Personal Finance Explained in easy ways

Posted by john wayne on March 2nd, 2020

When we are trying to understand Personal Finance, the very best thing to do is to comprehend what Personal Finance is NOT.

Many individuals believe that accounting and personal finance are the same, but Personal Finance is NOT Accounting.

On the surface they may appear the very same; they both have something to do with money. Nevertheless, the meanings will assist us much better understand the differences.

Merriam-Webster's meaning of accounting is "the system of recording and summarizing business and financial deals and examining, confirming, and reporting the outcomes."

Based upon this meaning, we see that accounting is the process of analysing and tape-recording what you have already made with your loan.

This is why having an accountant is normally not enough when it concerns your personal finances.

Accounting professionals usually don't issue themselves with personal finance (there are some exceptions to this rule). Unless your accountant is also a financial consultant or coach, she or he will likely just take a look at what you have actually done with your money at the end of the year and supply you with a report of their analysis.

This report is generally your tax return; what you owe the government or what the federal government owes you.

Very hardly ever does the accountant supply an individual with a Balance Sheet or Income Statement or a Net worth statement; all really helpful tools that are needed to efficiently handle your personal finances.

Personal Finance is taking a look at your finances from a more pro-active and goal oriented viewpoint. This is what provides the accounting professionals with something to record, confirm and evaluate.