Organize Your Personal Finances With These 7 Accounting Tricks

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By Fergus Cleaver

Whether you’re just starting out on the road to financial independence, getting ready to hang up your hat and retire, or somewhere in the middle, your personal finances could probably use some polishing.

You don’t need to hire an accountant for that—but you could stand to bone up on some of the tips and tricks that accountants follow with their own clients. (Hey, who said advice wasn’t free?) Start with these seven.

1. Spend Less Than You Earn

This is the golden rule of personal finance. As any accountant will tell you, spending more than you earn is unsustainable by definition.

That doesn’t mean curbing your spending is easy, of course. The world is full of financial temptation, from big-ticket splurges like first-class upgrades to drip-drip-drip money pits like lattes and takeout lunches.

One easy and painless way to control your spending is to set budgets for the spending categories that give you the most trouble. For instance, if you’re prone to eating out when your cupboards are fully stocked at home, set a strict weekly restaurant spending budget. If you occasionally catch the online shopping bug, load your Amazon gift card with a predetermined amount at the beginning of the month and stop spending once it’s gone.

2. Keep Your Receipts

Document, document, document. It sounds like a pain, but keeping even the smallest receipts can help you avoid big financial problems down the line, from overcharges by shady vendors to identity theft that threatens to drag down your credit score or drain your bank account.

You can avoid drowning in receipt paper by accepting emailed receipts whenever possible—lots of vendors now offer this option, and more follow every day. And you don’t have to save your receipts in perpetuity; once you receive your bank account or credit card statement and verify that each purchase is accurate, you can safely discard them.

3. Be Tax-Efficient

Everyone needs to pay their fair share of taxes—but only their fair share.

Tax law is complicated and jurisdiction-specific; what applies in one part of the world is irrelevant in another. That said, for most consumers, tax efficiency starts with maximizing contributions to tax-advantaged retirement accounts and spreading out windfalls (such as stock sales) to minimize tax obligations in any given year. Other tax-efficiency strategies apply to smaller groups—for instance, international travelers who make large purchases overseas should always apply for VAT rebates from their host governments.

4. Set Aside Funds for a Rainy Day

Do you have an emergency fund? You need one. A sudden medical emergency, or job loss, or unexpected home expense—any of these things can completely upend your personal finances and require months or years of sacrifice to redress.

The ideal emergency fund is sufficient to replace at least six months’ income. The sooner you start, the sooner you’ll get there; try to set aside 2–5 percent of your income each month until you hit your goal.

5. Prepare for the Unexpected

An emergency fund can help with unexpected big-ticket expenses, but what about truly catastrophic events, like the loss of your car or home? That’s what insurance is for.

As a general rule of thumb, every major asset (including your life) needs insurance protection. Though insurance premiums certainly eat into your disposable income, that’s a small price to pay for peace of mind and a valuable fallback that hopefully you’ll never need to use.

6. Seek Out Extra Income Sources

No, this tip isn’t about papering over disappointing figures with “creative accounting.” It’s about legitimately increasing your personal revenue—and, ultimately, the financial resources at your disposal—by seeking out sources of extra income.

Everyone has underutilized talents. Everyone. And, thanks to the internet, everyone with a broadband connection can monetize those talents. Whether you’re an aspiring graphic designer (99Designs), video producer (Upwork), or craftsperson (Etsy), you can find a paying outlet for your creativity. The hardest part is getting started; after that, you simply need to let your passion guide you.

7. Embrace Transparency

By and large, accountants are serious professionals who fastidiously adhere to solemn ethical codes and complex financial regulations. Regrettably, the guild has a less-than-pristine reputation thanks to a (very small) handful of bad apples who make unsavoury headlines with their periodic misconduct.

Any accountant worth his or her salt (not to mention his or her practice license) will tell you that transparency is to be prized above all else—not just when it’s legally required, but because it’s the right thing to do, and because it’s very often the antidote for conflict and uncertainty.

