The Hidden Bookkeeping Money Decisions You Make Every Day: S9E8

Bookkeeping isn’t just spreadsheets and accounting software. Our favorite Bookkeeping Mensch, Paul Rosenblum, reflects on how everyday money habits quietly shape our lives, from business spending decisions to the way people think about vacations, groceries, risk, and long-term planning. He explores “the human side of want and need,” showing how emotional spending, financial stress, personal history, and instinct all influence the way we handle money. This conversation reframes bookkeeping as something deeply human, revealing why some of us naturally think like planners, budgeters, and business owners without even realizing it. 

Transcript

Season 9 Episode 8: The Psychology of Money: The Hidden Money Decisions You Make Every Day

Bookkeeping.  It’s everywhere. It’s an intricate part of your daily life. And you don’t even know it. It’s nothing that you consciously think about, it’s just there. With the proper training, you can be a bookkeeper if you really want to. Self-teach?  Maybe, only if you have the ‘bookkeeping gene’ running in your family.   Let me explain.  I’m Paul Rosenblum. 

This will be a rather non-technical episode.  Leave me a comment if you like these kinds of episodes, rather than the technical bookkeeping ones dealing with particular situations and financial entries.  

When you sit down and pay your rent or mortgage, you are actually doing bookkeeping. Bookkeeping in your head -maybe not on paper or using computerized accounting software, but you are spending money and even just for a second or two, you are thinking about how much money you have vs how much money you are spending. When most people go to the grocery store, there might be a moment that people think about how they will pay for the groceries.  Cash, credit card, debit card or a mixture of all three. Or which credit card should they use? The one with the most cash back, or the one with the most airline miles for your next vacation?  

When you go to a gas station, do you fill your vehicle with gas, or do you get $20.00 worth and call it a day?  Even if you don’t realize it, you are thinking about budgets. 

These same ideas are used in business. If you are a business owner, (not all of my clients, but many of them), do think about which credit card to use for particular purchases---- as a bookkeeper, I will have meetings with clients to help them determine when to use credit cards rather than cash or Zelle or debit cards. Some business owners decide by instinct, others ask their bookkeeper for help. 

People who get into trouble with money buy things without thinking (consciously or unconsciously) about how much money they are spending.  They spend money by want. I want this item vs I need this item is the same thing to them. And businesspeople do the same thing. The human side of want and need get in the way. 

As a bookkeeper (and yes, I am human as well), I usually am able to take a step back from how my clients spend their money and not get emotional about it. Sometimes, my own history gets in the way. My personal history is in my 20’s and 30’s, I was struggling financially and had to watch what I spent all the time. I was barely able to survive.  And that has stuck with me through my 60’s and now into my 70’s. So, I am still careful with money, even though I have savings and investments. But by being a bookkeeper, I can point out quickly, based on my own history, where people are going wrong with money and how much of it they spend.  

If you are an owner of a business and the business has 1 million dollars of sales, and expenses of $750,000.00, for an easy example, then that leaves about $250,000.00 left over. If you have an LLC, it means you can ‘draw’ out maybe $200,000.00 and leave the company with a profit of $250,000.00 in the books, and $50K of cash in the bank. However, so many business owners take money out of the business for personal expenses as they need it to feed their lifestyles. Usually, that leaves the business with no money in the bank account to pay taxes on the profit made.  That is bookkeeping and managing money and that is why business owners need to have conversations with their bookkeeper to control the spending on the personal side.  

Even if you aren’t a business owner, you still have to be able to manage money.  Your personal life should be treated as your personal business. The same rules apply, even if you don’t use accounting software or any organized way of tracking income and expenses. 

Can you afford to take a vacation? I know you want one, but one has to look at their finances before a vacation is booked. Is it the Hilton or a budget hotel?  Are you going to get a fancy rental car or a budget model? And now with airlines the way they are, even after you buy the ticket for the flight, there are fees for baggage, and after going through security (if there are no fees attached to that), there’s very expensive food in the airport, gifts, books, liquor, magazines and tips for anyone who helps you with your luggage if you have a lot of it. Once you get on the plane, you could be paying for Wi-Fi access, or ‘premium’ food if you don’t want water and cookies only. And depending on the airline, paying for a premium movie on the monitor. And maybe the earphones as well. Before you get to the hotel, you might be spending $200 or more on these extra items. Has that been figured into your budget?  And if it has been, is it only in your head, or do you put it down on paper?  And when you are on vacation, do you constantly think about the amount of money you spend and how to manage it properly? I, unfortunately, do. I’m not proud of it, but as my mother used to say --- It is what it is.  

