Ultimate Guide To Improving Your Personal Finance
Personal Finance is a comprehensive approach to using the techniques and methods of corporate finance in managing an individual’s money and financial affairs. Basically, Personal Finance has everything to do with YOUR money and assets. The process involves planning and managing all of your personal financial activities; income, savings, spending, investing & protection.
The above-mentioned five areas are considered to be the most important ones in the process of personal finance. Let’s discuss them in a little more detail so that you may have a clear understanding of this term.
Generation of income is the starting point of an individual’s or a family’s journey of financial planning. Income just simply refers to the sources of cash inflow received and used by an individual or a family to support themselves. The most common sources of income include hourly/weekly wages, salaries, bonuses, commissions, dividends and pensions.
Cash inflows from all of these sources can rightly be used to save, spend or invest.
This area covers all types of expenses incurred by an individual or family when purchasing services or goods or anything that can be classified as being consumable-this excludes investments. Spending diverges into two categories: cash and credit. The former involves spending by paying with cash in hand while the latter involves spending by paying with borrowed money. Common sources of spending include rent & mortgage payments, food, entertainment, taxes, interest and credit card payments.
All expenses reduce the cash available to an individual for saving or investing. You really wouldn’t want your expenses to exceed your income and this is an area that is in your control, unlike income. Controlled and monitored spending can help in reducing the burden on your income.
Saving refers to surplus cash that is ‘saved’ and retained to be used later in the future. This surplus cash results when the income is greater than the spending and can either be saved or invested. The management of savings is a crucial part of personal finance. The most common savings options include paper money (physical cash), savings & checking bank accounts and ‘money market securities.
It is common for individuals to have at least some savings in any form to deal with any unexpected events and manage their cash-flows well.
Investing involves purchasing assets, usually long-term, that can be expected to generate some returns for the investor. Purchases are made by investors with the hopes of receiving more money than the amount invested initially. Investments carry risks for the investor as not all rate of returns turn out to be positive. The most common investment options include stocks, mutual funds, bonds, real estate, private companies (shares) and valuable art pieces.
This area of personal finance is considered to be the most complicated one and many people tend to receive professional financial advice in this matter to make the most ‘profitable’ investment.
Personal financial protection refers to the variety of different ‘products’ that can be helpful in providing financial protection against unexpected and devastating events. Common protection ‘products’ that exist today include health insurance, life insurance and estate planning.
This area is another one that has some complexities involved and is usually managed with help and advice from professionals.
Tips to Help You Successfully Manage Your Personal Finances
All of these 5 areas of personal finance discussed above need to be managed carefully and smartly for you to rid yourself of financial problems and worries in the present and future. Starting today, you can surely work on improving your current money situation! Just follow the following easy steps and you will start noticing the change in your financial position. Your financial problems may even start to diminish if you stay committed!
Define Your Financial Goals Clearly
Assessing your goals and listing them specifically is key here. Sit down and think about what your long-term and short-term goals are. Things such as holidays, investment and retirement plans are going to define your goals.
Once you have written out your financial goals, start prioritizing them. Creating a priority list will allow you to deal with each goal in the appropriate manner and also pay attention to what is most important. This is a crucial step as prioritizing will essentially help you in creating a relevant financial plan that aligns almost precisely with your goals.
Create a Plan
Developing and implementing a financial plan will ultimately help you in achieving both your long and short-term financial goals. A rough draft of your plan may involve the creation of a monthly budget & a spending plan and trying to pay the debt.
After trying out and working with this short plan and achieving those goals, you may start seeing some financial improvements in the form of excess cash resulting from reduced debt payments or controlled spending. Now is the time to update your plan, set new goals and prioritize them according to your current situation.
Remember that sticking almost religiously to your budget is key here as there is no room for unplanned and over-spending until you have reached financial stability.
To successfully manage your personal finances, you need to stay focused on your long-term goals (e.g, retirement plans) but also actively keep working on reaching the near-term goals. Hence, creating & updating time relevant and specific plans will help you significantly in allocating your financial resources appropriately.
Get Out of Debt
The burden of debt can be a plague for you when it comes to achieving financial stability. The sooner you get rid of this plague, the better it will be for you! Hence, once you start working on your personal finances, make it a point to not miss any debt payments.
