There is doubt that most of you are here to learn the magical formula that will secure your financial future. But, let me tell you a secret, there is no fixed formula!
Moreover, everything depends on how well you can manage your personal finances by budgeting, saving money, planning for the future and making the appropriate investments.
Managing the personal finances is not as easy as it may seem because one has to keep a tab of their expenses and all keep a check on their loans, liabilities, banking products, mutual funds, and all other such monetary expenses.
Glance at the aspects of personal finance
Well, all the financial activities which are done at a personal level fall into the category of personal finances. To manage the personal finances one has to take care and take account of their income, expenditures, long-term and short-term budgeting goals, mutual investments, and also think about their financial security.
This will depend on a number of factors starting from income, expenditure, lifestyle, requirements, standard of living and goals. You must remember to include and analyse all the following things while managing your personal finances:
- Insurance policies
- Loans and mortgages
- Banking and savings account
- Mutual funds, bonds, and equity
- Credit cards
The concrete aspects to put a step towards the aspects of personal finances are:
- Analysis and assessment of your desired cash-flow:
With the help of personal finances, one can easily take care of the cash flow and the expenses into and from their account respectively. Moreover, it helps to assess the liabilities and that is what’s considered for the sake of personal finance.
- Calculating and handling your taxes:
There is no such individual who doesn’t have paying their income taxes. Every year a lot of money from your income goes into paying taxes. But, if the proper investments are planned and done correctly, then you can save a lot of money from going out of your hand in the form of taxes. So, that will also help you to plan your personal financial goals.
- Taking up a basic insurance policy at the beginner level:
Insurance is something which all of us require at some point or another. So, understanding the best scheme for you and investing in that will help you to save and secure your financial future. It also, helps to set long-term financial goals. Moreover, you must remember that personal finance will always involve a 360 degree approach towards financial sustenance and budget planning.
- Savings and investments of all sorts:
Investments can be done in a lot of ways starting from mutual funds, equity, personal provident funds, and many others. When you think about investments do not forget to focus on annuities because these are helpful products that assist in generating a fixed source of income especially for your future and thereby securing your financial condition after retirement.
- Finally, you have to focus on planning for your retirement:
I think most of you have heard about various retirement schemes. Sometimes, it is offered by employers whilst sometimes you might have to do it on your own with the help of Individual Retirement Accounts.
The benefits of personal finance management
Personal finance management may sound like a heavy phrase but it can start with baby steps. Imagine if you can follow a certain plan to manage your finances, then you can finally have that extra cash for going on vacations.
There wouldn’t be a shortage of money for any emergency medical treatment, and you won’t have to worry about how your life will be after your retire. All of this and many more such issues will be covered and backed up by your personal finance management plan. You’ll know where you are spending money, you’ll have a track of the money that you have saved as emergency fund and most importantly you will have a check on your expenditure.
- It well help you to evaluate your financial situation
Practically speaking, the personal finance planning that you will do as you proceed toward your finance management, it will provide you an insight about your financial condition.
Now, this planning will include budgeting along with taking into account all your investments, income, expenditures, and savings. Not only that, it will also help you to invest in the correct bank accounts, policies and schemes. The most crucial part of financial planning is the budgeting because it will give you a clear and distinct picture of your present financial situation which in turn will help you to secure your financial future.
- It will help you make profits from investment plans
There is a plethora of investment plans existing in the market today, and each plan is specifically catered to the needs and requirements of various individuals. The question is which one to choose if you want to make some profit, right?
Well, depending on the money that you want to invest in your current phase of life, you can choose from the various investment schemes but keeping in mind the one that offers the best return. The options range from mutual funds, public provident fund, bonds, categorical insurance plans, equity shares, and of course real estate investments. There might be many other options in the market but these are long-term investments and there are high chances that you will get a good return from them.
- It will keep you alert about where your expenses
When you think about it most of the times you can’t understand where you are spending your money. So, if you are well aware of your financial condition then you have already won half the battle my friend. Now, moving on to the other half is when you actually start acting upon it. Human beings live in a vicious cycle where the money you earn is the money you spend but sometimes the expenditure might just exceed your income, right?
So, in order to sustain life, people need to take care of their current life and also consider their retirement account as well. So, the first step would be to develop an easy-to-follow money-saving checklist. But, wait a minute, you have to follow and adapt it as well.
