A financial Statement – a simple way to keep away debt

It often happens that you do not understand how you fritter away all your money. It happened with me all the time. I kept wondering at the end of each month. Now I have learn how to get rid of this worry. Let me share the 'how' bit with you. I had mentioned about an income statement in my last post. There are a number of advantages and reasons why one should get into the habit of preparing regular personal income statement. Let us discuss them.

To track your expenses: Maintaining a personal monthly income statement is an excellent way to track your monthly and yearly expenditure. Generally income statements consist of the following categories: gross monthly income, rent, car payment, groceries, gas/transportation, bills (which include phone, common utilities, credit card payments and student loans), groceries, entertainment, and miscellaneous items.

To draft out a Savings Plan: It is very important to make a Savings Plan at the right time. This comes handy during times of emergency or in case of a job loss. By using the personal income statement you can add more money to your savings. Your savings is not merely an emergency fund. Savings can be for anything that you might long for. In addition to emergency funds and retirement savings, you can create a saving-bucket for travel, gifts, and other social events.

To ward off money tension: Money woes lead to contention in relationships and also physical problems such as high blood pressure or depression. Experts suggest that personal income statements are a remedy to such worries. By tracking monthly expenses you can determine where you tend to spend more. Thus you can cut down expenditure in those specific areas. This way you will be able to prioritize and drop unnecessary expenditures

To increase your Income: As you track the cash flow on your personal income statement you may be encouraged to find various other forms of income. Especially if you are not able to cover your monthly expenses smoothly, you may look for a salary raise or a part-time job. In this way, you are well aware of your financial situation and you might want to do something about it.

To maintain a record: Your personal income statement is also a way to keep a good financial record. Not only will you be able to track your spending trends and savings, you can avoid any discrepancies with local and federal taxes. Maintaining accurate records can help you to file your taxes.

So, what are you waiting for? Pull up your socks and get ready to draft your first income statement.

Comments

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May 10, 2012 at 6:14 AM

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