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Personal Finance and Its Need


Finance is a big issue. May it is the time of the 1950s or recent years, finance always had and will always have an important role to play in everyone’s life. Starting from a poor person who cannot even meet the basic needs of life to the millionaires and billionaires who still look forward towards making more money as far as possible, everyone needs finance.

personal finance
personal finance

Personal finance needs to be managed for staying happy and satisfied along with maintaining sustainable development. There are a lot of ways in which one can manage personal finance. One can even save money while buying the basic needs of life.

Cost is on the rise

Cost of different commodities is increasing at an alarming rate in today’s world. Coping up with this consistently increasing cost and hence increasing needs seem to be a hard thing to be done. Talking about the future generation, the cost will be even higher.

Hence, fulfilling the needs of the present generation without compromising with the basic needs of the future generation is highly required in today’s society. One should try to maintain personal finance in some of the other possible ways.

Compromising with some of the luxurious needs and making up the mind to live without highly luxurious items can lead to a great extent of managing finance.

Buying commodity of good quality but at cheap cost from nearby markets and hence avoids buying the same quality products at higher cost from branded showrooms or shopping malls and add to the financial savings of a family.

Financial advisers from a different location can be of great help in managing personal finance. There are a lot of centers and counselors available online or offline. These counselors can help one in giving proper guidance to the financial management program.

Manage Your Finance in Many Ways

One can manage personal finance in a number of ways. Saving money in a bank is the first step. After deducting the total expenses from total income, the left amount must be deposited in a bank account. This not only helps in saving money but it also helps in increasing the amount of cash slowly and steadily due to the interest given by the bank.

Coping up with the increasing price of commodities that are essential in our daily lives can be made easy by taking help of the discount coupons and offers available in both online and offline stores.

These coupons help one in buying the commodities at a comparatively lower cost than the market price. Hence the left amount can be either saved or can be spent on buying other essential commodities.

One of the major reasons for maintaining personal finance is that it can be used at the time of retirement. People never know what is stored in the future. One needs to remain self-dependent throughout his/ her life. Hence, saving money and maintaining personal finance can be of great help at the retirement stage.

When a person stops earning, survival becomes harder. Personal finance management can help one spend life peacefully and without depending on others for basic needs at retirement and at old age.

Personal Finance: Tracking Your Net Worth

Ever Wanted to Run Your Own Company? Practice Being a CFO with Your Own Personal Finance Balance Sheet

personal finance spreadsheet
personal finance spreadsheet

It’s been said that the first step to improvement is measurement. This is certainly true of personal finances. Measuring net worth is the first step to increasing net worth.

Practice Simple Spreadsheet Exercise

My husband and I started tracking our net worth nearly five years ago. This simple spreadsheet exercise has aided us immensely in achieving our personal finance goals these past few years. By thinking about personal finance the same way a company builds its balance sheet, it is easy to see the big picture and achieve long-term financial goals.

Just like a company balance sheet, “net worth” is calculated as “assets” minus “liabilities”. Our spreadsheet is constructed with a list of assets and debts in the first column and monthly dates across the top. Every month or two, I enter the value of each account in the corresponding column. Since my husband and I are rather geeky accountant types we also list subtotals for each of the following sections:

Assets

We start our spreadsheet by listing our assets. We start with “liquid” assets. These are assets that can be easily converted to cash. Our liquid assets include checking and savings accounts, money market accounts, mutual funds, and individual stocks. Liquid assets could also include bond funds, bonds, Treasury bills, and savings bonds, to name just a few.

Next, on the spreadsheet, we list our “retirement” assets. These include our 401K and IRA accounts. We’ve been slow to roll over old employer 401K accounts, so we’ve accumulated quite a collection of accounts in this section. Eventually, we’ll do the right thing and consolidate these, but in the meantime, our monthly net worth exercise has forced us to keep track of the locations and amounts in these accounts.

Following retirement assets, we list “college” assets. Our two-year-old son currently has two college savings accounts listed in this section. We track a pre-paid college tuition account and a custodial account for our son in this section.

