What do personal finances 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 about assessing your income, financial needs and allocating your money regularly to necessary expenses. The main goal is to have a clear picture of your expenses in order to put money aside for saving and investing.
Understanding personal finance can help you gain more control over your funds and set you up for future financial success. In fact, personal finance is about how we, as individuals or families, 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 in order to achieve your personal financial goals. They usually involve a long period of time. Personal finances define all the financial decisions and activities of an individual or household, including budgeting, insurance, mortgage planning, saving, and retirement planning.
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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 is the process of 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 all the expenses that you have. emergency » unforeseen events, 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 didn't plan to buy but decided to buy on impulse.
Having a budget in place allows you to make better choices and, as a result, worry less about overspending and debt. Note that a household budget is useful no matter what your life or household situation is.
For someone who earns little money, it is useful to make ends meet each month. It is also good for someone who earns a lot. Remember: it is 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 our loved ones, pay bills, save, and invest. Examples of some concrete forms of income include salaries, hourly wages, commissions, pensions, gifts, dividends, government payments, and bonuses.
Income refers to money – cash or cash equivalents – coming in either for work done, interest or profits from invested capital, or rent from rented property or land. When it comes from work, it is called salary.
🔰 Spending
Expense is the opposite of income. It is an outflow of money. Examples include paying bills, rent, mortgage, buying drinks with friends, shopping, buying gifts, and donating to charity. Our payments by credit card and taxes are also expenses.
Either we spend our own money or with money we borrow, i.e. credit. Expenses make up a significant portion of most people's income. When you spend more than you earn, you could eventually find yourself in financial difficulty. This situation causes you to lose your financial freedom.
So don’t underestimate the importance of expense management. It’s just as crucial, if not more so, than generating revenue.
🔰 Savings
If your income is greater than your expenses, that's a good thing, you have a surplus. This is money you can save. Economists sometimes refer to saving 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 about this: " who keeps his money under the mattress.
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. Japan’s economy suffered from extremely low growth for nearly two decades because consumers weren’t spending enough – they were saving too much. If people don't spend, businesses suffer.
🔰 invest it
If you are not satisfied with the returns you are getting from your savings account, you should consider investing. You could buy assets such as stocks and hope to eventually get a better return. 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.
Apart from 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 is about guarding against unfavorable or unforeseen events. It is also about protecting the financial interests of your loved ones. Examples include home insurance, car insurance, income insurance, and home contents insurance. These will protect you if anything happens to your home, job, 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 for yourself. 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. Want to take back control of your personal finances? No worries, I found an affiliate link that allows you to take back control of your finances in 6 weeks, I recommend you to buy it.
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 are in a better position to start creating a financially secure life.
🔰 Acquire help
Get professional help. There are many financial advisors out there who could help you get started. Make sure 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
Purchasing insurance is another important part of managing your personal finances. By purchasing insurance, you protect yourself from risks and ensure 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.
If you need our services, do not hesitate to contact us.
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