Everyone has heard about Personal Finance. It is one of those phrases that accompany us forever, but do you know and understand its meaning? Or better yet, do you know how to rule your own?
Personal finance is a term used to talk about how a person manages their own money. That includes saving, investing, paying taxes, getting insurance, building a retirement plan, and getting an education. Besides, how it looks our daily, monthly, and annual budget, among other topics.
Think about yourself as an enterprise. A company has incomes and expenses, but most importantly, it has a growth plan for obtaining more profits and benefits for everyone involved. The board’s job is to review how that particular company is doing it and how it could be more efficient in the very process.
Leading your finances is similar. No matter if now you are a company of one, or if you rule a big family. Your mindset should point to managing your current resources as a CEO would do it.
What is the goal?
The goal of being aware of your personal finance is to give you perspective. If you had a clear view of your current financial status, then you could start planning your next steps to achieve a new stage in your life. What do I have right now? What is the source of my regular income? How much am I spending? What kind of debt do I have?
This exercise is not about how much I have. It is more about what do I need to make a significant change in my life. As you can see, it does not matter if you own a lot or little. In fact, the more someone has, the more conscious it should be about this.
The first steps
There are some rules of thumb to apply at the beginning of this financial self-knowledge process. The main one is to get paid what you are worth. It is tricky, but people are often not aware of the value of their type of work in the marketplace.
Having a general idea of how much peers are earning in your work field makes it easier to determine if we are receiving fair compensation. Depending on the answer, looking for better opportunities would seem more plausible.
The second idea, spend less than we earned, another problematic issue. Nowadays, it is easy to let you go and succumb to expendable things in a given time of our lives. Identified essentials in our budget would help us evaluate those which could be left out without compromising our wellness.
More ideas to approve Personal Finance 101
If you are trying to get ahead financially, you must pay your credit card debt. Easier said than done, but it’s worth trying. Knowing how much you owe, how many cards, and what kind of purchases are the origin of the debt will help you prioritize. After that review, making an own payment schedule is the next stage. Pro tip: Paying just the monthly minimum is not a way to get rid of that type of commitment.
Experts always recommend buying in cash (or using your debit card) whenever you have the opportunity. This practice results in a straightforward way to evaluate if that purchase you’re making is necessary.
Last, saving. Please, keep in mind that there is no such thing as the ideal percentage of saving. Even more, the verb it does not refer to cash only, investing or not spending more than we should, fits in this advice. For instance, investing in a property, or doing minor repairs by ourselves, are ways to save money.
As usual, all of these advice pieces are general proposals that need contrasting inside everyone’s particular reality, but you can see them as a map or as a blueprint. First, you need to know where you are currently stand to then, choose a new position to go, and finally, draw the line to get there.
Remember, no matter how straight that path looks in theory, once you start to walk, the way will always be different, with plenty of unforeseen obstacles.