earn
…the more we spend
The more we work the more money we earn. The more money we earn, the more things we buy. Which came first, the chicken or the egg?
The real question is which came first, the desire for consumption or higher earnings? This is a real paradox. There is an argument to support each as being first. But when you examine closely, does it really matter which came first. More importantly what are you going to do about the situation?
What I’m really talking about here is getting honest about our financial lifestyles. Individually, consumers struggle in their own rights to stay ahead of potential financial disasters. With the economy in the condition it is today, many are paying special attention to national and global financial states. Is it because now we believe that the world feels our personal struggle? Or, are we now anxious that our perceived “cushion of comfort” has deflated?
Consumerism has reached new heights, as we find reasons to validate the choices we make. From a psychological viewpoint, one could say that our spending habits are directly related to our desires to achieve certain social status. We surround ourselves with successful people, hoping that in some way the success will “rub off” on us. In the meantime, we spend our time and energy trying to emulate what we think is success! In the short and long run, this leads to more consumption; more meals at restaurants, buying gifts, attending special functions to network, etc.
Yes, I know, it takes money to make money, but at what point do we do some serious soul searching about whom we are and what our life’s purpose is? Does it really involve acquiring the best of the best through consumerism? How important is that Lexus, or the Fendi suit, or even the Dolce & Gabbana bag?
Keeping up with the Jones‘ has turned the American dream into an American nightmare. Our spending habits have become our alter-egos. We have convinced ourselves that more is better. Look at how major companies have warehoused everything from purchasing cars, to grocery shopping, to outsourcing skilled labor from other countries. At some point the bubble will burst, just like the “dot com” bubble burst in the late 1990’s.
Looking at our economy today, that bubble has burst again. Why is it that during times of prosperity we forget that what goes up eventually does not stay there? We ride the wave of artificial enthusiasm for as long as it will carry us. Not giving any forethought into being prepared for the cycles that the economy experiences and its impact on our lifestyle. We’re like kids in a candy store, eating all the candy we can right now, not thinking of the tooth ache that comes later.
Our perception of needs versus wants is much skewed. We are in complete denial about our spending habits and how they are directly related to the social statements we make. Even on a national scale, we can compare the spending habits of major corporations to our own households.
For example, the mortgage crisis. Mortgage brokers were mesmerized by their own wheeling and dealing in unique products and the profits to be realized from selling them. In turn, the consumer, who purchased these mortgages, thought they could increase their social status by buying more house at cheaper interest rates. The end result, everyone is suffering. The mortgage industry has gone practically bankrupt as consumers are facing an all time high in foreclosures. Each side was looking only at the here and now, and forgot to prepare for the inevitable cycle.
What can we do to stop the madness?
1. Do some serious soul searching about your true purpose in life. Does it really include all the things that you’ve acquired?
2. Always have a plan, or need I say a cushion of your own. Pay yourself first.
3. Be in control of your spending habits instead of them controlling you. Impulse purchases are not an option, ever!
4. Always live below your means! Remember the Jones’ are an illusion.
5. Find creative ways to save money that can include the family, such as starting your own garden, cooking more fresh meals at home together, or having game/movie night vs. going out.
6. Make sure your home, if you have one, is weather sealed to save energy.
7. Re-cycle. It’s a must for our environment. Our future generations need an earth that will continue to sustain them.
8. Join forces with an associate and barter your talents and services.
9. Stop riding on the emotional momentum of the media. It’s like having someone else living your life for you. Make sound financial decisions and stick with them no matter what is happening in the world.
10. Stay healthy mentally and physically. We perform best when our bodies and minds are in sync.
It’s all a case of mind over matter. Take control of your life and your finances. Stop playing the victim role every time an economic downturn happens. Stand strong because we all have “Common Cents”.
copyright 2008 Jacqueline E. Ford
Jacqueline Ford, Chief Financial Strategist of JE Financial Services (JEFS) provides workshops focused on records management & systems implementation plus, bookkeeping & payroll services. Visit her website at http://www.bookkeepingsuccess.com to download a free copy of “Selecting the right Bookkeeper for your Business.”
Using your child’s name to establish credit is Identity Theft!!
Tis the season to be careful!
Everyone will be doing some serious shopping no matter what is reported about the economy. Nothing stops us from spending money during the holiday season. Where there is a will, there is a way and we will find a way.
So while you are out there finding all those bargains to make your loved ones happy, what about someone stealing your identity and taking all of your hard money, or using your identity to make their own purchases. Identity Theft, what is it?
This can happen, don’t think for one moment that just because you use a debit card and have direct deposit, that is cannot happen to you.
This is the crime of obtaining the personal or financial information of another person for the purpose of assuming assuming that identity to steal it and use it to make purchases or establish credit without the victims’ knowledge.
