Personal Finance Planning
When people manage their finances, they consider financial risks and possible events when they make monetary decisions. Personal finance planning allows people to consider various ways of obtaining financial security such as obtaining savings or checking account, investing in stock markets, managing income tax payments, and settling credit card debts.
Several areas make up personal finance planning. These areas should be addressed, so that people can prevent financial woes that can affect their standard of living. They need to make the right decisions when spending or investing. It is also essential that they take into account future events that will require them to have some cash or financial resources. The following are among the recommendations in planning personal finance.
1. Determine the financial position or situation.
Effective personal finance planning involves the understanding of the monetary resources and net worth. Individuals should be aware of their net worth or the balance sheet that contains all the assets with deducted liabilities. They should also know the cash flow in the household, by deducting all possible expenses to the expected annual income. When they analyze their financial position, they can determine the time-frame when they will accomplish their personal goals.
2. Consider getting adequate protection from insurance.
After individuals determine their financial situation, they should consider obtaining protection from emergencies and risks. The common risks include property, disability, death, health, and liability. They need to understand the type of coverage they should have for the insurance, as well as the payment terms for the policy. Those who have insurance can have adequate protection from risks, and they can also avail of tax benefits.
3. Manage income tax returns and avoid accumulating tax debts.
It is necessary for individuals to determine the payment date and amount of the tax they need to settle. The government provides incentives such as tax deductions for those who pay their taxes according promptly. These benefits can be a great help to most households, and individuals can prevent severe burdens associated with tax debts.
4. Accumulate properties and make investments.
Many people should also consider saving enough money, so they could acquire valuable items that can upgrade their standard of living. For instance, they should try to purchase their own house, start a business, save for retirement needs, and pay for education fees and other expenses. Before they invest on properties, they need to secure their finances. This way, they will not end up experiencing debts or financial problems after acquiring properties.
5. Save money for retirement needs.
Aside from having short-term life savings, individuals should allocate funds for retirement and future needs. They can expect financial security and stability even when they are no longer employed, as long as they have accomplished their retirement plans.
Personal finance can help individuals meet their current needs and prepare for future risks. They need to understand financial principles that can help them manage their resources and prevent monetary problems.
What do I mean by saying that successful personal finance nothing to do with money? Most people think that if they had loads of money then all their money problems would be cured. Actually I think the reverse is true - their money problems would just be starting. We've all heard about lottery winners who suddenly get millions of dollars but within a few years it's all gone. Some people will simply put this down to poor money management but it goes deeper than that. Whether you are successful in personal finance and create wealth in your life, starts with what you think and feel about money.
When we are young we are like a dry sponge soaking up all the information around us - the good, the bad and the ugly. That's where we learn our first attitudes towards money and personal finance, even if we don't realize it at that stage. We accept the financial attitudes and money management of our parents, family and friends without even thinking about whether we agree or disagree with them. Sayings like "Money doesn't grow on trees" and "I'm not made of money" stay with us as we grow older. What did your parents and family say to you about money as you were growing up?
When you think about what you were taught back then you may not agree with it now, but it may have been valid then. Unless you are aware of what you were taught you may follow the same financial awareness even though it may no longer be valid. Now don't get me wrong I'm not blaming your parents for this, they did their best and taught you what they knew, but in some cases it's simply doesn't work any more. The idea of going to school, then University, getting a job for life and then a state pension isn't valid any more as the population ages. A recent article on This is Money explains the problem we'll have with changing demographics.
What else were you taught about money as a child? Many people were given money on birthdays if they were good children. I stress the 'if they were good children' because as we grow up we tend to associate money with being good. I know we can all find examples of where getting loads of money has absolutely nothing to do with being good, yet we still link receiving money to actually deserving money. If people only received money when they deserved it then I can think of some millionaires who would be much poorer!
Thinking about rich people: who do you think about when you think of when you think about wealthy people? Do you think of wealthy business people who gives millions of dollars to charity such as Warren Buffet and Bill Gates, or do you think of con and scam artists? This is actually important as to whether or not you can create wealth. If the first people you think of when you think of the wealthy are actually con artists then it's unlikely that you'd want to be like them. If you associate money with bad attitudes and sayings such as 'the filthy rich' then why would you want to become wealthy? It'd be like someone who hates the sight of blood becoming a surgeon.
Money itself is neutral. It's not good and it's not bad - although what you do with it can fall into either of those categories or somewhere in between.
So in conclusion, take some time to be aware of how you think and feel about money. How you think about money and personal finance will reflect on how you deal with money and the ways you accumulate money. You could be sabotaging yourself when it comes to personal finance simply because your thoughts and feelings around money are negative. When you realize that money is actually good for you and your family, and that you deserve it, then dealing with money and acquiring it, will become easy.
If you are looking for information that can help you manage your personal finances responsibly, then you have found the right article. In the remainder of this piece, we have enumerated and discussed five tips guaranteed to help consumers like you to succeed in their quest to handle their respective financial resources in the best way they can.
Helpful Tips for Consumers
• Come up and stick to a personal budget. We encourage all our readers to come up with a personal budget. This tool will not only help you manage your personal finances in the most responsible way you can. It can also help curb overspending, which is the main reason why a lot of consumers today have huge financial obligations and severely damaged credit profiles.
To do this tip, you need to take your time examining your income as well as your monthly expenses. Consider what percentage of your income goes to your expenses and how much money goes to your savings account. If you think that you need to reduce your expenses for the month so that you can save more, then list down all the items that you have spent cash on for the past months. Then, think about which goods and expenditures are necessary and which are not. By doing this, you can eventually come up with a final budget that you can use not only for managing your day-to-day finances but also for reaching the financial goals that you have set for yourself.
• Sign up for automatic savings. If you find it hard to set aside cash that will go directly to your savings fund, then we suggest that you sign up for an automatic savings arrangement with your bank. In this arrangement, your bank will automatically deduct an agreed-upon amount of money from your salary, and transfer it to a savings account, which imposes a significantly higher rate of interest.
By employing this tip, for sure you will find it easier to save up for your future. And, at the same time, you can have a sure source of funds that you can use to finance emergencies and other urgent needs.
• Take out lines of credit only when necessary. Before you apply for and take out a credit account, like a personal loan or a credit card, you need to consider not only if you really need it, but more importantly if you can afford it. Always remember that most credit programs offered to a majority of consumers these days impose steep rates of interest and fees and very stringent payment terms. And if you won't be careful in choosing a line of credit, you might end up with one that will not suit your needs, preferences and your financial capability. This is why we encourage you to take out credit programs only when it is absolutely necessary.
• Look for additional sources of income. If you think that you need more funds to sustain your lifestyle, then you might as well consider applying for a good-paying home-based job that will fit your schedule. For example, you can serve as a part-time virtual assistant to an offshore executive. You can also start your very own online business so that you can supplement the income you earn from your full-time job.