After college assets, we have a section for “fixed” assets. This section includes our house, cars, and furniture. Other common fixed assets might include boats, motorcycles, coins, vacation homes, etc. The values of the cars I usually update a couple of times a year by looking up the value on Kelly Blue Book’s value calculator. This value depreciates over time based on the age, mileage, and condition of the vehicle. The value of the house I update once or twice a year with our best estimate of what the house would sell for. There are many real estate websites that can help with this valuation.

Liabilities

Now comes the “liabilities” portion of the balance sheet. Similar to a corporate balance sheet, we start with “short-term” liabilities. Our short-term liabilities include our two credit cards, our car loans, and my husband’s graduate-school loan.

Fortunately, our credit card debt is now at a level that can be paid off each month and the car loans are now non-existent, but that was not always the case. It took strong fiscal discipline and our net worth exercise to reach this stage.

Finally, we list our home loan. This is a really easy number to track since the pay-off amount comes every month with the mortgage statement. That’s it for the liabilities. Other examples of liabilities might include business loans, store lines-of-credit, and loans from other family members.

Subtracting the liabilities from the assets gives net worth. The beauty of this simple exercise is the big-picture perspective it gives to personal finance. With a little fiscal discipline, savings will increase and debt will decrease each month, giving a higher overall net worth value.

For our family, this spreadsheet has been a terrific tool in tracking investment performance and measuring our progress in paying down debt. Also, by regularly checking in on investment and credit card accounts, we’re protecting ourselves from identity theft and surprise changes in investment performance.

Ten Unbreakable Rules of Personal Finance

Struggling with personal financial matters is not uncommon, and many people find themselves in unpleasant situations. When it comes to personal finance, what are ten rules that you must never break?

Personal Finance

Set a Household Budget

Unless you have an excessive amount of extra money to spend each month, you need to have a budget. When the money comes in for a particular bill, check it off as complete. You must also make sure that your bills for the month are not exceeding the amount of money that you make.

Pay Your Credit Card Bills 

Credit card debt can have a huge impact on your personal finances. You need to make sure you are paying your bills in full each month. If a payment is coming and you do not have the money, payday advance from Dallas TX  to Los Angeles CA can offer you instant cash with less than perfect credit.

Stop Using Credit

When you are able to stop using credit to pay for things, you really have the opportunity to improve your financial situation. Credit card debt, along with its interest, can continue to grow and grow. It might take years to get out of it.

Watch Other Loans

Taking out an excessive amount of other loans can hurt you in the long-term. You might struggle to keep up with the payments. Short term loans, such as the ones available at http://www.powerfinancetexas.com/payday-loans/san-antonio-texas, can help you better stay within your budget.

Be Careful of Interest Rates

You might think that you received an excellent deal on a loan, but interest rates can negatively impact you. These figures can be so high that you wind up paying them off before years before you even get to the principal balance.

Shop Deals and Special Offers

Some people make it a habit to never purchase anything at full price, and you should try this strategy as well. Go through the circulars each week to find out what is on sale at the local market and keep a file of coupons in your house.

Don’t Overspend

When you are out with friends, spending too much money is easy. Set a personal budget before you leave the house for the night and stick with it.

Review Your Monthly Bills

You can probably cut back on some of your monthly bills. For example, you do not need the most expensive television package or cell phone plan. Go over them now to see where you can cut.

Save Your Coins

Do not just throw your coins away after you go shopping. Save them up; you’ll be surprised how much money you can amass.

Allowances to Your Children

At some point, you must tell your older children that they are reasonable for their own expenses. If they wish to spend money, they must get a job.

These rules will really help you have more money in the bank and to stop struggling with your finances.

Eight Myths About Personal Finance Debunked

The world of personal finance is one that’s filled with both pitfalls and the potential for expensive mistakes. It’s also a world that’s not exactly helped by the wealth of myths that surround it.

If you want to learn more about personal finance and how to make the right decisions therein, an excellent place to start is therefore debunking the most popular of those myths. Here are eight little pearls of wisdom that hold no basis in truth.

The More You Know, The Safer You Are from Scams

Many investors like to believe that the more they learn about investing, the less likely they are to fall for scams. Unfortunately, the opposite is more likely to hold true.

This is because those who know very little about investing tend to seek a second opinion before investing in anything. Those who think they know what they’re doing tend to act alone and are therefore likely to be easier to scam.