Here a few examples:
Southern District of Florida. A woman was indicted and pleaded guilty to federal charges involving her obtaining a fraudulent driver’s license in the name of the victim, using the license to withdraw more than $13,000 from the victim’s bank account, and obtaining five department store credit cards in the victim’s name and charging approximately $4,000 on those cards.
Children sometimes have their identity used by their parents to establish accounts in their name. This is also a form of identity theft because children are being victimized with not way to stop it from happening.
Hackers are waiting online to steal your information so you must get the right tools to get rid of and monitor Spyware and Adware that is frequently downloaded with games, tool bars and new programs.
PrepaidLegal.com says that it is no secret that identity theft is a major problem not just in America but all over the world. Many of think we are not at risk? Unfortunately you are, we all are. Ask yourself these questions;
- Do you hand your credit card to servers at restaurants?
- Do you sign your credit cards?
- Do you supply personal information over the Internet?
- Do you keep your Social Security number in your wallet or purse?
- Do you leave mail at your home or business for the postal carrier to collect?
- Do you shred unwanted mail with personal information?
What if you discovered that your identity had been stolen?
Contact the Federal Trade Commission (FTC) to report the situation, whether Online,
By telephone toll-free at 1-877-ID THEFT (877-438-4338) or TDD at 202-326-2502, or By mail to Consumer Response Center, FTC, 600 Pennsylvania Avenue, N.W., Washington, DC 20580
Call your bank and/or credit card company.
Contact the three major credit repositories – by the time you do all three major credit companies after contacting you bank you must complete the following steps for each credit company;
To report fraud, all three credit companies Equifax, Experion and Transunion.
Order a copy of your credit report
Dispute information in your report, call the phone number provided on your credit report.
Opt out of pre-approved offers of credit
After all this then you will do the following
Contact your local office of the Postal Inspection Service if you suspect that an identity thief has submitted a change-of-address form with the Post Office to redirect your mail, or has used the mail to commit frauds involving your identity;
Contact the Social Security Administration if you suspect that your Social Security number is being fraudulently.
Contact the Internal Revenue Service if you suspect the improper use of identification information in connection with tax violations
Fill out and submit the affidavit form supplied by the FTC to dispute new, unauthorized accounts count on spending on average $1,500 in out-of-pocket expenses to resolve the many problems cause by identity thieves
By the time you go through about a 20 helpful but extensive steps recommended by the Federal Trade Commission in its 30-page consumer support publication you will may get some results. The problem is not having any avenue to take care of the legalities that could occur from damaged credit. Especially if a crime is committed in your name.
WITH THE IDENTITY THEFT SHIELD: Get REGULAR monitoring of your credit report and let the proven leaders in the identity restoration and legal services fields assist you.
With no obligation, you can view a short presentation and learn more by visiting my website. See what Pre-Paid Legal can do for you at: http://www.prepaidlegal.com/idt/slackl
Consumerism, What is It?
Consumerism is mental slavery based on the constant purchasing of consumer goods and is the cause of fear based behavior that leads to depression and severe anxiety. Slavery today means being enslaved to ideas and beliefs.
Consumerism it not fatal, we can be cured although it will take developing some discipline, self control. and a big adjustment in our thinking. We can and should use our resources more efficiently which means to cut back on impulse shopping, save for retirement and work smart by creating multiple streams of income. Our consumer behavior is influenced by those who can control it. Most of us match our lifestyles to the amount of money we make and live beyond what we can really afford. Consumerism or over consumption is an obsession with the owning things a definition of our buying power.
The power of credit cards can create the illusion that you can afford to buy when you do not have the ability to pay it back. We make credit purchases for the items we must have and bank on being in a better position to pay for it by the time the bill is due.
A well known top economist, David Rosenberg say “The process of bringing our wants and our needs into realignment is going to involve years of savings and frugality.” We will all be required to change our behavior and habits of uncontrolled spending.
The fact is we are consumers and need to consume resources to survive. Due to the drastic change in the economy some consumers don’t have much choice but to cut back on spending. How do we change our behavior and learn to preserve our money to plan for retirement or keep the house from going into foreclosure? What can we do differently that will make a difference?
Raises aren’t being given at the rate expected to keep up with inflation and barely covers the increasing gas, the rise in food prices or other goods and services. Realistically everyone is feeling the crunch, just look at the prices of liquid detergent for example, the 64 oz does not exist any more, the choice is the 50 oz. concentrated for the same price. Sounds like a bargain, not by a long shot, the fact is hat you will use the same amount per load that you used when you purchased the 64 oz size and use it up faster, so you will need to repurchase sooner.
I may be overly concerned about this and sound like an alarmist but paying attention to how the economy effects my spending is how I try to avoid being in debt. School loans and extended is a set up for failure if you don’t have a plan. The economic crisis is causing panic and people are getting creative in their methods of making money, Some go to farmers markets to shop and stretch their dollars, others have yard sales. Officials in the state of Indiana are considering a law to limit the number of yard sales a resident can have each month. Families generate income by buying and selling used clothing and other items to make up for lost income from losing their jobs.
