The law does not require individual persons to keep financial records the way that businesses are required to do so, but not keeping such records can end up being an expensive mistake. For example, the statements provided by your bank and credit card companies may have errors, and you might not find out until it is too late to fix the problem. You may have forgotten a bill payment, and thus your credit score takes a hit. You might be clueless about how to allocate income for investing and saving. Or you might be overlooking some expenses that could give you tax advantages. Therefore it is smart to keep good records of your personal finances.
Do It By Yourself Or Hire An Accountant?
It is not difficult to keep a record of your income and expenditures (you don’t have to have studied accounting or be a math wizard), but you have to spend some time and make an effort. The way you accomplish this task is a matter of personal preference. You can hire someone to do all of it, or you can do it all yourself, or you can hire someone who is an expert to help you at various times.
Option 1: Hire An Expert
If you do not have the time or if you feel that your time is too valuable to waste, you can hire a professional to help you. But what sort of expert? When people talk about personal accountants, they might mean a bookkeeper or a tax adviser, tax preparer, or even a Certified Public Accountant. You should hire the type of person who has the professional qualifications to suit your needs.
Bookkeeper. This person can do a lot of mundane services for you, such as pay your bills, make sure your checkbook is balanced, and checking statements from your credit card companies. They may have had specialized training in bookkeeping. Bookkeepers can be certified by the American Institute of Professional Bookkeepers, or they can take online training to obtain Quickbooks certification. The pay rate for bookkeepers depends on where you live, the services you need, and the type of bookkeeping expertise the person has, but in the United States, the fee can be as little as $20 an hour, and the price can be even lower if the bookkeeper is located overseas, such as someone who is hired through upwork.com.
This professional has been trained in accounting, (perhaps with a college degree) and can take care of bookkeeping responsibilities. The hourly rate charged varies depending on the location, the expertise, and the job details, and can be about $35 an hour, or more.
CPA. This person will have a college accounting degree and maybe even a Master’s accounting degree and has been certified by the American Institute of Certified Public Accountants (AICPA). A CPA is probably too expensive to be hired to carry out bookkeeping tasks. They can charge bookkeeping fees of $50 an hour or more. (CPA’s often do not do the bookkeeping personally but will oversee a bookkeeper in their firm who does the work.
To carry out the tasks mentioned in the beginning, a personal bookkeeper is sufficient. Most people do not employ accountants (only the wealthy will find they can afford the expense of these professionals). Your bookkeeper can schedule appointments on a regular basis (weekly or monthly) to enter data and perform tasks assigned by you. These tasks can be done by the bookkeeper online or in person at your home or at their office. You will need to provide access to your financial accounts and statements so be sure you check the references of the person you wish to hire.
Option 2: Do It Yourself
Paper ledgers are no longer in use. Today even an average consumer can obtain accounting software that is user-friendly as well as various cloud solutions. The main options for handling personal finances include:
Quicken This is a software solution to help you monitor your financial situation. For an additional cost each month, you can automate your bill payments so they will always be paid on time, and in the correct amount.
Mint.com This is a cloud-based solution that is available without cost and allows you to pay your bills electronically and tracks your finances. It will simplify your financial record-keeping by syncing up with your bank account. (See Mint.com for their tools to track money.)
Mint and Quicken can also help you track information with their mobile apps.
Option 3: Combine Both Types Of Efforts
You can use a bookkeeper to get your personal accounting system started. You should hire someone who is familiar with the kind of software program you will be using. The bookkeeper can create accounts to hold your information. If the accounts match the categories needed for taxes, this will simplify your tax return process. A bookkeeper can also check out your records periodically, to ensure you have recorded all your income and expenditures correctly, and to be sure your bank statement is correct.