Where are your money records? Here’s why you need to create one today

Mutindi Muema started off her career journey earning little. She had more needs than money, and kept saying that she’d start saving when she got enough money. By the fourth year of her working life, she was still waiting for enough money to show up. All this changed when she did personal finance courses on financial growth. 

“After creating a personal balance sheet, profit and loss accounts for a year, and calculating my net worth, I was shocked to see the status of my finances. I had zero savings mostly because I saved to spend, furnish the house, for school fees, and other expenses but never saved to invest,” says Mutindi, who is an Advocate of the High Court specialising in Technology, Telecommunications and Medical law. 

“This was an eye-opener as it made me realise the essence of tracking expenditure and keeping financial records,” she says. To track your expenditure, you will you’re your personal finance records.

These records will tell you where your money is coming from and where it is going. According to financial and economic analyst Ephraim Njega, personal finance records are critical if you work in the gig economy where income is irregular. 

With an irregular income, the risk of impulse spending will be higher, especially when there are no records that keep tabs on your income versus expenses. By keeping daily financial records, Njega says that you will be better placed to adjust your needs and wants. 

“When finances are tight, it is easy to decide on what you can remove or reduce. When they improve, you can increase without straining your finances,” he says. Njega explains that when detailing your records, you can use both the manual or electronic method. “I have been doing it manually because it helps me to be consistent. The manual method means that I can do it anytime without having to switch on any device,” he says.

Most people, though, do not know how to keep these records, what they should entail, and how to craft them. According to Njega, there are seven fundamentals that should be included. These fundamentals should include:

• Daily records of recurrent expenses and income
• Monthly summaries of expenses and income
• Records of money invested
• Records of special expenses. These are expenses that don’t recur every month or expenses that are not personal. They include items such as donations and grants.
• Records of assets bought during the year
• Annual summaries of all records
• Banking records

According to Njega, you can start with your daily records then move to monthly. He explains that your daily records should be as follows:

According to Njega, your monthly records should be as follows:

When keeping your personal finance records, you should know the status of your bank accounts. Start by collecting your bank statements and credit card statements. Use the most current statements available to ensure accurate information to begin tracking. 

Once you have the latest statements, organise them into investment accounts, credit card accounts, checking accounts, and savings accounts. Whether you are using the excel spreadsheet or a manual notebook, you should enter this information into each type of account. Each account should have two columns for deposits / credits and withdrawals / expenses. With excel spreadsheet, you will be able to utilise the calculation feature which will automatically calculate the balance in the savings, investments, and checking accounts or the total expenses in your credit account.

How long you keep your personal finance records will vary from purpose and type of document. According to personal finance advisor Kevin Payne, the financial records you should keep within one year will include your paychecks, bank statements, investment statements, utility bills, canceled cheques, and purchase certificates for products with warranty. 

Within a span of three years, you will not want to keep your utility bills, but will rather want to keep your income tax return certificates, medical bills and insurance policies, and your annual investment statements. “There are multiple ways you can store your essential documents. For instance, when using cloud-based solutions, you can store your most critical records on Google Drive, iCloud, Amazon Cloud Drive, Dropbox, Microsoft OneDrive, and iDrive,” he says. 

If you have no access to these tech storage solutions, you may consult your bank for document storage. Documents that could affect your long-term personal finances that you should keep will include your retirement and pension plans, beneficiary forms, powers of attorney, wills and living wills, marriage certificates, inheritance documents, birth and death certificates, and property ownership documents such as leases and title deeds.   BY DAILY NATION