TYPES OF ACCOUNTING
Cash bases accounting is the management of your current transactions. This way you keep track of any money being taken out of your account or any money that might be deposited, and whether or not it was deposited from you or from someone else.
When any types of transactions take place on your checking account, that is when this type of accounting will come into play. When someone is talking about assets, they are also talking about the cash that you have acquired.
WHAT ARE ASSETS?
Of course there are many types of assets but your cash is really the most basic one there is. Any other form of investment that you may have, including, stocks, bonds, Cds, 401ks, 529s and so forth are also a type of asset, and your house and car are as well, but are usually only a real asset if you own them outright. Otherwise your mortgage holder and car finance company own them!
Assets come in all different forms. Start simple, by making sure you keep track of all your transactions, and trying to stick to your budget, so that you gradually pay down any debt you might have. Once you’ve done this, you’ll be in a position to save, and even to invest.
Once you know what all your assets are and what they are worth then you will be able to begin with your asset management methods. Once you have started figuring out a record-keeping system that works for you, and savings and investment strategies that start paying dividends, then you will have the ability to earn more money from multiple streams of revenue, and you will be able to watch that money grow and help you achieve your financial goals.
YOUR FUTURE FINANCIAL GOALS
It’s never too early to start saving for the future. Once you are in a position to start thinking about saving and investing, also consider consulting with a financial planner. Be realistic about your goals, do your research, learn about what things cost. If you want to buy a house worth $500k, what is it REALLY going to cost.
What will the difference be in that financial scenario if you were able to put down $150k of it in cash? And is this a worthwhile investment, if all of your capital and income are ‘feeding the beast’ and leaving you cash poor with no chance to save for retirement?
Unfortunately, in our get credit quick, get the American Dream society, people don’t stop to ask these questions. Owning a home is a noble aspiration, but is it a false security blanket at the end of the day? Looking at the current crisis in the housing market, one could argue yes.
The essential problem goes beyond that though, to being constantly encouraged to impulse spend on everything in sight on the TV. And let’s face it, how much are we ever taught about asset management at school?
But a little knowledge can go a long way. Even if you think things are so bad than nothing can make a difference, you’d be surprised at how $5 saved here and there can add up.
It’s like the humble dime. It’s small, light-weight, but you get 10 of them together and it makes a dollar.
And once you learn more about asset management, you can encourage your partner, if you have one, and even your children too. That way you can all be actively planning and participating in reaching your financial goals, not being hostages to fortune. Asset management means just that, YOU manage your assets, for a brighter financial future.
