The Three Main Accounting Principles for Personal Finances

When I was young I thought that money was the most important thing in life; now that I am old I know that it is. ~Oscar Wilde

We live in what is called an "information age". There are few, if any, people left in this world who could not benefit from knowledge of how to use the information out there to improve their personal finances. That's what this article is about - specifically, how accounting principles can help us with our personal finances.

Now wait...before yawning and clicking away to find articles on Britney Spears or American Idol...think about this. Chances are you are using accounting in your life already, and may not know it. Most people have at least some dealings with money at their workplace, and will take admirable care of the finances for their employer. Yet these same people do little or nothing with their own money. Anyone with money of their own could benefit from some basic knowledge of accounting principles, which are not that hard to learn. Know how to wield the tool to make the most of what you have.

In the old days a man who saved money was a miser; nowadays he's a wonder. ~Author Unknown

That's all accounting is...it's a tool to identify what we have, where it goes, and figure out where we'd like it to go. It's not about being huddled over a bank book or at the computer for hours. It's about figuring out our goals and who we really are.

Let's get started.

Accounting breaks down into three parts. The first part is identifying what we spend, and where, and how much. The second part is recording that spending in an organized, trackable way. The third part is communicating that information to others and analyzing what needs to change, if anything, about our spending patterns.

Anytime we spend money on something, from paying rent on your apartment to buying food to giving some change to a homeless person in the street, we are making what's called a transaction. What transactions do you make? Do you know where your money goes?