THE CONCEPT OF PERSONAL FINANCE

Money is a tool that can buy your basic needs. It can be used to help others or give you the freedom that you dream.
But, what good is money if you do not know how to handle it properly?
As they say, “A fool and his money are soon parted”.
When you foolishly spend your money on unimportant things, you’ll end up losing all of it.
Money management is part of our daily life from monitoring cash inflows to calculating the outflows.
When you encounter the words “Money Management”, you may think it’s all about budgeting.

Financial planning is not merely budgeting. It’s a systematic approach to handling money and issues related to personal financing.
“The person who does not know where his next dollar is coming from usually does not know where his last dollar went”.
When you have a lot of money in your wallet, it’s easy to lose track of where you spent each dollar. Then, you’ll end up spending much more than you initially planned. Personal financing can benefit you in so many ways. One of which is knowing exactly where your money goes. Moreover, personal finance management gives you a holistic view of your income versus your expenditure. Aside from not spending on unnecessary things, you find a better use for your money. You can save it or invest it to increase your income further. By handling your hard-earned money properly, you stay on the path towards your short term and long term goals. Let’s say you are hoping to buy a car in 6 months, but you also want to save up for your dream wedding in 2 years. Without money management, things can get out of hand.
You must know how much you are earning and spending, what needs to be adjusted, and how realistic your timeline is. But with careful planning for your finances, you can accomplish your goals smoothly. Now the major concern is, how do you create a personal financial plan that works? Here are simple steps to easily incorporate financial planning in your daily routine:

1. Assess your current economic situation and set your financial goals

First, understand your current financial situation so that you can create realistic financial goals. Know how much you earn and spend regularly.
Then, set your short term goals and long term goals.
It can vary from paying off debt, going on a vacation, or retiring early.

2. Set a budget and a strategy

Here’s where you create a strategy that works for you so that you can go from where you are today to where you would want to be financially in the future.
You have to evaluate and track your cash flow.
Should you have an emergency fund?
What do you need to save up for?
Do you need to cut your expenses?
Do you need to take on a side hustle to increase your income?

If you need your daily dose of caffeine and you’re used to buying a cup of coffee from your favorite coffee shop, maybe you can find a cheaper alternative.
Perhaps, you can make coffee for yourself to lower your expenses and allot your coffee budget to your savings or investment.

3. Implement your financial plan

At this point, you implement your financial plan.
This is where your discipline and commitment come into play.
Be conscious of the financial choices you make to stay on track in reaching your goals.
Lastly, keep track of your financial plan and re-evaluate if necessary.

The Bottom Line

Through financial planning, you have an idea with what’s happening with your hard-earned cash. You are better off in terms of debt, savings, and investment. With these simple steps for planning your personal finances, you become prepared for any surprises or financial hurdles that might come your way.
It gives you a sense of solace and confidence that you are in the right direction and that you can reach your financial goals.

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ABOUT THE AUTHOR

Jun Sing Tan

I help young adults and working professionals achieve their financial goals with a full suite of risk management and wealth accumulation solutions. I firmly believe that financial education should be easy and achievable for all. I am committed to service and hope to be your one stop financial solution.

author

Jun Sing Tan

November 23, 2020

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