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What is Personal Finance?

Updated: Jun 13, 2022

The topic of personal finance is a big one, made up of many pieces, from saving for retirement to making sure your credit card bill gets paid on time every month.

1. Personal Finance: the way how you manage money

Personal finance is not just about making money. It’s also about managing, spending, and saving it. It’s about making decisions, plans and choices that will improve your financial situation for the long-term.

2. Planning & Smart Decision-Making

Getting all of your financial ducks in a row takes planning and smart decision-making.

To plan, you have to be aware of your needs, goals, and priorities. You also need to be aware of what's going on in the world around. It will shape your decision about how much money you should set aside for savings each month or how much debt it would be safe for you to take out now.

3. Long-term Planning

Long-term personal financial planning includes retirement savings, insurance, and investments. But, let's start with easier steps like saving for your dream car.

Here are some quick tips to get you started:

  • Open up a savings account that you can access at any time.

When setting aside money for a goal, it's helpful to have a separate bank account that you can use when needed without having to worry about affecting your regular budget or spending habits.

A good rule of thumb is to put away 10% of each paycheck into this fund until it is full (or whatever amount feels comfortable).

  • Set specific goals for how much money you want or need to set aside in order to achieve them—and then stick with those plans!

4. Short-term Planning

Let's say that you want to take a vacation to Italy in the next few months. You know it will cost $2,000, but don't know how long it will take you to save up for the trip. Your short-term financial planning includes saving money regularly so that you can pay for this big expense when the time comes.

Short-term financial planning also helps people prepare for other large expenses such as college tuition and home repairs. The key is that these huge expenses are coming soon; they're not something you should plan for years down the road.

5. Save for the Emergency Expenses

It's important to have a solid understanding of your budget and not let any expenses slip through the cracks.

The first step is creating a list of all your fixed monthly expenses (like rent), as well as one for variable expenses (such as groceries).

Once you have your lists in front of you, think about whether or not these expenses are realistic given both your income level and the cost of living where you live.

If they're too high, there's no shame in negotiating with providers like cable companies or utilities.

If they're too low, consider ways that could be adjusted without sacrificing quality or comfort like getting rid of cable altogether or swapping out expensive home decor for thrift store finds).

In summary...

Personal finance is a topic that everyone can benefit from learning about. It's not just for people in high-paying jobs or for those who have a lot of money to invest—it's for all of us, because we all have things that matter to us and need to make sure we're managing our money in the best way possible so we can be happy.

No matter what your age or income level is, it's never too early (or too late) to start thinking about your future!


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