The application of financial principles to the monetary decisions of any person or family is called personal finance. It deals with the methods and principles by which individuals or families receive, spend and save their monetary resources during a certain period of time, considering possible risks and other financial changes.
The main tools of personal finance management may include: checking or savings accounts, personal loans, credit cards, stock market investments, social security benefits, retirement programs, various insurance policies, income tax managements, etc. Thus, keeping all this financial information well-organized is very important for those who want to reach success in personal finance management.
Personal Finance Management:
As it has been mentioned above, the main feature of personal finance is financial planning which includes making a budget, saving money, collage planning, retirement plans, taxes, etc. It is a very dynamic process, based on reevaluation and constant monitoring. There are generally 5 basic components of personal finance:
1. Assessment. A person’s financial situation can be figured out by checking his or her financial balance sheets and income statements. The balance sheet summarizes the expenses of person’s assets, such as home, vehicle, stocks, food, clothes, banking accounts, as well as all personal liabilities like cash loans online, car debt or mortgage. As for the income statement, it lists the person’s revenue and expenses.
2. Setting up goals. Having multiple goals in life is a common thing for many people, including short-term and long-term goals. Making clear financial goals is always useful in managing your personal finances. What is interesting, the goal-making process is usually focused on meeting certain financial requirements.
3. Making plans. This implies the details on how to reach the goals you have set up. Your financial plan may include cutting unnecessary expenses, reducing stock investments or increasing your employment income.
4. Plan execution. Implementing a personal finance plan requires a great deal of discipline and perseverance. In some cases, it would be better to ask financial planners, investment advisors or accounting managers for a qualified assistance.
5. Monitoring and reassessment. As time goes by and everything changes, any personal finance plan should be constantly monitored for future adjustments and reassessments.
As practice shows, personal finance management is a rather difficult task, especially in our economically-complicated times. However, our personal finances can be kept under control by reducing excessive expenditures, avoiding risky deals and paying debts or other obligations in due time.
Mila Ray is a financial expert and copywriter working for the trustworthy lending company. In the articles she writes and shares her financial experience and provides honest information on financial issues. Mila has been writing professionally for 5 years and has an experience of work with different kinds of financial products and services.