Can Good Record Keeping Make You Rich?

What if I told you that managing your finances more efficiently could make you rich? Would you be interested in learning how to effectively manage your finances? Something tells me you would be. You see, the thing is… many would assume that in order to get rich you need to acquire more money. While that is a portion of the equation, the other part of becoming financially successful and staying that way is – financial management.

Accountants and Financial Management

Unless you’ve majored in accounting yourself, to effectively manage your finances it is ideal to work with a certified public accountant. Kansas City CPA firm MarksNelson points out that the right accounting firm will work with you to help safeguard and grow your business.

Consulting with an accountant on a periodic basis to set up accounting systems, make major purchasing or investment decisions, evaluate existing accounting systems for errors, and assistance with business tax filing is an investment worth making. It essentially helps you to keep your finances in order, which can certainly lead to a financial increase.

The Importance of Good Bookkeeping

Do you know what money you have coming in and out on any given day? Do you know how much of that money you’re spending on operational costs, investments, or savings? Whether your business brings in $30,000 a year or $100,000 a year if you’re not tracking your expenses, chances are you’re allowing money to go down the drain.

The mismanagement of funds can quickly start a domino effect. It will hinder your ability to purchase inventory, pay salaries, make investments, and even provide quality customer service. In a nutshell, poor bookkeeping can quickly lead to the demise of your organization.

Benefits of Good Bookkeeping

Let’s take a look at some of the ways effective bookkeeping can increase company profits and bring you closer to being rich.

1.  Better Financial Analysis – You can’t make a decision on purchases, hires, investments, or savings if you don’t have a clear understanding of how much money you have (cash flow). Ideally, with the right accounting system in place, you can clearly see where money is coming in and going out each month.

2.  Fulfill Tax Obligations – As a business owner, you’re responsible for paying a lot more taxes than you would if you worked for someone else. Proper financial records make it easier for you to remain in compliance with tax obligations. Keeping track of cash flow, account balances, profits and losses makes it a lot easier to file your taxes every year. It ensures that you’ve paid the correct amount, which can prevent you from receiving hefty fines from the local and federal government. Good records can also help you in taking advantage of the many tax benefits there are out there for small businesses, which of course saves you money.

3.  Prevents You From Going Into Debt – If you’re blindly making purchasing decisions or taking out lines of credit and loans that you can’t afford to pay back, you’re going to find yourself in debt. Quality financial management, however, can help you stay out of debt (or at the very least manage the debt you have). If you have a clear understanding of what you have and what you can afford you will make more effective decisions as it pertains to purchases and borrowing money. Accurately recording company debt can also ensure that you stay on track with payments so you don’t incur more fees or damage your company credit.

4.  Informed Purchasing Decisions – You have to be willing to spend money to make money in the world of business, but if you’re spending more than you’re making – it’s a waste of time. Bookkeeping ultimately helps you to see the bigger picture as it pertains to your company finances. Having a budget for instance lets you know how much you have to spend on necessary expenditures so that you don’t go overboard.

So… you may have caught on to the fact that bookkeeping won’t make your company rich. HOWEVER, it will help you to utilize your money more wisely and can assist you in saving hundreds if not thousands of dollars every year. Think about it… if you had an accounting system in place that allows you to manage cash flow, make more informed purchasing decisions, maintain your tax obligations, AND helps you to take advantage of deductions and credits… you’ll have more money to invest into your business so that you can ultimately meet your financial goals.

What are you saving for?

Seeing that I have already wrote two articles on saving this week, I figure it’s only appropriate to finish the week off with, yet another post, about saving. Consider these three articles the holy trinity of personal finance. Okay, maybe they aren’t that insightful…wait, actually they aren’t really insightful at all. Oh well, I tried 🙂

So we all have a desire to be rich, right? The word “rich” is totally subjective though. I would consider both, Kobe Bryant and Bill Gates to be rich, even thought there is a large discrepancy between their net worths. Being rich isn’t about reaching a specific quantifiable amount of cash, but instead it varies from person to person. Whether we are talking thousands, millions, or billions, I think we can all agree on at least a base line definition of wealth: comfort in knowing we have enough money to survive tomorrow.

Personally, I will feel wealthy when I have the ability to work any job I want, regardless of the salary. Imagine the freedom that would come with such financial stability! Not being dependent on employment income would be the best thing since sliced bread…Sure comfort, peace, and stability are all important reasons for accumulating wealth, but let’s be honest, we also wanna do some crazy awesome things with our hard earned moolah. Thus, the reason for today’s blog post title…What are you saving for?

I can think of a few things I want to do when I achieve great wealth…

1) Pay the Young Life summer camp fee for 50 high school kids that live in under privileged neighborhoods. This last summer I was able to take a charter bus full of these kids to camp through the generous donation of $30,000 from an anonymous donor. I got to be there and witness these high schoolers experience the best week of their lives! It was an incredible experience, and I can’t wait for the day I can do the same.

2) Buy a vacation property. I absolutely love skiing and have not been able to do enough of it since I have been living in San Diego (apparently it hasn’t snowed here since Dec 13th… 1967). It would be incredible to own a cabin in Colorado that I could spend a few weeks at every winter so I could get my ski on. Oh and I would get to said vacation property via my private jet of course 🙂

3) Visit each continent. I think it would be totally sick to go to every continent at least once. Sure Antarctica may be a little difficult to get to, but if you are loaded it’s probably more feasible. As of this point in my life, I can check one continent off the list (North America)… not a great start. Ninjafrica here I come!!!!

So those are three things I am saving for. What about you? Hopefully you have some plan to become financially abundant, what do you plan to do once you get there? Maybe take a year long vacation touring the world? Maybe you want to buy a killer whale and name it Rufus? Or perhaps you want to collect every action figure that has ever existed like this guy…

…whatever it is, I want to hear it. WHAT ARE YOU SAVING FOR?

“Finances are so complicated”

How many people have you heard excuse their lackluster personal finances because managing their cash flow seems like too much work. I’m afraid I know a handful of people that are so intimidated by their finances, they choose to ignore them completely. Guess what?! Managing your money is really, really, really simple. Even more simple than this maze…

There are really only three things that can be done with money.

1) Spend it

2) Save/Invest it

4) Steal it

4) Give it

For the love of all that is holy, don’t try and make personal finance more complicated than it should be. Your goal should be to have less than 100% of your money in the “spend” category. Ya got issues if you are spending 103% of your income every month, sadly this is more common than we all realize.

To keep this post short I’m gonna post up the percentage of my income that gets allocatted to each category every month….

Spending: 60%

Save/Invest: 30%

Donate: 10%

So that is the breakdown of my numbers. Keep in mind it is an average, some months my spending was 35% of my monthly income, and other times it was 140%, so it’s important to try to think over the course of a year or so.

Now it’s your turn sucka, why don’t you post up a quick snapshot of your “Spend, Save, Give” percentages. Try to be honest and accurate. There really is no “perfect” breakdown as each of us is unique and has our own perceptions of what is important to us.

p.s. don’t do drugs (yeah, I know that has nothing to do with finances, but I just thought you mind need a friendly reminder :))