For most young families, bookkeeping is rarely the first thing on their mind. There’s so much else going on in life that leaving money to take care of itself often happens, whether by accident or design.
Simple bookkeeping can help in many ways. From saving for a rainy day to simply anticipating upcoming expenses, when you’re in control of your money you get a sense of security and satisfaction.
All you need to get started with bookkeeping is a notebook or ledger from a high street stationer. If you can use Excel, starting a new workbook is also quick and simple. If you want to go a little more high tech, a subscription to a cloud accounting package is worth investigating.
The idea is to balance outgoings with what’s coming in, so you’ll need your bank statement to make your first column of expenses. Simply list every item of expense and how much it cost, along with how it was paid; cash, direct debit, bank transfer, credit card, or however else.
Create another column for money coming in, and make a note of all earnings, amounts and the dates you received them.
You can either make a new sheet for each month, or create additional sections in the same worksheet. Carry the balance in your bank account over to the start of the new month and continue as before, listing expenses. At the end of each month, the two column totals should equal each other or, preferably, show money left over in the bank account.
Seeing the Big Picture
After just a few months of keeping a record of where money is spent and from where, and how much comes in, you’ll see how your finances perform. You can spot where you’re overspending and where you can make economies, or know exactly how much is available to transfer into savings.
When Things are More Complicated
Balancing household accounts is relatively easy when your finances are simple. If, for instance, you have one job, pay tax and national insurance through PAYE and don’t have to submit a tax return, you only need to track money to make sure you’re not overspending.
When finances are a bit more complex you may need some professional accountancy help to get started. Working with money can get more complex if you run a side business as well as being employed (or if you’re totally self-employed), if you have investments, hold shares, receive dividends, pay tax on alternative forms of income, or any number of other circumstances.
In these instances, bookkeepers and accountants can more than pay for themselves by showing you how to maximise your allowances and organise a bookkeeping system that properly tracks everything.
- Bookkeepers take care of day to day tasks, entering figures where they belong and sometimes paying invoices or other business expenses on your behalf. They’re often employed on a part time basis, since many people only need help for a few hours or less each week. They do, however, make sure your books are ready for your accountant at the end of the tax year.
- Accountants take a more in-depth look at your financial situation. They’ll prepare reports, submit tax returns on your behalf and make sure you’re claiming your whole allowance against tax. Often, they can also offer business advice if they spot areas where your money is underperforming.
Whether you choose a very simple manual system or get expert help with more comprehensive, professional bookkeeping doesn’t matter so much. What does matter is that you have some kind of system, and keep track of what’s happening with your finances.
This is a guest post from Judy at Braant Accounting. Whether you want to hire someone to help you, or manage things yourself, there are some great tips here! I largely put getting a mortgage at 20 down to my spreadsheet skills! Thank you Judy.