7 Reasons You Should Do Your Monthly Bookkeeping Even If You Don’t Own a Business
Bookkeeping is one of the essential tasks to running any business. You have to be able to have a firm handle on your business’s finances at any given time, including profits, losses, and future planning.
But monthly bookkeeping isn’t just a task for business owners. It’s also beneficial for individuals to sit down and “reconcile their books” each month.
Here are 7 reasons you should do your monthly bookkeeping even if you don’t own a business:
Helps You Budget
Just like businesses and government entities, individuals need to maintain careful monthly budgets. These budgets help you understand how much money you’re bringing in each month, and where all your money goes.
Whether you’re a spender or a saver, a budget can be crucial to taking hold of your personal finances and achieving balance.
Sitting down each month to look at how much money you’re spending in each category - food, rent, leisure, etc. - can show you the areas where you’re making good and bad financial decisions, allowing you to adjust accordingly.
If you look at your monthly budget and notice that you’re spending a lot of money on eating food out of your house and on groceries, for example, you can more closely examine the individual expenses and see where you can trim them.
Additionally, budgeting can help you plan for your financial goals.
If you’re wanting to save up for the down payment on a house, reconciling your budget monthly can show you how much extra money you have to sock away in savings each month and predict how long it will take you until you can reach your goals.
Easier Tax Preparation
No one loves tax preparation season, and the whole process is more frustrating and time-consuming if you don’t manage your household books on a regular basis.
Keeping track each month of your income and any possible deductions - business-related expenses, donations, etc. - helps you avoid forgetting a possible deduction at the end of the year, which can cost you money.
If you’re collecting and tracking all your important receipts on a monthly basis, you’ll deal with less scrambling when tax time comes around. As long as you keep things all together in one space and make sure to put new receipts and documents there as you get them, you run less risk of losing important documentation.
While doing your monthly bookkeeping all year long won’t always mean you’ll pay less in taxes (Sorry!), it will make preparing and filing your taxes each year much easier.
Keeps You Organized
Do you struggle to find the receipts for that pair of jeans you impulse bought but that, once home, you discover don’t actually fit?
You either spend a long time searching for the receipt, hoping to find it, or you decide to just cut your losses and donate the jeans to charity.
Not being able to find receipts for products you want to take back, pay stubs to prove your income, or other important documentation, means you could lose hundreds of dollars - or more - each year. Keeping this information together makes it all easily accessible if you need it down the road, allowing you easy access.
Rather than having a big box overflowing with receipts, or just receipts scattered around your house, you’ve got your documentation collected together and organized. Maintaining this level of organization with your financial information can help you extend that organization into the rest of your life, helping you become more in control in all areas of your life.
Analyze Your Expenses
It’s very easy to overspend without realizing it, especially if you’re paying for everything with credit cards. A couple of dollars for coffee here, a lunch with coworkers there and things add up quickly.
If you’re not reconciling your expenses and budget on a monthly basis, these unnecessary expenses can add up and lead you to racking up debt.
Sitting down to look at your income, your planned expenses, and those unnecessary extras can help you find those areas where you’re bleeding money. Checking over each expense allows you to analyze whether or not it’s a necessity or just a “want,” and even if you can decrease some of your necessary costs.
Make Better Decisions
Have you ever been presented with an opportunity to take a great vacation, and all you need to do is come up with some money for the flight?
If you don’t practice monthly bookkeeping, you may make the decision to jump for this vacation without having the funds to cover even a portion of it, causing a lot of debt and financial stress down the line.
Knowing where you stand financially, and what your goals are, can help you know whether to take that vacation, buy a new couch, or go for a used car over that brand new one when you’re vehicle shopping. And you can make these decisions quickly, with one check of your books to see where things stand, instead of spending hours running the numbers and agonizing over the choice.
Better Planning
Having dreams is an essential part of life. Whether you dream of owning a home, starting your own business, or just being able to take a nice vacation every couple of years, you won’t be able to make those dreams a reality without a plan.
If you have a complete picture of your finances at any given time, you can start to plan for the steps necessary to make your dreams come to fruition.
You can see places where you can save money for that down payment or hotel reservation, or you can look for ways to add to your income to be able to create a little more financial space in your life. These plans can be taken to the next level by creating step-by-step goals with dates attached, so you can incrementally work toward those goals.
But without having that idea of where you are financially, you won’t really be able to make such detailed plans. Instead of achieving those dreams, you’re more likely to just accept that your dreams will always be dreams instead of working to make them happen.
Gives You Peace of Mind
Finances can be stressful. It can feel as if there’s never enough money to make it to the end of the month, especially if you’re not in control of where your money is going each day.
But sitting down to take a look at how much is coming in each month, and how much is going out, you can feel better about your entire life situation.
While you may still feel as if you don’t have quite enough money to cover everything you need to pay for, knowing that fact and making plans to fix the deficits can give you peace of mind.
Even if seeing your plan to fruition will take a long time, simply having a plan with specific steps you need to take is comforting.
Flexible Financial & Workflow Management
Keeping tabs on all the various parts of your business can be difficult. Whether it’s just you managing everything or you’ve got employees you have to keep tabs on, your to-do list seems to be never-ending.
With Toki, you can manage your business’s finances, organize your workflow, assign tasks to your employees, and more. The cloud-based platform allows you to work whenever you want, wherever you have internet access. Try Toki today!