If possible, direct any excess cash towards a debt account. Keep doing this every month, targeting and eliminating each debt account and you will find yourself free of debt after some time. Freedom from debt will ultimately reflect positively in your personal finances in the form of more cash available for you to spend, save or invest.
Don’t Hesitate In Seeking Financial Help
Once you believe that you have enough savings and you wish to build your wealth, you can turn to financial planners and advisors. These experts will be able to provide you with a detailed cost and benefit analysis of each of your investment options and will give you suggestions that will help you in maintaining your personal finances well in the longer-run. So, don’t hesitate and contact one if you have idle cash wasting away in bank accounts!
About This Personal Finance Guide
This guide offers the most insightful articles, educational videos, expert insights, specialist tips and best free tutorials about personal finance from around the internet. The learning guide is split into four levels: introduction, basics, advanced and expert. You can learn at your own pace. Each item shows an estimated reading or watching time, allowing you to easily plan when you want to read or watch each item. Below you’ll find a table of contents that enables you to easily find a specific topic you might be interested in.
Personal Financial Planning Theory
Financial planning theory is the same for business budget planning as it is for personal planning. The theoretical planning involves five simple steps that allow you to identify your budget’s potential and set financial goals for your personal budget.
What Is Personal Financial Planning and Why Is It Important?
Financial planning is important because it ensures you’re not just working for your money, but that your money is also working for you: Planning puts a roadmap to your finances, maximizing each dollar — no matter how many you have.
Principles of Personal Finance
You’ve probably heard “patience is a virtue.” This is a vital lesson in finance as well as in life. The desire for immediate gratification, or impatience, is another natural and childish trait. When left to run a muck, this trait leads to an unnecessarily expensive lifestyle and uncontrolled debt.
Common Financial Planning Mistakes
Many people earn, spend, save, and invest their money without a great deal of thought or planning. They have only vague goals and don’t analyze whether their limited financial resources are being put to the most productive uses to achieve those goals and provide financial stability. Without a financial plan and accompanying tools such as a budget, you’re going to have a tough time knowing where you’re going or how best to get there.
How Budgeting Can Improve Your Life
Do you know how much money you saved last month? Do you know how much you spent on food, gas, clothes, random stuff you probably didn’t even need and already forgot about?
If you answered “no” to either of these questions, you are likely missing out on being able to save a ton more money than you are currently.
How to Create a Personal Budget
Even if you don’t use a budget spreadsheet, you probably need some way of determining where your money is going each month. Creating a budget with a template can help you feel more in control of your finances and let you save money for your goals. The trick is to figure out a way to track your finances that works for you. The following steps can help you create a budget.
How to Apply Risk Management to Your Personal Life
Risk management is everywhere in business, but what most people don’t think about is that risk management is also in our daily lives. Every choice we make has a consequence and a reward. I recently sat down to speak with Ffx Academy founder, Patrick Kenney about ways people can apply risk management in their personal lives.
Steps to Creating a Smart Financial Plan
Through thick and thin, in good times and bad, the people who are successful at setting goals and achieving them — at least financially — are those who create a financial plan and follow it. Indeed, if you want financial security, having a good plan is the only way to achieve it.
The good news is that it’s not hard to create one — and here are eight simple steps to help you do so.
Tax Planning Tips
It’s smart to look at ways you might minimize your tax liability. That’s especially true for 2018, the first year that the sweeping new tax legislation (commonly known as the Tax Cuts and Jobs Act) generally applies. In light of the new income tax rates and significant changes to traditional deductions, it’s particularly important to speak with your tax advisor, says accountant Vinay Navani, of Wilkin & Guttenplan P.C. speak with them about some or all of these ideas.
Steps to Building a Complete Financial Portfolio
This step-by-step guide empowers you to take action by building a complete financial portfolio. This means that you have fully funded retirement accounts, are debt-free, have a six-month emergency cash reserve, own diversified investments across different asset classes, and invest in yourself.
How to Achieve Investment Portfolio Diversification
Diversification is a familiar term to most investors. In the most general sense, it can be summed up with this phrase: “Don’t put all of your eggs in one basket.” While that sentiment certainly captures the essence of the issue, it provides little guidance on the practical implications of the role diversification plays in an investor’s portfolio and offers no insight into how a diversified portfolio is actually created.
