How would you rate your family in terms of their money management skills
If you are like most parents of school-aged children, you probably grade them on a curve, and neither totally bad nor totally good. For you and your family, there are very fine gradations of money management skills, from poor to excellent. And yet there are many people in this country who cannot say the same. This can never be right.
And yet the gap between the skills of a person who is in receipt of employment support payments (e.g. Newstart or a Centrelink disability payment) and that of someone who is not is enormous.
Management Skill of Family is judged on knowhow of a Business Account:
The reason is that you have poor money management skills. Even when you have money in the bank and in the business account, there is always the possibility that you may get careless. When this happens, your business is still at risk. And there is absolutely nothing that the income and other payments system can do about it. The only thing that the system can do is make sure that when you do get careless, you are not using the money to the business account.
You can improve your money management skills.
It is quite simple. The only thing you have to do is stop spending. The income and other payments system cannot force you to stop spending. You have to stop spending yourself. You do this by paying yourself from your business account.
The main reason for this is because the income and other payments system can only assess your expenditure. If you take money out of your business account, the only way you can get it back is by spending it. At this situation, you will be able to assess your expenditure and get it back again. This is not possible with the income and other payment systems.
Even if you do pay yourself from your business account, it is still essential that you do this with a very low amount of money. You do this by setting up a ‘sub-account’. This means that you have two accounts – one in your business name and one in your own name. This is to prevent the business payments system from getting hold of your income.
For example, if you receive a payment of $100,000 from your company, it is possible that the income account will calculate that the amount is less than $100,000. Therefore you cannot pay yourself from the business account. Similarly, if you receive a payment of $100,000 from your employee, the business payments system will calculate that it is more than $100,000. It will prompt that you cannot pay yourself from the business account.
Personal Expenses is Like a Payment in The Business Account:
Even though you cannot pay yourself from your business account, you can still pay your employees and vendors from the business account. The main reason is that you do not want them to get the wrong idea that you are accumulating assets from the business. You are actually just paying for the services they are providing to the business. The same is true with your personal expenses. The payments that you make for your groceries, house rent, and car may not actually be assets that are accumulated from your business. Instead, they are payments that you have made for your personal use.
Why Personal Account Needed:
To keep the business from knowing too much about your personal life, you can set up a second account in the business system. This is the account which is known as the personal account. This account allows you to transfer money from your business accounts, and to spend money from your personal accounts.
This is also the account that is used to make income from the income generated from a trust if you are making income from a trust. Because the personal accounts are linked to the business accounts, if you have income from a trust, you can spend from the business and transfer the money to the personal account in the trust. The personal account does not allow the business to know that you are making income from the income generated from the trust. This is why you need to keep the personal account very separate from the business account.
To keep the money in the personal account separate from the business account, you need to enter the personal account into the personal accounting software. This account has a completely different name from the business account. This is to make it easier for the business. This is done to know that the money belongs to the business and not to the person.
There is no official regulation on the manner in which this second personal account can be used. It is accepted practice that the personal account must be used for those needs like; payments to friends, purchases for family and children, contributions to social causes and the like.
Concluding Message:
In addition, there are companies that create trusts where they do not actually give away their company’s cash. They rather give their family members, friends and possibly employees a percentage of the profits if they bring in profits. Therefore, there is no other option but to use the business accounting system. If you are in this type of business, then the personal account is the only option to use.
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