WHAT IS PERSONAL FINANCE?
Personal finance refers to the management and handling of financial activities like budgeting, investing, saving, mortgaged, risk allocation and includes personal banking, future planning for desires and goals and any such activities to enable those goals encompasses personal finance, it can be for a family or for an individual and requires some level of financial knowledge such as investment opportunities, tax laws among others.
WHY PERSONAL FINANCE IS IMPORTANT?
Finance has always been a very significant and important aspect in our life specially in the present world as it has become even more significant than ever. We should be financially literate to find opportunities and keep ourselves up to date with the world so as to be aware of any type of risks that may arise. Finance plays a large role in deciding the quality and direction of life of a human being in the current social and economic environment. For personal and family financial growth, personal finance plays a major role.
PROCESS FOR PERSONAL FINANCIAL PLANNING
- Looking at the present, i.e. evaluation where we stand, how the situation today is faring, to get a better understanding of weaknesses and strengths.
- Setting up goals as per the preference is pivotal as to the direction in which one should go ahead in the future.
- Identifying all the different courses of action that can be taken in the present scenario and evaluating the cost and time frame and associated risks with each such course of action.
- Evaluating all the identified alternatives and looking at each option cons and pros given the limitation of resources and choosing the alternative by mitigating the risk to a acceptably low level.
Implementing the chosen strategy or action i.e. time to play ball, actually making the investments completing the procedures.
Following up is mandatory as the conditions are always changing and accordingly one must be dynamic and evaluate from time to time to get the best possible results.
TYPES OF PERSONAL FINANCE
- Banking denotes the basic banking functions of facilitation and maintaining accounts of the transactions.
- Loans and mortgages refer to the services or facilities which enable a person to get leverage and purchase an asset to advance its objectives.
- Investment to be made by evaluating all the options and alternatives and opting out the best way out given the acceptance of a specific amount of risk. For instance, investment in real estate, fixed deposit, stock market, among others.
- Counselling can be obtained to get a bird eye view and a better picture of the scenario in hand and it acts as a fresh perspective and guiding force.
PRINCIPLES OF PERSONAL FINANCE
The principle of savings funds is the best when it comes to managing finances as the more we save, the more we will have and build.
There are a limited number of resources and any number of ways in which those resources can be consumed; we must be prudent and prioritise certain spending over others to get the best out of the limitations.
3. Restraint :
Living a life where we do not indulge in activities that exhaust our cash flows rather than enhancing it that is stopping ourselves from not getting in wasteful expenditure such as buying unnecessary stuff.
We should not work for funds; rather build wealth and make it work for us and create ways to have multiple sources of income.
We must always make efforts to impart knowledge in terms of finance and keep improving so as to have a better understanding and make better decisions in the coming time.
Personal finance is very wide in itself and today's scenario management of finances has become of utmost significance. There is always an alternative to hire some professional to manage all personal banking and finances. Almost all the banks and financial institutions nowadays provide such services where they manage your funds. For the same, you can get in touch with our experts at ZFunds.