Let’s talk about Bookkeeping 101.

I know talking about finances can trigger worry or shame for lots of us, so I promise to keep things shame-free and totally approachable. 

So. Why Bookkeeping 101? Well, from what I’ve seen, the road to good financial health starts by simply having an accurate current picture of our finances. Because if we don’t, we often end up making decisions blindly and then putting out financial fires later (and paying for it with interest, late fees and overdraft charges). Plus, without an accurate picture of what’s happening with our funds, it can be practically impossible to achieve savings goals.

How do we get an accurate picture? Bookkeeping! We record our income, we record each expense, big and small. We do things like make a record of any debt, what our recurring expenses are, and a projection of incoming funds. Maybe we save or scan receipts.

Sounds simple enough. But it can be really hard to get started. And then, even if we have started, it can be even harder to be consistent. Do we need to do bookkeeping daily? weekly? monthly? (Or for some of us, maybe hourly? Hah!)

I’m no expert on bookkeeping, so I turned to Ben Sutton of Mazuma. Ben offers accounting and bookkeeping services, and I met him at Alt Summit, where he manned the Ask An Accountant help desk. I called Ben up, and he was kind enough to share awesome information, like key reasons bookkeeping is so beneficial, and some his very favorite financial tools.

Gab: First of all, since this is 101, let’s start with what’s the difference between an accountant and a bookkeeper?

Ben: Bookkeeping is a sub category of accounting. An accountant can do many things, and bookkeeping is one of those functions. Bookkeeping is primarily entering transactions into a system — a spreadsheet or accounting software, then reconciling the account, and categorizing each expense (like rent, groceries, etc.) in a way that provides good information. A bookkeeper is really a data entry pro.

Gab: So would you say that most families can handle their own bookkeeping?

Ben: Yes! For home and family, doing it yourself is best, because only YOU know all the details about your transactions — a bookkeeper can’t tell if the purchase you made at Walmart was for food or for toilet paper. At our firm, we do bookkeeping for families, but it’s very rare.

Gab: That’s good news! A task we don’t need to hire out. : ) So then, what would you say is the goal of bookkeeping? Or, why should someone do this? What are the primary benefits?

Ben: Well, obviously, many of us get by without doing it. But if you want to have and keep a budget, it’s essential.

Bookkeeping at it’s most basic is knowing how much you spent and what you spent it on. The primary benefit of bookkeeping is for your own personal use, so that you’re not going over budget, and so that you have control of your finances and are aware of what’s going on. As a secondary benefit, having your books in order can help with tax returns.

Gab: Got it. If someone is ready to tackle their bookkeeping how would you recommend they start?

Ben: First of all, find out what you are spending. How much did you spend eating out last month? I’ll bet you it’s way more than you think. Spend 5 minutes going through your bank activity and add up all the eating out — restaurants, Starbucks, everything. Do you feel good about that number? Most people say: No! I didn’t know I was spending that much! People are often surprised at what they actually spend their money on.

Then tackle your other categories. How much did you spend on clothes, groceries, insurance? Knowing what your’e spending is the pre-requisite for creating a budgeting.

Gab: Okay. So how often do you think bookkeeping should happen?

Ben: At least once a month. Preferably weekly. For my own personal bookkeeping, I do almost all my spending with a debit card so it’s all online (I hardly use cash). I look at my bank account activity online, then categorize each expense. It’s a matter of grouping like expenses.

Gab: Any tools/books/websites you’d recommend?

Ben: Three things come to mind. First, Mint.com — it’s a cloud-based software that gathers all of the activity that goes on in your bank account and then presents it to you in a way that’s easy to categorize. It’s the BEST tool for personal bookkeeping and family budgets.

Second, if you want something that’s more of a traditional spreadsheet tool, try Quicken (or Quickbooks if you need something for a small business).

Third, Dave Ramsey’s book, Total Money Makeover. I highly recommend it, because it empowers you to take control of your financial life and not just drift in the wind. Plus, it offers good perspective on debt and is really encouraging about getting out of debt and avoiding debt. Dave Ramsey also has a radio show.

Gab: If a friend told you they were too overwhelmed to get started on their bookkeeping., what would you say?

Ben: I would help them understand how much peace can come from knowing what’s going on with your finances and having a plan for saving, and for getting out of debt.

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Thank you so much, Ben! I really love that you mentioned the peace that can come from doing this. I’ll bet we can all use a little more peace in our lives!

Okay, Readers. Now it’s your turn. What are your thoughts on bookkeeping? Though I don’t make as much time for it as I should, keeping expense records is the kind of straightforward work that can actually soothe my mind when it’s going a mile a minute. How about you? And what are your thoughts on the tools Ben recommends? Have you tried any with success? Or do you have something else you would add to his list? Have you ever had completely messy or nonexistent financial records and then whipped them in to shape? Lastly, for those of you who are awesome at bookkeeping, how often do you do it, and for how long? Or stated another way, how much time per week/month do you spend on it?

Share all your favorite tips, please. For those of us struggling to get started, success stories are so inspiring!