Benefits of Using Accounting in Your Daily Life

Though you may rarely think about how accounting can help in your everyday life, learning accounting skills is one of the best things you can do to achieve financial success. Implementing accounting principles into your life can help you reduce financial stress and anxiety, build wealth, and reach your financial goals.

This blog explores the practical benefits of integrating accounting principles into your routine and offers practical advice to impove your financial well-being. 

The term “accounting” might conjure up images of buttoned-up financial professionals poring over inscrutable fiscal statements and spreadsheets. However, you can learn and implement basic accounting principles into your everyday life with relative ease. Once you understand the fundamentals of budgeting, smart spending habits, and investment strategies, you’ll be positioned to build a financial future you can be proud of. 

Budgeting is essential to achieving financial stability. Before you can strategize for your financial future, you must understand your income and expenses. How much money do you make each month? What are your major expenses? How much do you spend on nonessential expenses? 

Make informed budgeting decisions by sorting your spending into categories and determining how much you're willing to spend in each category. The key to creating an effective, workable budget is to set goals that are reasonably achievable and then continually evaluate and adjust your budget as needed.  

As you evaluate your income and expenses, you should determine how much money you have left over to put into savings. Create an emergency fund so you’ll have money in the event of a large, unexpected expense or financial emergency. Most financial experts suggest saving enough money to cover three to six months’ worth of expenses. An emergency fund provides peace of mind and helps you avoid acquiring debt in the event of a job loss, car accident, or other major financial setback. 

Saving money can seem like a daunting task, especially if your income-to-expenses ratio leaves little room for flexibility. However, becoming aware of your spending habits is one of the first steps toward achieving financial balance. Do you find yourself making impulsive purchases at the store or going out to eat more often than your budget allows? Can you find ways to cut down on these types of expenses? 

Many people have subscriptions, gym memberships, and streaming services they don’t know about. One survey found that the average American spends $133 a month on forgotten subscriptions. Changing internet or cellphone providers, meal planning, reducing online shopping, and buying generic brands are other easy ways to cut down on spending so you can save money.

Keeping track of your income and expenses will simplify the tax preparation and filing process and help ensure you don’t miss out on any tax breaks. Many people qualify for tax deductions based on student loan payments, health savings account (HSA) contributions, childcare costs, and charitable contributions. If you have a small business or earn income as an independent contractor, it’s important to keep your personal and business expenses separate to prevent confusion regarding taxes. 

Once you’ve optimized your saving and spending habits, created a budget, and put money away for a rainy day, you’re in a great place to build wealth through strategic investments. 

Accounting helps you understand the time value of money, risk assessment, and other types of financial analysis to make smart investment decisions. Accounting knowledge can also help you avoid making bad investments. Once you understand accounting basics, you’ll be better able to make informed investment decisions. 

Accounting principles are relevant far beyond personal finances, and learning accounting skills can significantly expand your career opportunities. Financial accounting is what most people think of when they hear the word accounting. It involves recording financial transactions, constructing financial records like income statements, and informing investors and other stakeholders about crucial financial information. But there are also many other types of accounting. 

Managerial accounting centers on optimizing big-picture financial strategies. Cost accounting specifically focuses on cost-benefit analysis and cost management. Forensic accounting is the process of closely investigating financial records and transactions for discrepancies and fraudulent activity. Tax accounting involves tax planning and ensuring an organization is compliant with tax laws. Each of these branches of accounting offers numerous growth opportunities personally and professionally.   

If you’ve ever created a budget, balanced a checkbook, or made a spreadsheet to keep track of your expenses, you have used financial accounting principles. Financial accounting can benefit you by helping you become aware of your relationship with money. Do you need to work on reducing expenses? Is there room in your budget to invest more and grow wealth? Many people underestimate the importance of accounting because they don’t realize how they already use accounting skills to benefit them in their daily lives. 

Managerial accounting is typically used to help business leaders make wise financial decisions. For example, a managerial accountant may evaluate a company’s cash flows, operating costs, and performance metrics to find ways to improve profitability or make pricing decisions. 

You can use managerial accounting principles to set reasonably attainable goals and plan for your financial future. Evaluating your personal financial situation can also help you determine how to best allocate your financial resources. Should you pay off credit card debt or focus on building your emergency fund? Is buying a new vehicle the right choice for your family or should you continue to lease? Answering questions like these isn’t easy, but managerial accounting principles can help you make informed decisions. 

The goal of cost accounting is to evaluate the costs of producing goods or services. For example, a manufacturing company might use cost accounting to decide if buying raw materials from another supplier could save them money. 

Cost accounting can aid personal financial decision-making in many ways. Consider a situation in which you must choose between two job offers: One job offers a greater salary, but it requires a 90-minute commute. The other job has a lower salary, but it’s a remote position with better health insurance options. In a situation like this, you'd need to evaluate the costs associated with the commute and insurance premiums and the difference in salary to decide which job offer would be the most advantageous. 

Forensic accounting is often used to detect and prevent fraud. A forensic accountant closely scrutinizes financial records for atypical transactions or suspicious activity. You can use this type of financial scrutiny to improve your personal financial management and security. 

Credit card fraud and identity theft are more common than most people realize. You can use forensic accounting principles to review your credit card statements, bank balances, and ATM transactions and look for signs of theft or fraud. 

Tax accounting focuses on managing tax obligations, complying with tax laws, preparing for audits, and reducing tax liability. You can use tax accounting skills to properly record and organize tax information, understand your tax obligations, and ensure you’re paying what’s owed. Tax audits conducted by the IRS are stressful and can lead to serious financial and legal penalties. However, if you manage your finances intentionally, keep accurate financial records, and ensure your tax obligations are met in full, you’re much less likely to experience negative consequences because of an audit. 

Accounting plays a major role in creating financial stability and achieving your goals. From analyzing expenses and creating a budget to making savvy investments, you can apply accounting principles in your everyday life to inform decision-making and improve your financial well-being. 

WGU offers several accounting-related degrees, all of which have been designed with input from industry experts to help students thrive in real-world professional situations. Our Bachelor of Science in Accounting degree, for example, prepares you for a career in finance, accounting, consulting, or business ownership. Earning this bachelor’s degree is also the first step toward getting a CPA certification. If you want to enhance your accounting skill set and industry knowledge, you can complete WGU’s Master of Accounting degree program. We also offer a Bachelor of Science in Finance degree.

At WGU, there are no set course dates or log-in times, so students complete their degree on their own time, advancing as soon as they master the material. This competency-based education approach allows 70% of WGU students to finish their bachelor’s degree in less than four years. If you want to excel in finance or a related industry or learn accounting skills to benefit your personal finances, a degree from WGU can be a pivotal step toward success.