Life today is very complex. Because of the development and advancement in modern technology and modern lifestyle, life today gets more and more complicated.
Sometimes, these complexities in life should be attended to financially. Proper financing is very crucial.
Let us say that you are a very rich person. Although you have large sums of money, if you spend them unwisely (or without proper financing), then there is a probability of you ending up in poverty.
Let us, also, presume that you have small amounts of money. Although you are not privileged, if you spend you money wisely (or with proper financing), then you can make the most out of what you have.
With the examples given above, we see that financing is very important in order for us to attend to the complexities of life.
This article will guide beginners to the world of personal financing. It includes basic knowledge and tips that can equip a novice with the things he or she needs in order to engage in proper financing.
Read carefully the following paragraphs and absorb them well if you want to be guided accordingly.
Personal financing, as defined, is the application of the basic processes of finance in order to have good decisions with relation to money for the benefit of yourself or of your family as well. It comprises the following:
1. Ways of having or obtaining a stable or large income.
2. Proper management of money at hand.
3. Saving the money at hand.
4. Spending the money at hand wisely.
In making your finances, you consider you present as well as your future events that needs to be attended to financially.
There are several compositions of personal planning. They include bank accounts, loans like credit cards, mortgage liabilities, and the like. They also include income generation like businesses, labor, and the like.
Steps in Personal Financial Planning
There are steps in personal financial planning that must be followed in order to have a good financing strategy.
Follow the following steps:
You can do this by listing your entire source of income and computing your total amount of income.
After this, you must list all of your liabilities and computing your total amount of liabilities. After getting the results, you must compare them to one another.
With these, you can know if you have enough budget to pay all of your liabilities.
2. Setting Goals
If you set a goal, you can now prepare for it. For instance, your goal is to have a brand new car.
If you really want to have one, then you will save a small portion of your income n order for you to have the budget to buy it.
3. Creating a Plan
If you follow properly the preceding steps, then you can formulate a good financial plan for yourself and your family.
It may include the process or the ways on how you will accomplish your goals.
After you have formulated your plan, you must execute them correctly in order for it to work properly
Monitor the progress of your personal financing in order to make sure that it works properly.