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Many people talk about personal finance, but broke people seem to be the ones giving the most advice. What exactly is personal finance anyway?
Making Personal Finance Personal
Personal Finance is the name given to everything related to the financial scope of an individual by applying the same financial concepts used in a company. This means that in your finances, you will hear about budgeting, planning, and cash flow. These are just some of the essential topics under the umbrella of “Personal Finance.”
In this article, we will give you six easy personal finance tips that lead to a big payoff. These tips will provide you an insight into what differentiates millionaires from the rest of us when it comes to personal finances.
Are you struggling to pay off your credit cards? Never have any extra money to invest? Why is all of this so hard?
It’s time to understand precisely how your knowledge of finance is fundamental to all of this. Here are our tips!
Becoming Your Own Personal Finance Expert
Understanding personal finance is as essential as knowing the way home, learning how to use the internet, or your cell phone. Money is an integral part of our lives, without which we cannot access anything: from essential items to leisure.
Those who do not understand personal finances are hostage to a system created to keep people indebted and unable to invest. To put it another way, a scheme to keep people financially disadvantaged.
Don’t think that everyone who drives an expensive car, lives in a big house, or has luxurious habits understands personal finance or has any money. In fact, these are strong indications of indebtedness and total unfitness in personal finances.
Often these people who “appear to be” are highly indebted to “maintain an image” that, if they dedicated themselves to their finances, would realize that they are at odds with their financial reality. The knowledge of personal finances will allow you a virtuous circle that begins with the care of your budget and financial self-knowledge, culminating in investment and personal enrichment.
Commit To Living Differently
To start your financial planning, the first step should be to gather as much information as possible about your economic reality. Identify your current account and investment statements, everyday expenses, monthly income, and any other documents that will help you in the first analysis of your financial situation.
It is vital to understand how much money you have in relation to how much debt you owe to know the real equity situation. The objective is to prepare your financial planning in an appropriate and realistic way.
Six Personal Finance Tips You Need To Follow
These steps will cover the need to pay attention to interest rates, understanding your current investment allocation, and your current risk tolerance. To give yourself the best chance at success, you need to be reasonably familiar with budgeting, debt payoff, and investing for the future.
1. Organize Your Personal Accounts
Being organized is essential for those who want to develop financial control and is also one of the basic requirements for proper personal financial planning. The good news is there are several ways to organize personal accounts.
The hardest part of organizing is starting in the first place. If you commit and begin, your chance at success will significantly improve. Organize your accounts by checking, savings, investments, debt owed, etc. Put them in separate categories, so you get an overall picture of your current financial situation.
Track your investments for free with Personal Capital. It's how I track my pension and retirement funds.
I use a spreadsheet in Microsoft Excel to stay organized, but you can use whatever you are most comfortable with – including a piece of paper and a pencil.
2. Use A Monthly Spreadsheet Using Excel
Keeping track of your finances using Excel is relatively simple, and you do not need advanced knowledge to do it. There are many budget spreadsheets available online, and some even offer graphs that facilitate the visualization of expenses and revenues.
Just remember that it is essential when preparing financial planning and, consequently, your spreadsheet, that expenses and income are very well detailed and categorized.
Avoid “items in your spreadsheet that are named “Others” and “Miscellaneous,” because for planning to work, details are essential,” says William W. Blair, finance consultant at Writemyx and Nextcoursework. There’s no point in spending and not knowing where the money went.
Also, remember that a credit card bill is a form of payment and not a group of expenses. Therefore, when using them at supermarkets, the amount of this expense should be allocated to “supermarket” expenses and not to a “credit card” expense.
3. Define Your Financial Goals And Projects
Many people begin to save money several times and at different times in their lives. They do this even for relatively long periods, in some cases even for years, but they fail to see the purpose of saving and end up spending the money overnight.
There must be a specific objective for your money: the specified reason serves as an additional motivator for you to save and invest better what you are able to save.
Define your goals as short, medium, and long term. From there, make projections of how much money you will need to accomplish your goal. Depending on your timeframe, you should choose different investments (more or less risky, with greater or lesser potential for return).
4. Learn That Personal Financial Education Is Profitable Knowledge
Financial education is much more than just talking about money or feeding spreadsheets. Financial education is synonymous with freedom!
By fully experiencing the concepts of financial education, people come to value management and conscious choices, discovering that achieving dreams is faster (and cheaper) when done with planning.
Financial education is about valuing resources, learning to build more and more with less.
5. Adjust Your Habits To Build Good Personal Financial Planning
Changing or adjusting habits is essential for anyone seeking financial independence as a lifestyle. The transformation begins by abandoning consumption only for status.
After all, the transformation of financial education “presents us with a real-world where the successful person does not feel accomplished by demonstrations or ostentation, but by personal achievements,” says Lisa E. Williams, blogger at Britstudent and Australia2write.
6. Live According To Your Financial Condition
Part of the discipline that is so necessary for the success of your financial planning comes from the understanding that you must live according to your financial condition. Spending on luxury items or travel can be tempting, but in a few months, you tend to regret the momentary pleasure.
So, care for your long-term financial health and make smart choices.
Discipline is the key to success! As we said, what will make the difference between success and failure is your commitment to putting into practice everything you learned in this guide. So, make personal financial planning a priority.
Financial planning is a powerful weapon and needs to be a priority in people’s lives. To build your budget, keep in mind you need a lot more willingness and commitment than advanced finance knowledge. Still, for more complex matters, it makes sense to seek help from qualified professionals.