Understanding Personal Finance

personal finance growth

A richer and fuller life is only POSSIBLE if you take charge and take control of your personal finances!

So, what is it all about? And why it is so important to you and everyone? To stress proof your finances, you will need to understand what personal finance is about. Personal finance refers to the process of applying sound financial principles of making financial decisions on your personal life. In other words, it has to do with money, your money! Often, It involves processes such as budgeting, financial planning, estate planning, investing, money management, insurance, record keeping, retirement planning, saving and tax planning.

Well, we have many topics to discuss in personal finance, but the three fundamental and foundation topics that you should know about are your careers, taxes, and budgeting. Your career or your job is one of the ways of gaining money; taxes (for instance, income tax, which levied by the government on annual income) are very important, you should understand what taxes are all about, and finally budgeting (understanding where your money goes) is essential. Budgeting can help you with self-control. A good budget should account for how much money you’re going to gain from a career, how much you’re going to lose by paying taxes, how much you need for basic needs such as food and clothes, how much you should save for retirement, and how much you have left over for extraneous spending.

Personal finance is also linked with terms such as bonds, credit cards, debt, financial goals, investment portfolio, insurance, interest rates, loans, mortgages, refinancing, shares, social security, stocks, the stock market. If you are serious about managing your money better, these are terms you should familiarize yourself with and try to gain as much knowledge in these fields. As from daily expenses on groceries, saving for dream car or house and even planning for retirement, all these issues will have a direct impact on your lifestyle, relationships to others and your status in life.

Simply put, a richer and fuller life is only possible if you take charge and take control of your personal finances, it doesn't matter if you are looking at saving for dream cars or retirement. At the end of the day, the aim of personal finance is to better manage your money and make your money grow so that you can run into financial freedom and independence.

Start planning your Finance

Managing your own money is not a complex and in fact, there is so much FUN with it!

To begin, you must know about financial planning. It is the process of managing your finances to meet your financial goals. Your financial goals may include asset accumulation, buying your dream car or dream home, managing insurance costs, saving for college funds or planning for retirement.

It is an often misunderstood conception that financial planning is a very complex process and needing much time and effort that it is best entrusted to the professionals to handle. While it is correct to say if you are a novice to personal finance and financial planning, it is best to consult a professional to tell you initially. Still, at the end of the day, you should train yourself to pick up the necessary knowledge to manage your money instead of depending on others.

Always remember that finance professionals are only there to recommend you, they are not you and they may not fully understand and comprehend your lifestyle, preferences, risk appetite and other factors to make proper recommendations. Therefore, claiming that not having enough time or too busy to manage your finances is not an excuse. Knowing that if you set your mind to do it, you will know that managing your own money is not a complex and, in fact, there is so much fun with it!

Here're the things you need to know, Financial planning can be broken down into five primary areas:

  • Financial assessment
  • Setting of financial goals
  • Creating of financial plan
  • Execution of financial plan
  • Periodic monitoring and reassessment of financial plan

Let's go into details for each of these areas HERE.