If you put your vacation budget on paper, even handwriting it loosely, and you think about the money that you spend on vacation, then you might want to look into bookkeeping for a career.  I love bookkeeping, but for me, it’s sometimes a curse at times.  I can’t fully relax on vacation, knowing that I am spending more money on vacation than I do when I’m home in my regular routine. But enough about me. 

Like I said, bookkeeping is everywhere. It’s a larger part of your life than you realize. The people who don’t think about money and spending habits, and the wants and needs getting all mixed up their minds, are considered ‘different’. 

Some people go bankrupt during their lifetimes just because of overspending, and even though they are supposed to fill out budgets and take classes about spending money, they just can’t learn the basics. We are all human, with our individual flaws.  The same way you should understand your weaknesses with money and budgets and overspending, you should also realize your strengths with money and budgets.  If you naturally handle money well, then bookkeeping might be for you. A.I. or not, H.I.  (Human Intelligence, or Human Instinct), will show you the way.  Just follow the signposts, like I did. (in Season 2, Episode 9).

How many people think about budgets and money when they have kids or adopt kids? Some do, but I think the majority don’t. Having a family is so important to people that the money issue comes later. If, when you are thinking about having a family, you are also discussing money and budgets and places to live and schools, then doing something in the bookkeeping field might be for you. You are organized, and thoughtful when it comes to handling money and making plans.

I have a few of my clients who take out more money from their businesses as a ‘draw’ than the business can afford or pay themselves a W-2 salary that the business can’t afford. That’s when you need a bookkeeper or someone who has the instinct of how to handle money to help with that situation. There are lots of ways tax-wise to handle that if you file as an S Corp., but since this is a non-technical episode, I won’t go into those here. Some of these I have discussed in earlier episodes.  

Because of the economy and the pandemic back in 2020, many people were laid off or lost their jobs due to various reasons, and were forced to start their own businesses, and that’s a very hard transition. From being a W-2 employee to an LLC owner not having payroll for yourself can play havoc on someone. One has to learn a totally different way of spending, budgeting, and using money.  

As I said, bookkeeping is everywhere. It is part of so many decisions that we make every day. Being a renter on rent stabilization, or being a homeowner with a mortgage, purchasing a car, or leasing one, buying a top-grade computer or a middle of the line one, even which streaming services we purchase for entertainment is all part of our daily thinking. If you are self-employed and rent is due on the 10th of the month at the latest, then you have to make sure you collect enough money from your clients to pay that rent on time (hopefully you will already have that money in the bank account by the first of the month). 

If you are a very organized person who plans out your own financial life well, you might want to consider becoming a business owner or a bookkeeper or even a certified financial planner. Your brain might be wired for it. But as I said, it can also be somewhat of a curse.  

I don’t like myself sometimes when I think that my wife and I shouldn’t buy two of something at the grocery store because one is enough.  One example is chips -- 2 for $6.00.  If I want one, and not two, it will cost me $3.50.   Still cheaper than $6.00. I can’t help it. If something is on sale at 40% off, remember, if you don’t buy it, it’s 100% off the purchase price!  And I also can’t help conveying that kind of thinking to a struggling business owner.  If a business can’t afford to match the employees 401K contributions, then don’t. Period.  If a business can’t afford to pay the owner $400K a year, then don’t. 

 If I take a long trip in a rental car, I always get $20 to $30 of gas at a time so that I don’t return the car with more gas in it than it had when I first rented it. And if I get $20.00 worth of gas, I do NOT get $20.01 or $20.05 I stop the meter at exactly $20.00. I’m not compulsive about anything else in my life except money. That’s why I’m a bookkeeper. If you can relate to that, you might have a new career just waiting for you. Go for it! 

Uber or Lyft?   “Wait and Save” only for me!  Rarely am I in that much of a rush to pay $2.00 or more for the same ride! I have learned to be a bit more relaxed recently on vacation.  Enjoying life and splurging once in a while is important. 

If you are at a restaurant and paying the bill, you normally would add a tip.  More bookkeeping. So, we all have it built into our brains.  Some more than others. I could never be a construction worker; some people can’t be bookkeepers.  Don’t put them down. We all have our H. T’s (Human Talents). Respect everyone.  Just understand that bookkeepers should get the most respect (Just kidding)!!!  

I’m Paul Rosenblum