personal finance essay

personal finance essay

The Importance of Personal Finance Management

1. Introduction

Modern lifestyle means that many of us live beyond our means, and we often go into debts or even bankrupt. Personal finance management is important because it gives the individual a good guide on how they should budget their earnings, such that they can manage all their monthly expenditure and at the same time put some money aside as savings. It is also important because it gives the individual an opportunity to gauge their money and comprehend how much money is entering and coming out in the form of revenue. This will also give the individual an opportunity to improve their money inflows. Yet, those individuals who are wealthy, personal finance is important because it teaches them how to manage all the money that they have accumulated over the years. The importance of this is that in the case of an emergency, they could use the accumulated money. Anyone who never managed their money very well in the previous years soon finds themselves in a financial mess.

There are many people who often talk about the importance of personal finance, but not many of them actually understand the importance of personal finance management. When you talk about personal finance management, you are talking about managing your money. It can also include things such as banking, budgeting, retirement planning, and investments. No matter who you are, personal finance management is significant because everybody should control their spending in terms of their income, expenditures, and how they spent their money between their various wallets, bank accounts, credit cards, and credit facilities.

2. Understanding Personal Finance

What One Should Know With money being the most essential part of people’s lives and managing it being sometimes a tough task, there are financial pitfalls that can be avoided if one has the right information. Money management as a subject offers a wide range of opportunities to anyone taking personal finance. This includes professional employment positions in financial institutions and businesses, consultancy services offered to those who need it, and also personal development for self-employed individuals. Whether it is short or long-term decisions that an individual needs to make, personal finance will let one have access to the money they need, become independent, and more knowledgeable in how they can create a solid future for themselves and their loved ones.

Personal finance is the process of effective personal financial planning, which is aimed at meeting set financial goals that may include short, medium, and long-term financial goals. The simplest way to view personal finance is understanding it as what a person or family does to meet their financial needs and to accomplish their life’s aspirations and dreams. Setting up financial goals can be relatively simple, but achieving them requires hard work and the right financial management techniques. The basic activities that are included in personal finance are goal setting, investment planning, financial planning, budgeting, income tax management, estate planning, saving plans, retirement planning, credit and debt management, life and general insurance, and health management, to name just a few.

3. Strategies for Effective Financial Planning

If your only goal in life is to get rich, then this probably is not the best book for you to read. On the other hand, if your lifestyle requires a great deal of money, and you truly desire this lifestyle, then this is the book for you! There are only two ways to get large sums of money. The first way is to borrow it, and the second way is to make it. If arranging your personal finances involves a large number of expenses and some of them are beyond your monthly paycheck, then undoubtedly you will find this book of some interest. We hope that you realize that managing debt comes before the other aspects of your personal budget. If you’re young, and it’s important that you achieve a goal in your life, the quicker you start managing it, the more successful you will be.

Having seen the financial and emotional gains people derive from personal budgeting, we are now passing this experience on to you. Initially, just begin by putting your spending into money value per day terms. The reason we say daily is that nearly every budget item you will ever have is measurable by day (and it is personalizable by night) but if you use a weekly or monthly time period, there will be almost as many different methods as there are people. However, other periods work just as well if you like them better. Another beginner’s way to start is to begin with some of your large, long-term goals (especially if an actual purchase is envisaged) and see how they look when you reduce them to a daily rate.

4. Building a Strong Financial Foundation

Corresponding to building construction that needs a good foundation to prevent it from collapsing due to major and minor earthquakes, we also need to build a foundation to support our financial life. If our personal life has become so faint because we only manage our personal finances, our well-being will also be neglected. The strength of the financial earthquake that will hit us, we don’t know when it will come. Regardless, shouldering the needs of our financial life is our responsibility. Don’t be the shoulder of the government, donors, and others just for your financial life. Too many shoulders of the shoulders we end up either willingly or inadvertently leaving them with debt due to financial mistakes and eventual collapse of our assets, even debt that leads to bankruptcy. According to Steve Down, building a solid financial foundation can bring us financial independence while increasing our economy can bring about economic independence in our communities.

A few months ago, I wrote an article about personal finance management. In that article, I discussed the management of all the finances that a person receives. From employment checks to sales checks received from personal merchandise, these finances must be recorded and managed to build the foundation for a sound financial life. My goal in writing the article mentioned earlier is to show the importance of these financial records in bankruptcy cases through financial counseling programs. This is not mere bookkeeping management, but it is a method of recording and managing all kinds of financial flows that are convertible. It records the amount received from any source to any source, for who and for what, then saves that record from worry and future headaches due to financial mistakes.

5. Conclusion

Life is unstable and unforeseen circumstances may happen at any time. Despite this, one should regard the future and plan now for such an unexpected burden. Retirement is a concern for many today. No one knows what the future holds. To avoid future financial hardship, proper preparation must be done. In this regard, it is important to seek the advice of a good financial advisor. It is important that one understands the options when planning for future investments. Currently, too many people pay much attention to their retirement planning during times of financial difficulties and thus secure their financial future. The personal indebtedness of people in financial difficulties is often the cause of such concern and follows the seeking of sound financial advice. Logic should dictate that we plan for unforeseen events like retirement. By ensuring that individuals have done the necessary financial planning, the best advice is also heard. By then, it is often too late and the necessary economic knowledge is lacking. Ensure that sound financial advice is sought from now as it is never too late to continue planning towards your financial distress.

Over the past number of years, the author realized the importance of managing one’s personal finances responsibly. For that reason, the author decided to provide readers with a well-written article. In the article, readers will find the what, why, and how. These findings are based on research conducted by the author. From research done, certain useful advice was discovered. Research shows that it comes down to, amongst other things, where one finds oneself in life. Not everyone is in the same boat. The NABC-method was used as the basis for this article – what, why, and how. The idea in the method was to create innovative thinking, not only to solve problems, but to win and retain clients.