Have you ever thought of using Xero to manage your personal finances? Well you are not alone. I have a few clients who have loved Xero so much that they have decided to us it to manage their personal finances as a personal finance app.
If you have decided to do this, I have a few recommendations on how to optimize what you are getting from it.
- Talk to your accountant about a reduced price plan. Xero partners have access to accounts not available to the public which have reduced functionality but may fit your needs. The basic Xero account is $20 USD. However, a Cashbook account (one of the partner accounts) is only $12 USD. This is all you need for your personal finances. You will still be able to connect your personal bank and credit cards (and download the transactions) and code them.
- Decide what type of expenses you want to track. You don’t need to over track things. For example, it is good to track “Restaurants” vs “Household food and supplies”. However, you do not need to detail if you went to a movie theatre vs a concert. Those items could be grouped to one “Entertainment” account.
- Keep on top of it! There is no point in having the account without using it to understand and possibly change your behavior.
Many may ask why or when you would want to do this. I see them being an advantage in two areas:
- Digging out of the whole: I have seen when a person goes through a large financial setback and is conscious of the need to closely budget as they edge out of their current position.
- The aspiring retiree: in determining if you have enough to retire, it is important to get very clear on your monthly cash flow needs.
Running an account like this for a year can really help you determine what your monthly cash flow needs truly are. Furthermore, it can help you see where you can cut expenses. This may allow you to set greater monetary targets for your retirement or even move your retirement up.
If you want to get clear on your personal finances using Xero as a personal finance app is an option. It was of course designed for SMB’s but if you are already comfortable with it for your business, why not give it a try for your personal finances too.
Virtual Heights Accounting
A CPA firm that focuses on process automation using technology. We offer year end, tax, CFO, Controller and bookkeeping services and specialize in technology, professional services, e-commerce and the not for profit sector. If you have any questions, please contact us from our website. http://vhaccounting.ca/contact-us/. If you have any comments