There are numerous words, phrases and quotes associated with personal finance, including investment options, saving, budgeting, bonds, IRAs, loans, mortgages, refinancing, shares, credit score, debt, social security, mutual funds, stocks, stock market, bond market, financial goals, portfolio balancing, insurance, interest rates and enterprenuership. Which is the reason most of us have trouble understanding personal finance.
I think futher complicating this important issue beyond our understanding, is one of the reason most of us languish in poverty and debt.
That said, if you really want take control of your finances and manage your money better, you need to be familiar with these terms.
I know, it sounds scary and crazy, but believe me it is not as complex as you have been made to think, if you can remember this equation:
Make More Money+ Spend Less + Save as Much as You Can = Better Money Management
In this post, I would like to make your financial management easy to understand and undertake. And to be honest, I think it’s fairly easy to understand what personal finance is once you put aside all the big words the so called gurus and financial advisors throw at you.
Financial Planning
Now, whether your aim is to increase your net worth, become debt free, retire early, payoff college loans or credit cards, or simply to better your money management skillsy, you need an action plan.
Personal finance planning comes down to 5 steps. Get them right and you are golden.
1. Assessing Your Financial Situation. First, you need to sit down and figure out your financial situation, how much you earn, how much debt you have, what is your expenditure, how much you have managed tsaved up etc. You can employ a software to do that, or you can do it the old fashion way using pen and paper. It doesn’t really matter how you do it, the important thing is that you do it.
2. Setting Up Your Financial Goals . Just like all other areas of life, financial goals will help keep you on track. The goals can be short term, medium term or long term. For a biginner, I would start with very small and achievable goals that can be accomplished fast. Reaching short term goals are easier and helps boost your confidence, giving you more motivation to keep going for the long run. A short term goal, for example, can be saving money to pay off a small credit card loan.
3. Creating a Financial Plan. The plan is simply your road map for achieving the goals set up in step 2. It's your blue print, your guide. It doesn’t have to be complex. Simply write down what you need to do in order to reach each of your goals. For instance, if you owe $600 on the credit card you are trying to payoff, and you want to pay it off in 12 weeks time, you will need to save $50 weekly.
4. Taking Action. You can plan until the cows come home, but if you don’t act, your dreams are not going to be realised. The most important part here is discipline. You must be committed if you want to accomplish your goals. Following our previous example, you would, come what may, put aside $50 every week so you can pay off that credit card in 12 weeks time.
5. Monitoring & Changing the Plan if Necessary.Your car unexpectedly breaks down and it will cost you a $2000 to fix it, your working hours get cut down, life is hectic and no matter how much you plan, unexpected things will happen and you will have to deal with them. Now, you can either allow it ruin your plan, or you can simply re-examine your financial situation and make necessary adjustments so you can proceed. Nonetheless, if you want to reach your financial goals, you need the second choice.
Where to From Here?
Start by browsing mysensiblecent.blogspot.com, use our page links to find specific topics of your interest. You will find advice, tips, and step by step guides on everything from ways to make that extra cash, save for and on everything life throws at you, becoming debt free, insurance credit cards, early retirement and much more.
Read, learn and act. That is a sure way you are going to get your personal finance in order and become a better manager of your money.
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