Why would you not consider yourself a business of ONE person? Or your family as a business of 3 or more people? Well that is exactly what you are – "Me Incorporated", "I Inc." and "We Incorporated". You really must consider yourself a small family business. Like any business you have ongoing expenses (mortgage, rent, utilities, groceries), revenue (salary and other income) and major capital expenditures (house, vehicle, vacations, renovations).
Like any good 'household business', you need to do some planning. Set out a budget for the year, track your expenses and retained earnings (savings). Yes, all of these looks, feels and is exactly like a well run business. On My Gosh! Do not rush out and buy an accounting package to run your household. And no need to take a crash course on accounting or bookkeeping. You can accomplish all your financial tracking and planning requirements with some paper or by using a simple template with your favorite spreadsheet package – Microsoft Excel or even with Open Office.
Just like a well run business, your cottage budget and tracking your spending is best served using a visible record of events; namely, financial records, bank or check register. It is just like tracking your road trip progress using a map. If you know where you are now, then you will have some idea when you will arrive at your destination. In life, money or finances allows you to get to your personal destinations or dreams. A visible financial roadmap of your 'Me Incorporated' finances, mapping your progress, seems logical.
Running your 'Household Business', like corporate business, requires a few processes to keep track of your finances:
1) Establish a yearly and monthly household budget. Consider all your expenses – weekly, monthly, quarterly and yearly outlays of money. You will be surprised at the length of this list and all the places you spend your money.
2) Track monthly your actual spending and income against the budget you established in step 1. This will help you see the 'peaks and valleys' of spending or seasonality aspect of your expenses. Over time, you will come to know these expense 'peaks and valleys' and this will help you maintain a positive cash flow. Bottom line: have money in the bank to pay all your expenses and still have some left over (retained earnings). Your single biggest challenge in running any household (or business) is always having enough money in the bank to pay the bills; especially, the unexpected ones. Having a buffer of savings will help with these 'peaks' in expenses.
3) Track all your bank account activity. Track and enter in your Bank or Check Register every deposit, every electronic (ATM, web, PayPal, debit machine) transaction and every analog (check, money order) withdrawal. And reconcile your bank statement every month. Know exactly how much money you have available in your bank account (s).
4) Especially track your spending through credit cards and lines of credit. These are potentially the 'run away' expenses. …