Author: pc

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.

WHY NOT USE SOFTWARE?

I know we have not mentioned all the really handy accounting programs out there that can help you with asset management. This is because you don’t usually carry your computer around with you, while a check book register or a small notebook are portable, so you can note down your expenditures any time, anywhere.

As the old saying goes, the dullest pencil is better than the sharpest memory. We would also advise you to make note of what you do with that cash you take out of the ATM. All too often, it can vanish into thin air without you even noticing. You can write the amount you spend right on the slip of paper, and note down what it was for.

Was it an essential, like milk, or was it a luxury like beer? Again, part of asset management is sticking to your budget and trying to cut down on your impulse spending, so writing these things down will help you spot your areas of impulsiveness.

A notebook for all finances is an even better idea than the checkbook register because you can also note down any items you might be putting on your credit card/s.

THE GOALS OF ASSET MANAGEMENT

The whole goal of asset management is to make the most of the money you do have. Credit cards, with their fees and interest and other potential penalties, are not the best way to make the most of your money.

Accounting comes in a couple of different forms, including, accrual accounting and cash bases accounting. Accrual accounting will help you keep track of what you owe if you’ve exceeded your income. This should then let you know that you are spending entirely too much money and that you had better begin cutting back here and there where possible, in order to manage your assets more efficiently.

It is a rare person these days who doesn’t have some form of debt, and a credit card CAN be a good thing if you are making your payments on time and more than the minimum on a regular basis. This is how you can boost your credit score. It is also a way to decrease it though, if you are not careful!

It is not always intentional either,”we are all also very busy. And yes, mistakes do happen. Your checkbook register may have a different amount written in it, compared to the amount of money that you have spent.

That’s why we recommend duplicate checks, and pressing down hard when you fill them out. All too often we write a check and can’t recall who it was to, what for, and what amount.

Keeping these kind of detailed records and making a habit of keeping all your little bank slips and receipts will also be handy at tax time. Especially if you start thinking about running your own small home based business, you will need to keep track of everything you spend, supplies, corporate hospitality (which you can deduct at 50%), and so  on.

In another article we will talk about the risks as well as rewards of tying your personal finances to your own business, but for now, the main thing to remember is that effective asset management is all about keeping track, and staying within budget and on target for your short term and long term financial goals.

The Basics Of Asset Management Part III

Asset management is all about being more consistent and efficient about managing all of your assets,  and improving all areas of your financial portfolio which need to be improved.

Many people make the mistake of not managing their different types of accounts properly.

The most common mistake being made is in reference to people’s bank accounts.

BALANCING THE BOOKS

These types of mistakes could be prevented if people would take a bit more time to regularly record all their financial transactions, every day, or every week, and make sure to balance out their check books.

The whole point of your little check register is to have a little jotter where you can note down everything going in and out of your account quckly and easily, so you can then reconcile it all when your statement comes at the end of each month.

But you can also be more proactive about it. If you think  you might have missed a few items, go into your bank and ask them to give you a print out of the week’s transactions, and see if you’ve made a mistake, or can’t recall the purchase made.

Keeping a record of all transactions being made at all times is an essential part of good asset management.  If you make a cash withdraw, put it in the records.  If you’re busy and can’t do this every day, always request a paper record from the machine and keep the slip with your checkbook register.

Every check being written has to be put into your check book record so that you do not miscalculate, which could lead to being put into the red and being stuck having to pay service charges and other fees that  your bank may apply.

These fees are getting more and more steep depending on the bank, so don’t make a bad situation worse through carelessness. I don’t know about you but I can think of far nicer ways of spending $39 than paying it to my bank for an overdraft fee.

Good asset management will prevent things like this from occurring.

Continues in

The Basics Of Asset Management Part II