Successful Investing and Portfolio Management
At its core, investing is simple. That doesn’t mean it is easy, just that the behaviors necessary for success are fairly straightforward. By reminding yourself of what they are, and always keeping them in the back of your mind, you can improve your odds of reaching financial independence as you amass a collection of assets that create passive income.
What You Can Do to Avoid Investment Fraud
Fraudsters are counting on you not to investigate before you invest. Fend them off by doing your own digging. It’s not enough to ask for more information or for references – fraudsters have no incentive to set you straight. Take the time to do your own independent research.
Types of Securities Fraud You Must Avoid
Sixteen of the most common securities frauds are listed below. Study this list and become familiar with the common characteristics of each fraud so that you recognize it when you see it and can avoid getting duped.
Educating yourself about investment securities fraud is the best defense against becoming its next victim. Once your money is gone, you can’t get it back. Protect yourself starting today.
Best Budget Apps and Personal Finance Tools
We sifted through these budgeting and saving services, selecting the most helpful in a variety of categories. Whether you need something that actually pays your bills for you or simply lets you know when your bank account is running dry, the solution is on this list. Bonus: Many of these tools are free.
Tools and Tactics to Do Your Own Financial Planning
A good financial adviser asks questions to understand a client’s finances and goals; do-it-yourselfers can find tools to replicate those steps. The internet is awash with information, including tools for creating (and keeping to) a budget, seeing how much home you can afford, and calculating loan payments or your readiness for retirement.
The Best Personal Finance Software
Take a look through the selection of free tools we’ve collected together, and you should find something that suits your personal finance needs, making it easier to keep track of your money. This free personal finance software could hopefully save you some money too or, at the very least, see where you’re currently spending it.
Personal Finance Case Study: Young Couple Overwhelmed With Debt
This personal finance case study focuses on a younger couple who are completely overwhelmed with debt and desperate to get their financial lives turned around before the birth of their first child. Their goal is to reduce their consumer debt over the next few years and start saving for retirement and establish college funds for their children.
An Honest Look at The Personal Finance Crisis
Millions of baby boomers are moving into their senior years with empty pockets and declining choices to earn a living. And right behind them is a younger generation facing the same challenges. In this deeply personal talk, author Elizabeth White opens up an honest conversation about financial trouble and offers practical advice for how to live a richly textured life on a limited income.
Let's Get Honest About Our Money Problems
Struggling to budget and manage finances is common — but talking honestly and openly about it isn’t. Why do we hide our problems around money? In this thoughtful, personal talk, author Tammy Lally encourages us to break free of “money shame” and shows us how to stop equating our bank accounts with our self-worth.
Further Reading: Best Personal Finance Books
The Simple Path to Wealth: Your road map to financial independence and a rich, free life. In the dark, bewildering, trap-infested jungle of misinformation and opaque riddles that is the world of investment, JL Collins is the fatherly wizard on the side of the path, offering a simple map, warm words of encouragement and the tools to forge your way through with confidence.
Get a Financial Life: Personal Finance in Your Twenties and Thirties. From tackling taxes to boosting credit scores, Get a Financial Life can show those just starting out how to decrease their debt, avoid common money mistakes, and navigate the world of personal finance in today’s ever-changing landscape.
The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness. Design a sure-fire plan for paying off all debt—meaning cars, houses, everything. Recognize the 10 most dangerous money myths (these will kill you). Secure a big, fat nest egg for emergencies and retirement!
The Compound Effect. No gimmicks. No Hyperbole. No Magic Bullet. The Compound Effect is a distillation of the fundamental principles that have guided the most phenomenal achievements in business, relationships, and beyond. This easy-to-use, step-by-step operating system allows you to multiply your success, chart your progress, and achieve any desire.
Further Learning: Best Personal Finance Courses
Personal & Family Financial Planning. This course will address many critical personal financial management topics in order to help you learn prudent habits both while in school and throughout your lifetime.
Financial Planning for Young Adults. This course is designed to provide an introduction to basic financial planning concepts for young adults. The FPYA course is organized across eight separate modules within a 4-week window. Topics covered include financial goal setting, saving and investing, budgeting, financial risk, borrowing and credit.
Personal Finance Masterclass – Easy Guide to Better Finances. This is a course that teaches normal people like you the skills and knowledge to truly understand how money works. It shows you the path towards financial freedom.
Personal Finance Course by Purdue University. Manage your money more effectively by learning practical solutions to key investment, credit, insurance and retirement questions.