Accounting and it's Perks

I didn't quite appreciate the importance of knowing the ABCs of accounting till I began attending this core course in the 1st term curriculum. My experience has been that people are usually casual about minding their own finances. Work usually expands to occupy the time available, and finances are checked merely to make sure that the savings haven't nose dived, we haven't become a victim of identity theft, and, of course, to deposit paychecks, pay bills and file tax returns. Anything beyond this can be characterized as co-incidental, maybe even unusual.

Accounting brings in structure to understanding money. You can actually value everything you possess (assets/liabilities), have made (income), gained (gain), spent (expense) and lost (loss). Every home should have its own balance sheet and income statement. I don't mean to overwhelm you with CA/CPA jargon so first let me brief you on these terms. Balance sheets give you a snapshot of what you currently possess. Assets are possessions that'll result in future economic inflow and liabilities are possessions that'll result in future economic outflow. Income statements, on the other hand, can help you monitor how you earn and spend your resources over time.

To some extent, I find myself reiterating Kiyosaki from "Rich Dad, Poor Dad", nevertheless I will continue with my thesis. Ultimately, we all work to make our paychecks. That money stacked in currency cash is steadily losing value. Likewise, many assets depreciate in value over time. We can't avoid taxes, just like we can't escape death, in life. The amount of money in this world is continuously increasing, and, hence, our share of wealth is continuously decreasing. To maintain a net worth and certain level of purchasing power, there has to be a conscious effort to comprehend the health and the future potential of our finances.

Inspite of coming from a modest family, W. Buffett was sure at the tender age of 25 that he doesn't have to work to make money, on the contrary, money can work for him to make more money. The lesson: use your money wisely, it can do more for you than buy you popcorn and tickets to your favorite movie show.