Updated: May 3
Personal finance primarily refers to the financial management of a person’s or a family’s resources. It’s a fact that you need money in order to afford basic necessities in life. Money impacts all of us and our decisions have an impact on our finances.
Financial literacy is similar to learning any other language. You have to use and apply your knowledge to stay proficient. There are certain terms and concepts you need to be aware of, and practice makes perfect when you’re building your awareness with money matters.
Other facets of personal finance include budgeting, banking, planning for retirement, insurance, and more. The term also stands for the various financial institutions which offer financial services to a person during their lifetime.
Personal Finance is Essential because it Helps Meet Money & Security Needs, it Helps in Budgeting, Saving & Spending, it increase Cash Flow, Keeps Off Unmanageable Debts and Helps Grow Our Assets.
Providing for your family’s financial security is an important part of the financial planning process. Having the proper insurance coverage and policies in place can provide peace of mind for you and your loved ones.
A proper financial plan considers your personal circumstances, objectives and risk tolerance. It acts as a guide in helping choose the right types of investments to fit your needs, personality, and goals.
Standard of Living:
The savings created from good planning can prove beneficial in difficult times. For example, you can make sure there is enough insurance coverage to replace any lost income should a family breadwinner become unable to work.
Better financial understanding can be achieved when measurable financial goals are set, the effects of decisions understood, and results reviewed. Giving you a whole new approach to your budget and improving control over your financial lifestyle.
A nice ‘cushion’ in the form of assets is desirable. But many assets come with liabilities attached. So, it becomes important to determine the real value of an asset. The knowledge of settling or canceling the liabilities, comes with the understanding of your finances. The overall process helps build assets that don’t become a burden in the future.
It used to be called saving for a rainy day. But sudden financial changes can still throw you off track. It is good to have some investments with high liquidity. These investments can be utilized in times of emergency or for educational purposes.
Finance is an important aspect of everyday life. Keeping finances in balance is a vital thing to be a successful individual in virtually all areas of life. It is of utmost importance that children and teenagers get taught about the importance of finances and are able to see their personal finance in action. This will ensure, as a young adult, they will know even the basics of how to handle money, deal with credit, maneuver insurances and other basic forms of finances.