Personal Finance is an act of making financial decisions and activities that an individual or a family makes. When planning for the personal finances, they must put into consideration the salary they receive each month because it will serve as the basis for their financial decisions. A person should also consider the various financial problems and the unexpected life events that may cause a change of the financial decision.
Importance of Financial planning
The main component of personal finance is financial planning . It usually involves the analyzing of the amount of money you have as of the moment and allows the person to control over their financial situation.
Financial planning involves the following :
Analysis of the current financial status through making of financial statements like the balance sheets and income statements. Setting of financial goals and expectations that will help in guiding the financial planning and this is done through having a target that will comply with the financial needs.
Creating a plan that includes decreasing of nonessential expenses and also investing in mutual funds . This financial plan can help in reducing uncertainty regarding the future needs and expenses.
It is inevitable that there are uncertain risks that may occur in making financial decisions that is why a person should learn to evaluate risks and use financial planning information sources to avoid or solve a financial problem.
It is important to always monitor and reevaluate the financial decisions regularly because there will be some instances that may cause the changing of the financial plan.
Almost all people want to personally handle their finances so that they can see to it that they’ve met their expectations and can control their personal money . However , it is very difficult for us to successfully manage our money without exceeding the expense’ limit for example , buying a new car when you already have one . Therefore , a person should learn to focus on the areas that should be prioritized in financial planning . That is why there are times in our life that we are short of funds and if get worst money is badly needed due to emergency purposes.
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