personal finance bankWhat’s the biggest difference between home finances and goals and those of a major international conglomerate? Scale. Yes, there are vastly different sets of rules and regulations, but at the heart of the matter it really comes down to size. You may be skeptical but consider the following.


While a corporation likely has a large accounting department, often broken down between receivables and payables, and you have…well, you, the basic function is the same. That is to say, tracking income and expenditures. A big company is going to need significant payroll programs or freight audit software and possibly a system to allow them to “talk” to each other. Likewise, many individuals power up their computers to run a program (or their phone to run an app) that allows them to perform many of the same functions. They both track utility bills, income (paid invoices vs. salary) and allow reports to be generated.


Individuals don’t have shareholders to be accountable to (unless you want to include spouses and significant others in that definition) but they do need to make sure their resources don’t get outstripped by their expenditures. Living above one’s means is a sure way to financial ruin. It doesn’t matter if it comes under Chapter 7 or Chapter 11, it means the same thing: bankruptcy. This is something that can impact your life for years, if not decades.


Both entities need to look forward and make sure they have a “rainy day fund.” Industries grow and grow…until they don’t. Not all that long ago people asked, “what’s a smartphone?” If certain companies hadn’t seen it coming and prepared in advance they would be on the ash heap of history today. Similarly, a person who doesn’t formulate strategies for the potential loss of their job, or account for the possibility of a catastrophic injury to self or property, can find themselves in deep trouble when disaster strikes. So, everybody, human or created entity, needs to make sure they have plenty of liquid, or easily convertible, assets and insurance available.


Knowing how much money is coming in is very important. Setting up a plan for its allocation might be more so. When you tally up the income, decisions on where to apply it must follow. If you decide to just wing it, you can find yourself looking at eviction, foreclosure and repossession. Not exactly the struggles you need to add to an already stressful life, For individuals, these are some of the most common budget categories:

  • Rent/Mortgage
  • Car Payment
  • Insurance (home, auto, life)
  • Clothing
  • Credit Cards

Sadly, one of the more neglected ones is “self-pay.” Sooner or later, there comes a time when everybody must stop working. When retirement comes because the body can no longer match the rigors of regular employment you’re going to need income. Relying on disability or Social Security can mean a drastic change in lifestyle.

Whatever business you’re in, making widgets or running a household, certain financial truths apply. You may not have a degree in accounting, but you do need some of the basic skill set.