Only then you are bound to go a long way. Another point to remember is that you should use your credit cards responsibly. Do not go overboard with shopping, my friends! Moreover, do not miss out on the deadline to pay off your loans and debts before deadlines. You must maintain a clean credit score. Additionally, do not forget to keep a tab on your monthly investments; try to close those funds which are not providing much return.
- It will keep you focused towards your money goals
Well, to be financially secured means to be aware of your financial goals and planning. So, remember that you have to build your wealth step by step, gradually over time. Along with that, you also need to keep a check on the financial path which you have laid out for your future self.
One major concept would be to keep some money aside from your income every month. That will be a good practice and it must recur to you as a habit. You have to spend time to work on your very own personal finances because that will create a good profile for your finance management.
Moreover, it will also enhance your portfolio and make it stronger. Another thing to remember is that you cannot let debt get out of your hand if you plan to take care of personal finance management.
- Structure your savings and expenditure
Budgeting and saving are the two most important aspect of managing your personal finances. A lot of times, it might happen that a large amount of money from your income might get spent in a jiffy due to some miscellaneous expenses, lifestyle maintenance, taxes, and other such costs.
Well, technically speaking it is imperative to put efforts in creating your monthly budget so that one can keep some money aside for emergency fund. Now, it entirely depends on you whether you want to invest this money in some schemes or keep it aside for medical purposes.
The best part about saving through personal finance management is that in this era of technology a number of tools and apps can be obtained from the internet. One can easily download them on their cellular devices and also keep a tab of every single penny which they have spent.
- It will be staircase for providing some extra money
An investment if done in the right manner and procedure then it is an investment for life. Therefore, remember to invest wisely. You have to invest a lot of time to get the best schemes and pan that will suit your needs. So, instead of confining yourself to a specific insurance scheme or a set of policies it is advisable to keep exploring to get the most out of it. Investment diversification in various methods will be your key to success! You have to strengthen your portfolio to the best extent possible so that you can secure your financial future with high returns.
- You can control your money with personal finance management
So, once you have your finances sorted, you can say goodbye to stress, and that will also reduce your chances of financial crisis. All in all you can finally be a happier person because you don’t have to worry about the unforeseen events which might need immediate expenditure because your emergency fund is going to rescue you.
Another thing about a good personal financial planning is that it helps you keep an eye on your immediate financial goals and also motivates you to channel your savings towards your retirement plans. Moreover, when you have sufficient control over your own savings and expenses then you will be able to control your money as well.
- Helps in building a better future
Have you heard about the phrase: Make it or break it? Well, the same thing goes when you plan your financial goals. It is upon you and the budget that you create so that you can save money that way. With the development of technology now you can get hold of personal finance tools which will assist you to track and monitor you investments, your expenses, and your debts and will slowly shape your financial future.
- It will provide you unlimited career options
A lot of employers use credit checks nowadays and so it is critical to plan your financial future quite ahead of time. Employers often use a lot of background check before hiring an employee and that is what determines who is best qualified for a job or a promotion. So, if you are well aware and determined about your financial planning, then chances are high that you’ll get selected over a candidate who has the same academic credentials as you.
Utilise tools for personal finance management
Finance management not only deals with managing your money and budgeting but also involves investing in something which will help you grow your net worth. So, here I will mention some of the best application available online which can help you with your finance management.
- Personal capital
- You Need A Budget (YNAB)
- Good Budget
Well, times are tough and it is very important for you to start early on the saving machine so that you can lead a peaceful life after retirement. Moreover, there is no age or time to start. Whether you are in college, or you are working for the past twenty years, you can start managing your personal finances right away.
Moreover, all the above apps will not only help you to keep a tab on your expenditure but they will also give you a head start while you start saving and planning your financial goals. Remember to make both short term and long term financial goals and never miss your deadline to pay a debt.
Keep saving and secure your financial future right now!
About the author:
Maja Kazazic is one of the most reputed professors, who has been guiding a lot of students for managing their personal finances. He is known for his unique and innovative methods of teaching. He has more than six years of experience and has an MBA degree from Harvard Business School. He is a financial management expert and also works as a reputed blogger. He is also quite popular for his easy to understand language.