People are losing their homes and facing a 25 percent increase in heating bills this coming winter. Certain industries have fallen apart which creates a domino effect of job loss across the country. Companies are cutting cost by cutting jobs leaving families destitute and struggling. When there are no jobs receiving unemployment compensation is an option but barely enough to make ends meet. Families are downsizing to more affordable housing, and searching for creative ways to pay for college.
Poverty has a tremendous impact on our well being which affects the quality of life for everyone. Some have fear that crime will increase due to the recession in response to the changes in the economy. There is fear that panic and desperation will cause people to commit more crimes. Neighborhoods are changing as homes are abandoned or foreclosed on. More people are on the streets. Copper plumbing is being stolen from empty houses, causing flooding and sometimes structural damage, so the home loses value which affects the property values.
Everyone is being encouraged to make a adjustments in their consumer behavior by recycling, finding alternative income streams and spending less on unecessary purchases. We can learn to live the lifestyle that we can afford.
The Benefits of Owning vs Renting
Purchasing a home is an intimidating process without the news reports about the current mortgage crisis, repeating terms like sub-prime lending and balloon payments. Families are losing their homes at an alarming rate and it has been reported that African Americans have been the target of mortgage lenders processing high cost loans by qualifying those with poor credit scores for high interests rates and hidden costs like balloon payments. Sub prime is a type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans.
Dedrick Muhammad co-author of a report from United for a Fair Economy called “Foreclosed: The State of the Dream 2008, cites the sub-prime mortgage crisis as the source leading to the greatest loss of wealth in modern US history for people of color who stand to lose over $200 billion dollars. Dedrick Muhammad is senior organizer and research associate at the Institute for Policy Studies.
It all seems overwhelming to our desire to own a home and have our own piece of land to cultivate overshadowed by the anxiety we all feel for those families that are victims of foreclosure due to predatory lending practices. We dread the thought of losing a home before we even purchase one. If you have ever lost a home is it a paralyzing experience. The feeling of shame, blame, and guilt to feel your home and security slipping away can be devastating.
In 2002 the “Home ownership Challenge” was introduced that represented a set of policy initiatives designed to make home ownership a reality for minority groups, mainly Blacks and Hispanics. The Department of Housing and Urban Development (HUD) analyzed the most recent home ownership data from the U.S.
Census Bureau and highlighted the obstacles preventing minority families from owning a home. When you do the math, after about 6 years a homeowners mortgage payment of $1000 over time will be less than rent of approximately $800 per month. Renting has fixed costs over the course of a lease and increases gradually over time.
The landlord is responsible for the property taxes, the maintenance of the property and insurance for the property to protect his investment. Any insurance the landlord has on his property does not protect your belongings while you are renting.
Mortgage payments can essentially stay the same over time depending on the terms of financing and give a home owner a tax savings advantage by deducting the interest on mortgage payments. Home owners are responsible for the physical condition and maintenance of the property, home owners insurance, property taxes, and the closing cost of buying or selling. The consequences are significantly more complicated in home ownership than in renting when you miss a mortgage payment.
Buying a home is an important investment decision which requires research and investigation. The obstacles to home ownership for African Americans and Hispanics has been highlighted by HUD and the U.S. Census Bureau as follows;
- A lack of inventory of affordable single-family housing available for sale in many areas where a majority of residents are minority families;
- A need for down payment assistance, which affects minority families to a greater extent than non-Hispanic whites because they have less accumulated wealth that can be used to help children with down payments;
- A lack of access to affordable mortgage credit;
- A lack of understanding of the home buying process;
- Weak credit histories, often arising from a poor understanding of financial matters and where financial counseling is required there is a lack of information about available home ownership programs in the community and language difficulties or cultural differences.
Renters are not confident that they can afford a home due their ability to make a down payment and meet closing costs.
African Americans are less confident than other groups in their ability to go through the home-buying process without facing some form of discrimination. African-American men and African Americans under the age of 35 are the most concerned about discrimination.
Credit is an even bigger concern for the minority households. Different parts of the American population also have significantly different levels of experience with credit and debt.
Responsibility is your ‘response’ – ‘ability’ to establish, maintain and monitor decent credit because credit is the key factor in qualifying for financing to purchase a home. Knowing your credit is weak and your ability to correct, and maintain it suffers from lack of motivation to tackle the “bad credit” mountain is being honest with yourself. If you can correct it, that is the best route. Do not look for a quick deal when you know that your response-abililty factor is as weak as your credit score.
Great programs offer assistance through the home buying process by educating and coaching you to shift your response ability to a new level of understanding about the breath and depth of this investment choice.
Do your research and buyer beware to avoid becoming a victim or being trapped with more financial debt and responsibility than you can handle. Losing a home is devastating and affects the overall security of your family and well-being.
