Accounting for your Personal Finances

Hello there millennials!

I'm here again, the Money Guru to teach you how to become more financially savvy and attain financial freedom!

First of all, the most important thing to do right now is to learn how to account your expenses. You don't need to be a Certified Public Accountant (CPA) to do this. All you need is a pen and paper or even an application like Money Lover to do this.

I will be teaching you a simplified version of the financial statements, tailored to personal finances.

First, the income statement is basically Income - Expenses = Net Income. Second, the debts section is Debt - Debt Payments = Net Debt or if you are the one loaning, Loans - Loan payments = Net Loans.

The income statement is divided into Income and Expenses.

For income, it's sub-sections can include the following:

1. Gifts - This is a tribute to you in the form of money. This can be from parents or relatives who gave you money instead of a physical gift for the holidays.

2. Allowance - If you are a student or minor, this is the money parents give you for your daily expenses. If you are a professional, this is the money that the company gives you that are tax-free for various expenses like food, transportation, etc.

3. Award - This is the money you have won whether if be because of a contest or through a lottery.

4. Interest - When you have investments in loans which have an interest rate attached to it, you will be earning money in the form of interest payments.

5. Salary - If you are a person with a stable job, this is the money you receive every pay day or every 15th or 30th of the month depending on the company's policy.

6. Selling - If you own a business or sell certain goods and services on the side, this the money you receive from customers who paid you for them.

For expense, it's subsections can include the following:

1. Food and beverages - These are the what you eat and drink for your daily sustenance. Subsections of this can include eating in restaurants and cafes.

3. Transportation - These are expenses where in you ride vehicles like taxis, cars. vans, buses, trains, boats, airplanes, etc. to go to one place to another. Sub-sections of these may include gas, travel and parking fees.


4. Entertainment - These are activities that are done for fun like watching a movie, playing games and buying toys or the like.

5. Shopping - This includes footwear, clothes, accessories, electronics, etc.

6. Health - This includes personal care products, sports activities, doctor appointments, medication, etc.

7. Others - You can customize your sub-sections and add additional subsections depending on the lifestyle that you have. You can include subsections like education, family, children & babies, pets, books, fees and charges, etc. It's up to you how you want to account for your expenses because accounting is an art.

For debts and loans, there are only four sub-sections:

1. Debts - These are the amounts you borrow to finance your activities. For personal finance, this usually in the form of credit card debts or mortgages.

2. Repayment - This is the amount you have paid for your debts. It is wise to start of paying off larger debts first because they usually incur higher interest over time as long as you haven't paid them yet. After this, you can go to smaller debts.

3. Loan - This is the amount you loan out to people whether they be for friends, family, co-workers, etc. Usually, in personal finance and here in the Philippines. there is no contract when it comes to such loans. It is usually through a verbal contract of trust.

4. Debt Collection - This is the amount that has been paid to you from the people who borrowed money from you. When asking for this, we exercise sensitivity if the person can't pay yet but don't be a push-over especially if the person has not been paying for the wrong reasons.

If you want to easily do all of these, you can download the Money Lover application from your app store and be able to track your expense on the go. Accounting for your personal finances is integral to understanding and improving your financial situation, becoming more financially savvy and gaining financial freedom.