Personal finance is much more than just a paycheck.
It’s the decisions we make and the things we do with our money that will have an impact on our lives and futures.
Personal finance includes saving for retirement, paying off your mortgage, buying a home, starting a business, and getting out of debt-just to name a few!
It also includes how you make purchases so that you don’t go into debt or spend more than what is reasonable.
The importance of personal finance
Personal finance is all about personal control. The more personal control you have over your own personal finances, the better you will be able to plan for your future and ensure that you are on the right track.
Personal finance is also about personal responsibility: it’s up to you and not anyone else to make good decisions with your money.
If you have personal control of your personal finances, then you don’t need checklists or reminders or people telling you what to do – you already know!
Steps to take for personal financial success
Review your personal budget
Start with your personal budget. Review what your personal expenses are on a monthly and yearly basis. For instance, personal expenses could include rent and utilities (monthly) or personal income taxes (yearly).
You should also review the personal assets you have acquired like stocks, mutual funds, and bonds. You may also want to review the amount of debt you have for everyday purchases like a car or mortgage.
It is recommended that you list your personal assets from most expensive to least expensive to create an accurate personal balance sheet.
Set personal financial goals
You should create personal financial goals, or personal goals, for yourself that you want to achieve over the next year or five years. The personal financial goals you set for yourself should be personal and realistic so they can be accomplished.
Some personal finance personal goals could include paying off your mortgage, starting a business, or retiring by the age of 50.
The first step in reaching your personal financial goal is to create one…
Create a personal emergency fund
The next step in your journey towards personal financial success is to create a personal emergency fund.
This should be a fund saved up for the unpredictable moments that happen in life.
Emergencies might include things like a medical emergency, job loss, or when you need to put out an emergency fire.
You should save up for these emergencies by stashing away $1,000-$2,000 in easily accessible savings account or money market.
Then you can use this money if and when the moment arises without having to go into debt.
Establish a personal retirement plan
The next step in your journey towards retirement is to establish a personal retirement plan.
The IRS will provide some good tips on what you need to know about establishing a personal retirement plan. However, you’ll want to check with your personal accountant as there are many different types of personal retirement plans.
Live within your means
The most important part of personal finance is to live within your means. This not only applies to the amount of money that you make but also to the amount of money that you spend.
Your paycheck might go up by $1,000 next year but if you are spending $1,500 more than you make then this will have a negative impact not just on your finances but on your life in general.
Living within your means is about finding out what is reasonable for your income and making sure that you are staying within those limits so that you can build up savings for future investments or emergencies.
Some people might be tempted to put things on credit cards or borrow from friends and family to buy something expensive they really want. While this might seem like a good idea at the time, it is not in the long term.
If you take the time to establish a personal budget and set goals that are realistic, attainable and based on your needs rather than desires-you’ll be able to live within your means. You can then use this extra money for emergencies or retirement savings which will give you peace of mind as well as financial freedom in the future!