Millennials, Get Your Finances Under Wraps!

Collaborative post – may contain affiliate links

While most Millennials will have received a thorough education in various areas of knowledge, many will have complained about the same thing at some point or another: we aren’t taught enough practical things. Yes, we may well be able to do trigonometry, or analyze a short poem by Christina Rossetti. But when it comes to taking care of the must-do tasks that we face in adult life, many of us are left clueless. Finances and accounts tend to be a couple of these areas. Sadly, we are launched into the grown up world and expected to just know how to do these things. But not to worry. That’s where we can come to the rescue. Here are a few necessary pieces of information to help you get your personal accounts and business accounts under wraps in no time.

Business

Let’s start with business. Why? Well, because this area is generally where larger quantities of money tend to be involved, and you can consequently get into more serious trouble if things don’t add up properly. If possible, work hand in hand with a bookkeeping firm who will be able to keep on top of all of your internal and external reporting. This removes issues and ensures that someone who is fully qualified and competent is taking care of things. However, it’s always good to have a general idea of what’s going on. There are several types of accounts that you can have when it comes to business, so let’s quickly differentiate between the different types before we go any further.

Checking Account

A checking account will take centre stage when it comes to your business accounts. Profits from sales are deposited in here, wages are paid out of it, and expenses such as bills are taken out of it. You may have heard others talking about cash flow within their businesses and its importance. Well, this is where it all happens!

Merchant Account

If your company accepts payments by credit card, you’ll need to set up a merchant account.  This goes for those who deal with online payments and payments through third parties such as Paypal too! This is great for attracting more customers. After all, the more forms of payment you accept, the wider the audience you invite in!

Accounts Payable

Accounts payable are exactly what they sound like: a record of all of the money that your business owes out to others. This can include things like mortgages, company car payments and any other form of credit you may well have taken out. This is a purely informational account for the sake of keeping on top of your records.

Accounts Receivable

Accounts receivable are essentially the opposite of accounts payable: this is all of the money that others owe to your company. If you have extended credit or let out a loan to customers these amounts will be included in this category. Much like accounts payable, this is again a purely informational account for the sake of your records.

Payroll Accounts

If you have employees, you will need a payroll account. All worker’s wages are deposited into this account, ready to be distributed out to individual staff members’ bank accounts.

Personal

Your personal accounts solely deal with your own, personal income. Anything to do with business accounts or corporate accounts shouldn’t overlap here. This is your personal banking. Essentially, you will open up one of these accounts at a local bank branch. To work out which to choose, take a quick look here. Different banks and branches will have different strengths and benefits, so be sure to compare around the market before choosing one. They will have different interest rates on savings accounts, will offer you different overdrafts and some will have extra benefits if you take up their own branded credit cards. Your personal wages or salary will be deposited into it and you will use it to pay for personal expenses such as rent or mortgage payments, bills, food, and entertainment. Your personal tax will also be paid out of this account at the end of each tax year. Make sure not to go over your credit limits or agreed overdrafts, as this will result in you being given fines and receiving charges. Keep your statements too. Nowadays this is a little easier, as most banks encourage you to have online statements, which are cheaper for them and more environmentally friendly.

So, there you have it. The basics of business accounts and personal accounts. If you haven’t organized your own yet, it’s time to get on top of things. The sooner you take action, the better, as it helps you to get organized and avoid charges or further problems down the line.

Practical Tips for How to Use Surplus Money

Guest post by Grace Frenson

Most people tend to be irresponsible when they have surplus money by buying things they don’t really need, believing that the money is never-ending. While some people are born into fortune, a lot of people are not.

Proper money management is one of the surest ways to secure one’s future and save for rainy days or anything unexpected. There are several things to do with extra cash–the list is unlimited.

Though you may feel the need to spend your money on whatever you want, it is important to have your priorities sorted out. If you consider some essential things you need in life, you can determine the best plan of action to take. Here is how you can use extra money:

Invest in a Business

Businessmen are often preoccupied with the best way to use surplus money to make more money. Investing in one or more business could be the best way to achieve this.

People who are fainthearted in taking business risks would prefer to leave the money in their savings account, but the money would seldom grow when left there.

Investments do not always ensure the safety of the money, but if it succeeds it will bring a greater return than when left in a savings account. If it is really surplus money, it may be worthwhile to take a risk on it.

Use a 10 Year Saving Strategy

You have been working to secure your future, and now you have extra money. it is time to put some mechanisms into place to keep you from overspending.

One way to keep tabs on future events is by creating a 10 year saving strategy. This allows you to save for predictable expenses for the next 10 years.

Such expenses could include predictable costs such as a house, a wedding, kids, and so forth. If you have enough surplus money, you could even set up separate accounts for each of the items.

Stash the Money in an Emergency Fund

Money is not an inexhaustible commodity–unless you are a multibillionaire, you may exhaust the “excess” money in just a few months. If you haven’t already, you need to consider stashing the money in an emergency fund to take care of emergency situations only.

The amount of money you chose to put in it is up to you. However, emergency funds may come in handy in situations such as unexpected and costly health care bills, home repairs, auto repairs, unanticipated travel, and so forth, so you want to save wisely. Besides helping you to deal with an emergency situation, emergency funds could help protect your credit record.

Job loss is one of the common reasons people end up needing an emergency fund. Say you get injured or sick and have to go on disability, you want to have those supplemental savings in place in case your career or livelihood is threatened.

Increase Your Health Insurance

This may seem obvious, you need to invest in as much insurance coverage as you can afford. If you really have a surplus cash, health insurance is paramount. Health is wealth, and wealth becomes irrelevant and meaningless if the health cannot be secured.

Opting for health insurance is one of the wisest investment decisions you can ever make. This is even much more critical with how high medical bills are today. Medical debt is the single biggest reason people end up bankrupt or in a huge amount of debt.

Putting the money toward health insurance is synonymous to saving it for rainy days.

Obviously, nobody plans on having a critical health condition, but it does happen and you don’t want to be unprepared when it does. Thankfully, you have the cash, and you could make a difference to be prepared for the unexpected.

Create a Budget

You may really be misconstruing the cash as being excess if you have not created a budget and mapped out all of your upcoming payments. A budget will help you keep tabs on your income and expenditures.

It helps you to manage the financial flows and see where your money goes or would potentially go. Creating a budget will help you to make a detailed plan on important necessities like insurance, utilities, food, and housing, as well as miscellaneous activities.

Even extremely frugal people would be tempted to spend money on unnecessary stuff when they have excess money. By making a list of preference and value would help you to know what to spend money on and what to avoid.

A list of preference and value simply shows you items that are worth spending your money on. Of course, the preference and value may differ from person to person but the bottom-line is that it details your highest level of priority and utility.

The highest scale of your value and preferences is the right place to begin spending your surplus money. However, if some items don’t really make it to your list but they are simply critical for life–you need to reconsider your budget and adjust it accordingly.

Be Careful When Spending

When having an abundance of money, it is easy to spend it all quickly. Be careful to not go down this path, and spend your money on what is prevalent in your life.

If you are in a bit of credit card debt, consider paying that off, or paying off your child’s student loans. You want to be sure you don’t spend the money and then not even know what you spent it on once it’s all gone.

Think long and hard about how you want to spend–or not spend the extra cash. You don’t want to regret the decision you make in the long run.