While corporations are obligated by law to keep financial records, individuals are not, and failing to do so can be expensive from a financial and tax viewpoint.
It's possible that the credit card and bank account statements you get are inaccurate, and you might not realize this until it's too late to make changes. You may fail to pay a bill, causing your credit score to suffer. You may have no idea how to allocate your money for saving and investing. Alternatively, you may ignore costs that might generate tax benefits. So it makes sense to keep track of your personal finances.
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| Are Personal Accountants Necessary for Me? |
Should I Work with a Pro or Do It Myself?
It isn't difficult to keep track of your income and spending (you don't need an accounting education or to be "smart with numbers"), but it does require time and effort. It is entirely up to you how you go about it. You may pay an expert to do it completely, do it yourself, or combine the two, with an expert assisting you on occasion.
Make Use of a Professional
You can get expert help if you don't have the time or think that your time is worth more than what you'd pay someone else. But who is it?
When individuals discuss hiring a personal accountant, they frequently use the phrase loosely to refer to anybody from a bookkeeper to a CPA, tax preparer, or even tax consultant. Choose the specialist who best suits your requirements:
Bookkeeper
Your personal money may be handled by this person's concierge services, which might include paying your payments, keeping an eye on your checkbook, and reviewing your credit card transactions. A bookkeeper may or may not have had specialized training. A bookkeeper can become certified by the American Institute of Professional Bookkeepers or completely online courses to become certified by QuickBooks.
The cost of a bookkeeper's hourly rate can be as low as $20 in the United States and even less for a bookkeeper abroad, depending on where you are, what services you need, and the level of expertise they offer.
Accountant
They are capable of handling accountancy tasks and have accounting experience (as well as a college diploma). The hourly rate is generally $35 per hour but can be significantly higher depending on the location, the job description, and the level of experience.
Accountant, Certified Public
This accountant is certified by the American Institute of Certified Public Accountants and likely holds a college degree in accounting as well as a master's degree in accounting (AICPA). While a CPA can provide bookkeeping services, this expert may be prohibitively pricey. Hourly rates for bookkeeping services can range from $50 to $100 per hour. (The majority of CPAs employ a staff member in their company rather than handling bookkeeping services themselves. A bookkeeper, for example) in this case.
Bookkeeper
A personal bookkeeper will be required for the activities stated before. The majority of people do not utilize an accountant (only wealthy individuals can justify the cost of these tax pros). Your bookkeeper will set up regular appointments (e.g., weekly, or monthly) to input data and complete the duties you specify. Bookkeeping can be done in person (at your house or at the office of the bookkeeper) or online. In any case, you'll need to offer access to your bank accounts and credit card transactions, so carefully examine the references of anyone you intend to work with.
DIY
The days of keeping paper ledgers are long gone. Today, not only specialists but even normal consumers may use user-friendly software and cloud solutions. The most popular personal finance choices are:
Quicken
You may use this program to make a monthly budget and keep an eye on your finances. For an additional monthly fee, you may utilize a bill-paying system to automate your payments, ensuring that you always pay on time and in the correct amount.
Mint.com
You can track your personal accounts using this free cloud-based tool, and you may use it to pay your payments online. It connects to your bank account to help you organize your personal finances.
Organize Your Efforts
To get your personal accounting going, you may work with a bookkeeper. Look for someone who is knowledgeable about the program you intend to utilize. The bookkeeper can create accounts (which function similarly to folders) in which you can store your data. You can simplify tax return preparation by creating accounts that look like the same categories used for tax purposes.
To ensure you are accurately recording your income and expenses and reconciling your bank statements, the bookkeeper can periodically (e.g., quarterly) review your work.
Whatever method you use to manage your personal accounting, keep it separate from any commercial accounting. Your household budget should account for the cost of this accounting.
