What does personal finance refer to?

Are you ready to master your finances and prepare for your future ? The first step is to understand personal finance. Managing your money is necessary for living a self-determined and secure life, whether you're planning your retirement fund or saving for a car.

Personal finance is all about assessing your income, financial needs, and regularly allocating your money for necessary expenses. The main objective is to have a clear picture of your expenses to set aside money to save and invest.

Understanding personal finance can help you better control your funds and prepare for your future financial success.

In fact, personal finance is about how we, as individuals or families and not as businesses or organizations, let's manage our money, save and invest.

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???? What is personal finance?

personal finances are about managing your money to achieve your personal financial goals. Generally they relate to a long period of time.

Personal finance defines all financial decisions and activities of an individual or household, including budgeting, insurance, mortgage planning, savings, and planning for retirement.

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Part of managing your personal finances is budgeting – creating a structured plan outlining income and expenses. The basic idea is to put yourself in a position where you don't spend more money than you earn.

Setting a budget involves tracking your income and how much of your income you save and spend.

Basically, a budget is allocating the amounts of money you need to support your cost of living, your wants, and any other expenses. emergency » contingencies, as well as putting money aside to invest.

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Budgeting is absolutely essential for financial freedom and security. Budgeting helps you focus on your long-term financial goals and track your savings and spending.

It can also show you where you need more control over your spending habits, such as impulse purchases – things you hadn't planned to buy but decided to buy on a whim.

Having a budget in place allows you to make better choices and, therefore, worry less about overspending and debt. Note that a family budget is useful regardless of your life or household situation.

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For someone who earns little money, it is helpful to make ends meet every month. It is also good for someone who earns a lot.

Remember: it's not about knowing how much you earnMore how much you save and invest is important on the path to financial freedom.

???? Personal finance – five main areas

To help you fully understand this finance, we look at the five main areas of personal finance.

🔰 Income

Our income is money that we receive and then use to buy things, support loved ones, pay bills, save and invest.

Salaries, hourly wages, commissions, pensions, gifts, dividends, government payments and bonuses are examples of some concrete income.

Income refers to money – cash or near cash – coming in either for work done, interest or profits from capital invested, or rent from rented property or land. When he comes from work, it is called salary.

🔰 Spending

Expense is the opposite of income. It's a cash outflow. Examples include paying bills, rent, the mortgage, paying for a drink with friends, shopping, buying gifts and donating to charity.

Our payments by credit card and taxes are also expenses.

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Either we spend our own money or with the money we borrow, ie credit. Expenses are a big part of most people's income.

When you spend more than you earn, you could eventually find yourself in financial difficulty. This situation makes you lose your financial freedom.

Don't underestimate the importance of expense management. It's just as crucial, and maybe even more so, than generating revenue.

🔰 Savings

If your income is greater than your expenses, that's a good thing, you have a surplus. It's money you can save. Economists sometimes refer to savings as deferred consumption. There are many ways to save money.

If you don't like or trust banks and other financial institutions, you can invest your money. There's an old adage to that: who keeps his money under the mattress.

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Most people have a savings bank account, which is called a deposit account in some parts of the world. You can also make payments into a retirement account.

If too many people save too much, the national economy can suffer. The Japanese economy suffered from extremely weak growth for almost two decades because consumers were not spending enough – they were saving too much. If people don't spend, businesses suffer.

🔰 invest it

If you are unhappy with the returns you are getting from your savings account, you should consider investing. You could buy assets such as stocks and hope for a better return eventually.

Investing is the most complicated area of ​​personal finance and one of the areas where people get the most professional advice.

The sector in which you invest depends on your risk aversion or risk seeking. an investor risk averse does not like to take big risks. A risk-seeking investor is looking for a higher return, even if it means more risk.

Besides stocks, you can also consider investing in real estate, mutual funds, or bonds. If you have enough money, you can even invest in someone's startup business if you like their idea.

🔰 Protection

Personal finance protection consists of protecting against unfavorable or unforeseen events. It is also to protect the financial interests of your loved ones.

Examples include home insurance, auto insurance, income insurance, and home contents insurance. They will protect you if anything happens to your home, your job, your furniture, etc., or your car.

If you live in a country that doesn't have free universal health care, consider getting health insurance.

???? Personal finance – what to do

For many people, trying to secure their life financially can seem overwhelming or daunting. The one that requires a level of expertise that they do not have.

Don't despair, you are not alone. To start, set simple goals. Try to identify where you are now and where you expect or would like to be in five or ten years.

Calculate whether you have a monthly surplus or deficit. In other words, is your monthly income more or less than your expenses. When you have done this, you have created a plan and a budget.

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For your next steps, you have two choices:

🔰 Do research

Spend about a month reading as much as you can about personal finance. There are thousands of interesting and helpful articles and videos online.

Then see if you're in a better position to start creating a financially secure life.

🔰 Acquire help

Get professional help. There are many financial advisers who could help you get started. Make sure that the one you choose is qualified. You can ask your bank if they offer a personal finance advice service.

However, their person is probably a linked advisor; they will only give you advice on their bank's products. Independent financial advisors have access to a much wider range of financial products.

If you currently need help to better manage your personal finances, do not hesitate to contact us.

???? Important Personal Finance Terms

🔰 Budgeting

Budgeting is an important part of managing your personal finances. A budget helps you track your spending habits and plan how you will spend your income each month.

Start by calculating your total monthly income, then use an app to track all your expenses each month. This will help you see where your money is going, where you can save, and where you can spend a little more each month.

🔰 Insurance

Buying insurance is another important part of managing your personal finances. By taking out insurance, you protect yourself from risks and guarantee the security of your material status.

🔰 Saving 

Whether you're in your XNUMXs and just starting to learn about personal finance, or you're in your XNUMXs and looking to better manage your funds, one thing is for sure, you should save for the future.

It is important to establish an emergency savings fund to cover any financial difficulties and a retirement savings plan to help you in the future.

If you have problems managing your personal finances, know that we have premium training that allows you to save better, reduce your expenses, make good investments or even know how to prepare for your retirement even when you have a small income. You can buy our training on Master your personal finances Volume 1.

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