Creating an Effective System of Accounting at Home

Whether you are just running a discipline bookkeeping records (for a multitasking homemaker) or running a small home-based business, you can always rely on effective method of accounting to get most out of it. The goal is to be able to know : where your money goes, do you make a profit / saving or do you have a loss/ deficit, and what are the balance of your money.

How to Create a Simple yet Effective System of Accounting at home:

1. Define your Home Accounting Buckets (HAB) separately such as where will go to Revenue / Income (such as: salary, tips, proceed from garage sale, proceed from catering business, etc.), Expense (such as: mortgage payments, children's books and clothing, health insurance, car insurance, property tax, car payments, gasoline, Metra commuter train tickets, groceries for household, groceries for catering home-based business, donations to charities, etc.), and Investment (such as: 401K balance and contribution, stocks, ETF, bonds, gold, investment properties, etc.)

2.  Keep the receipts and put them into separate batches according to your HABs above.

3.  Add and Deduct each activity from the HABs above, then you will be able to get Net Saving / Net Income by reducing Expense HAB from Revenue HAB. If Expense is greater than Revenue or Income then you will end up with a loss or a deficit, otherwise you will be having a surplus.

4.  From a surplus, a household or a home-based business will decide to use the surplus to have activities in Investment HAB. A home-based business can decide to enlarge the business for example a catering business can decide to buy bigger stove or bigger oven or purchase more delivery vehicles; whereas a household can decide to use the surplus to buy stocks and bonds or money markets/ CD or buy gold or buy more investment properties.