By Bob Stanke, Guest Blogger
There are so many ways to budget and manage your money, and I have tried several different methodologies over the years. I have done everything from micro-budgeting
(the process of knowing your exact daily cost of living and waking up to an exact number of discretionary funds you have for that day) to macro-budgeting
(the process of lumping several smaller line items on your budget under just a few large categories). Each method has its pros and cons, and each has different levels of detailed-ness, but being a numbers (or “data”) guy, I like how money management works.
Being a business guy, I also like reports. I like charts and graphs, and seeing how numbers change over time based on certain decisions and actions a business takes. This is why I love reading Annual Reports that companies are required to release each year (yes, I enjoy reading annual reports for fun!). You get a great detailed report of the different things a business did over the last 12 months and what the financial impact was.
After years of reading annual reports and at the same time trying to find the right method for budgeting, I decided to bring the two together. Personal budgeting and business, all in one!
So for the last couple of years, I have been creating my own personal version of the Annual Report. In the document, I spend a fair amount of time detailing what I accomplished during the last 12 months, where I made mistakes, and what major numbers impacted my life. One set of those numbers are the financial status of my life. This is where I take a different look at money I look at it in the same way a business does.
In a company’s annual report, they are required to include 4 major financial reports. They are:
● Income statement
● Cash flow statement
● Balance Sheet
● Statement of Changes in Equity
You can find the definitions to these documents using a simple Google search, and even download templates to help you get started. With a little tweaking and modification, you can create these same statements for your personal finances. I am also willing to bet that they will give you new insights as to how you are performing financially. I even recommend going the extra step and create your personal annual report. It is interesting to see your past year in a snapshot, and even more interesting to look back at past years to see how you have changed.
Find out more about Bob Stanke on his blog, found at http://bobstanke.com