Whether you are writing your first personal budget or responsible for balancing your company’s yearly accounts, financial matters can sometimes feel daunting and complicated. The financial realm can include incredibly complex topics, especially when one considers not just personal financial subjects but those related to business as well.
However, armed with just a few fundamental concepts in your toolbelt and some solid financial habits to incorporate into your finance management practices, you can demystify the topics of both personal and business finances and feel confidence rather than dread when thinking about your financial responsibilities.
Get The Full Picture: Track Your Spending
Even in today’s technological tool-laden age, it’s amazing how many people still don’t effectively track their financial activity, whether that be their personal spending or even their business incomes and expenditures. Thankfully, it has never been easier to maintain a comprehensive picture of how your money and assets flow through your financial accounts and vehicles.
For personal finance tracking, popular tools include Intuit’s Mint and YNAB’s “You Need a Budget” app. There are countless budget tracker tools on the market today that range from free mobile apps to robust paid software tools. Each option offers different collections of features, ranging from joint account access for partners or families to automatic bank integration to seamlessly import transactions as they happen. Your personal set of financial circumstances and the tools or platforms you currently use can help you choose the tool that’s best for you.
For business account management, you’ll also be able to find a host of different tool options to choose from. For transaction tracking, you’ll likely use a different set of criteria to choose what tool is best for your business.
Take into consideration your accounting method and any current tools you already use for accounting purposes; your expense reporting and payroll needs; who will be managing the software or might be managing it in the future, and any other softwares you currently use for your business and whether you’ll need to be able to integrate them.
Right The First Time: Learn How To Correctly Categorize Expenses
Expense categorization doesn’t seem like it should have a major impact on one’s financial standing. In actuality, however, categorizing expenses correctly can have a number of positive ramifications when done correctly, as well as negative consequences when handled incorrectly.
Expense categorization is important for correctly filing taxes, applying for loans, filling out paperwork for your personal matters or for your business, complying with regulations in some cases, and, more philosophically, making sure your personal or business budget is doing what it is supposed to be doing. It’s extremely important to have a strong working understanding of expense categorization both for doing your personal finances and for your business’s finances (if applicable).
Be A Learner: Research Financial Topics Of Interest
No matter what your financial landscape looks like – whether you’re only responsible for a single checking account, or you have a wide portfolio of assets, accounts, and financial activity to manage — the number of financial topics and concepts that could theoretically affect your money is large. That isn’t meant to be a daunting statement. Rather, it’s meant to encourage you.
In the financial activity circuit, there’s a nearly never-ending supply of things you might find interesting or worth learning about. Engaging with financial learning can create huge dividends for your financial health over time. Even if you’re learning about topics that don’t have anything to do with your current needs or portfolio, you may someday have need for that knowledge. And in the meantime, learning about adjacent financial topics will still expose you to fundamental concepts of financial literacy that will aid you in your financial management journey.
Put Time To Work: Utilize Investment Vehicles
No matter what total amount of assets you have to work with, there are ways to invest those assets to work for you over time. From real estate micro-investing apps like Yieldstreet and Concreit, to auto-rounding investment tools like Acorns, to no-minimum stock trading platforms like E*Trade and Robinhood, small amounts of capital are all you need to gain entrance to investment opportunities. Investing has never before been more accessible regardless of the volume of liquid assets to which you have access.
Investing is a powerful tool because it creates passive income. Unlike active income generation, which yields only as much as you put in (in the form of time, expertise or know-how, labor, energy, etc.), passive income can be generated without any active involvement or contribution once it has been initiated.
The value of investments increases dramatically with time and has the potential to fundamentally change an individual’s (or a business’s) financial standings over a period of years. Investing can be a hugely important tool to understand and employ for both personal and business finances.
Leave It To The Pros: Seek Help When You Need It
Finally, it’s important to note that there is a limit to everyone’s financial savvy and capacity. And that’s not a bad thing. Financial professionals come in a wide number of shapes and sizes, and often have years or decades of high-level, professional training or schooling in their fields. They are well worth the cost of utilizing them in the number of pains, headaches, bad investments, and poor decisions you’ll avoid.
Accountants and Certified Public Accountants (CPAs) are professionals trained in financial management and tax law. Accountants often manage business accounts and bookkeeping throughout the financial year. CPAs are accountants trained in tax law that compile and submit tax returns for their clients. Accountants and CPAs can specialize in specific subjects (for instance, international business or specific industries and trading types) and can contribute hugely valuable and necessary expertise for both personal and business finances.
Financial planners and fiduciaries provide financial management advice and guidance. Depending on the type of service you’re looking for, some of these professionals will manage your assets for you as well. Others just provide suggestions for how to invest, when to make certain financial moves, and how to orchestrate your portfolio to maximize its potential.
Financial therapists and counselors provide therapeutic counseling and support for those who have experienced or are experiencing financial stress or hardship. Financial therapists have been trained on the specifics of how financial problems can create psychological and emotional stress for individuals and are able to help create strategies for alleviating that stress and pursuing a healthier financial standing.
Whatever your financial position may be, using these tips can help you improve your financial standing and make better finance decisions with personal or business assets.