What is Personal Finance?
Personal Finance covers all aspects of money management, including income, savings, tax, investments, budgeting, etc. Understanding personal finance is one way to have a successful money story.
There is so much to learn about money besides earning and spending.
Why is Personal Finance Important?
Being well informed about your personal finances;
- helps you make the most of your income.
- ensures you’re not just living from paycheck to paycheck
- helps you decipher good money advice from bad ones.
What Are The 5 Areas of Personal Finance?
The areas of personal finances include income, spending, savings, investing, and protection.
- Income: This is where all your personal finances are based.
- Spending: These are your expenses.
- Savings: The money you keep aside to cover any sudden financial need or achieve future goals.
- Investing: To grow your money so that you can be financially free.
- Protection: Protection from financial risk through insurance.
Best Tips for Personal Finance
1. Save money
Working with a savings plan is an excellent start. But be sure your savings are somewhere not easily accessible so you can build the discipline to not touch them.
A good practice is to have automated savings, so that a portion of your money is saved first, as you receive your income, and you are left to figure out what to do with the rest.
2. Budget
“A budget is telling your money where to go, instead of wondering where it went.”
John Maxwell
Knowing how to manage bills starts with creating a plan for your wants and needs. Calculate your net income, make a plan, and track your spending. If you find yourself going off track, adjust your spending to stay on budget and ensure to review your budget regularly.
3. Reduce debt
Getting rid of debts helps you have a clearer picture of where you want to be in your financial life. The longer you hold on to debts, the harder it is to pay them off. So start by writing down everything you owe and stick to the precise payment dates, bit by bit until they’re cleared.
4. Avoid impulsive purchases
Impulse buying is a normal part of society. Everyone is guilty of this. However, it becomes an issue when it is too frequent. A study showed Americans spend over $320,000 on impulse buys over their lifetime. You really don’t have to buy something immediately. Try waiting a day and see if you still need it.
5. Investments
Over the years, there has been a rise in different investment options from mutual funds, bonds, stocks etc. And contrary to what you may think, investing is not for the rich alone. Anyone can invest, so no money is too little. You just need to do your research on the kind of investment plans that work best for you just like you are doing by reading this article. 😉
Find out more about investment plans that are available for you.
10 Personal Finance Principles
- Know your income before you commit to any serious spending
- Before paying bills, set aside money for emergencies
- Start saving for your future now
- Always look for the best interest rates, whether on savings or to pay a debt.
- Never borrow what you cannot pay back
- Create a budget
- High ROI means high risks
- If it sounds too good to be true, it probably is.
- Write down your financial goals, and then work out how to get there.
- Buy insurance. Financial protection is key.
Bottom Line
Financial discipline is important but takes consistency. Having well-rounded personal finance is not a one-time thing because you continuously improve and learn from your mistakes.
Personal Finance Resources
Watch this video on personal finance for entrepreneurs:
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