Comment by tantalor
3 hours ago
You don't need accounting or double-entry bookkeeping to compute net worth.
Net worth is easy: assets - liabilities
You get the figures from your financial institutions and counting up your cash on hand.
The purpose of double-entry bookkeeping is to track the flow of money and to make sure nothing was missed.
But for net worth, you only need the end result, which you don't need any computation for.
The only thing that this solves is tracking money in flight, because during a transfer it disappears from your view of the accounts. There are simpler solutions to this problem than tracking absolutely everything.
You don’t even need to be precise for net worth, whereas double-entry accounting needs to be.
For personal finance the problem is almost always very obvious ($3,000 on candles) and all the spreadsheets and budgets won’t change that.
I find there area few things the budgets and spreadsheets help with from a personal finance perspective:
- Values vs reality: A $3000 candle budget is fine, but if you're spending $10/work-day on candles it might be easier to see when that accumulates and you can compare it against your longer-term aspirational goals. This is especially true for less tangible expenses like subscriptions where it can be difficult to see "I'm spending $3000/year on candles I never burn" from ground level.
- Planning and decision-making: It's easier to make good life decisions (e.g. "should I take $job" or "can I buy $house") if you have an accurate accounting of your life expenses.