In the private sphere, financial transparency means being open and honest with those closest to you: your spouse or partner, children, close relatives. Money doesn’t have to dominate your private conversations, but you should absolutely follow some basic ground rules of disclosure. And, to avoid losing sight of goals and progress in the mess of other obligations you no doubt have, schedule regular check-ins with your partners in financial planning.

Are you ready to organize your personal finances?

Small-Business Owner? Align Your Exit Strategy & Retirement Plan

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By Fergus Cleaver

Sooner or later, every small-business owner needs to look to the exit.

Exit strategies come in myriad forms. Though plenty of die-hard entrepreneurs work until they keel over at their desks, most look forward to stepping aside at some point. That might be through a succession plan that leaves the next generation in charge, a private sale to a competitor or investor group, an IPO, or another form of disentanglement.

Unfortunately, business owners all too often underestimate the sheer complexity of exit planning. An orderly exit involves lots of moving parts—and it needs to start way earlier than you might think.

Ask advice of any entrepreneur who’s successfully (and profitably) moved on from their business entirely, or exited day-to-day management responsibilities with confidence, and they’ll give you a straightforward, terrifying nugget: You need to start planning for your eventual exit as soon as you take the reins.

That doesn’t mean you need to devote hours of each workday to exit or succession planning. Early on, you don’t need to give it much conscious thought at all. But you do need to approach your management responsibilities from the perspective of maximizing the value of your investment. After all, that’s what your business is—an investment built with brains, brawn and sweat.

The more value you create, the more profitable your exit will be, and the more you’ll enjoy whatever comes next—whether that’s launching a new business or living a well-deserved life of leisure.

Let’s take a look at five easy ways to align your exit strategy with your personal retirement plan…before it’s too late.

1. Cultivate Interests & Hobbies Outside Your Business

Business owners sometimes struggle to find meaning outside their 9-to-5 (or, let’s face it, 5-to-9) activities. When you work tirelessly to build a successful enterprise, it’s only natural to bind up your personal identity with your company’s.

In the very long run, however, seeing yourself as merely an extension, outgrowth, or vessel of your company is deeply detrimental to your emotional health and well-being. No matter how successful you are as an entrepreneur, you’re so much more: a loving partner, a doting parent, an active competitor, a caring friend, a fun-loving free spirit.

Embrace those other aspects of your identity. Cultivate them. And find pursuits that you can keep up long after you step away from the business you’ve built. Your life will be richer, happier, and likely longer if you do.

2. Set Up Tax-Advantaged Retirement Accounts

Okay, back down to earth.

Just as many business owners have trouble seeing themselves as separate and apart from their enterprises, many wrongfully assume that their businesses are part and parcel with their retirement plans. Why sock away extra cash when you can reinvest it in your company, boost its value, and harvest a handsome payday when it comes time to sell?

This logic seems sound, but it’s not always the best course of action. Assuming that your business will sell for what you think it’s worth is a dangerous game. This is especially true for closely held enterprises in sleepy niches. Look at your tax-advantaged retirement account as a rainy day fund: While it would be better if you didn’t need it, the alternative—learning too late that your nest egg isn’t as big as you thought it would be—is worse.

3. Live Frugally & Set Aside Plenty of Cash for the Long Term

Following on point number two: No matter how profitable your company is at the moment, times can change. By living well within your means and setting aside funds on a regular basis, you’ll be better prepared for the unexpected. And if the unexpected fails to materialize? Then you’ll have plenty to live on after your exit.

4. Identify High Performers Within Your Organization

Unless your exit plans involve liquidating your business’s assets and shutting its doors for good, you need to make sure it’s in a position to thrive after you’re gone. That means identifying high performers within your organization, then grooming them for executive-level responsibility over time. It’s never too early to start thinking about this part of the transition, as some aspects of corporate management are best learned through experience.

5. Get a Mentor

Freaked out by the thought of preparing your business for your exit—or the act of stepping down itself? Talk to someone who’s been there before. If you belong to any industry associations or local business booster groups, you’ll surely find fellow members who’ve retired or exited. If not, retain a trusted exit planning consultant to help you through the process. As with identifying high performers and potential successors, it’s never too early to seek out professional or experience-based advice on this point.

Are you ready for what comes next?