When Credit Card Shopping, Always go for the lowest Rate

If you’re the type of person who always pays off their balance at the end of the month, you have no reason to worry about interest rates. They only apply when you start missing payments. Instead you should look for credit cards that come with generous rewards and no annual fee.

It’s also worth noting that even if you do tend to carry balances forward occasionally, the card with the lowest introductory rate still isn’t always the best choice. Teaser rates, as they are called, tend to jump dramatically after three to six months.

Everyone Needs Life Insurance

Despite what insurance companies might have you believe, life insurance isn’t a strict necessity for everyone. If you’ve got enough cash to cover your funeral costs and enough assets to take care of your dependents, there’s no genuine need for you to have life insurance.

Life Insurance Should Equal Twice Your Annual Salary

The days of life insurance requirements being dependent on salary are now long gone. How much life insurance you need depends upon a wide variety of different factors.

If you’re currently in quite a bit of debt, you’ll need to take out a policy that covers that figure. The lifestyle that your dependents currently enjoy and whether or not they’d be capable of living that lifestyle without you are also important factors to consider.

When You File for Bankruptcy, You Lose Your Home

Despite what many people believe, bankruptcy doesn’t always lead to you being out of a home. Different states have different laws and there’s more than one type of bankruptcy.

  • Those who file Chapter Seven can typically keep their home provided they pay off the remainder of their mortgage before they file.
  • Those who file Chapter Thirteen are typically allowed to keep their home provided they continue to pay their mortgage bills according to a revised repayment schedule.

If You Submit Electronic Tax Returns, You Are More Likely to be Audited

Quite a few people still believe that if they fill out their taxes electronically, they are more likely to be audited. The logic behind this myth is that electronic tax returns are faster to check for inconsistencies.

In reality, those who submit electronic returns are actually less likely to be audited. The reason for this is simple, statistically, those who fill out their returns without the use of software are more likely to make mistakes. They are also statistically more likely to lie.

If I Put Myself Through College, My Kids Can do the Same

Say what you will about the current generation being a little lazy but the fact remains that college costs a hell of a lot more now than it did even twenty years ago. While it might have been possible for a person to put themselves through college in the past, this is sadly no longer the case.

If you have children and you don’t put aside money for their education, you better hope they get a scholarship. Flipping burgers all Summer just isn’t going to cut it anymore.

Purchasing Property is Always Better than Renting

Finally, there’s the myth that’s pretty much been debunked all by itself in the last few years. In case you haven’t caught on yet, purchasing a house is not always smarter than renting one.

With property prices continuing to dance, it’s important to think long and hard before investing in real estate. What ten years ago was a very safe investment is now one of the most dangerous that you can make.

Personal Financial Planning

In these times, people can’t afford to be losing money. High interest rates, late fees, and penalties – they are plenty of ways to needlessly let money slip through the cracks. It’s more important than ever to keep a watchful eye on one’s finances. Read on to discover a few smart ways to manage your books and keep track of all the funds that are yours.

Your Tax Refund

It’s that time of year – the time of year to cash in on a tax refund. All you have to do is file intelligently and you could find yourself with a friendly bonus. On the other hand, many unlucky Americans end up with a hefty bill due on April 15. Oftentimes, the best solution is to seek professional advice and ensure your tax refund comes in on time, and in great form.

Your Best Interest

Whether with mortgages, credit cards or student loans, everyone is paying interest. There’s a reason that many major companies offer a debt consolidation service. It may cost a percentage, but it is often a reasonable fee given the result. Consolidating your debt may help you avoid serious interest costs. Shed hefty rates by paying on a quicker timetable or consolidating with your best and paying down from there.

Fuel Economy

As Americans, we spend an average of 50 minutes a day in our cars, just in our daily commute alone. With the fuel prices where they are, we can’t afford to waste money on an inefficient engine. The primary solution is to buy a brand new vehicle with a high fuel economy, but this isn’t an option for most of us. Simple maintenance like changing a fuel filter, replacing an air filter and filling your tires will shave gallons off of your weekly gas costs.

Commercial Services

As mentioned above, there are a number of debt consolidation services to remove the guesswork and manage your books for you. Companies like mint.com will compile all of your funds into one spreadsheet and organize your payments while offering special budget plans. There are also numerous websites to manage your funds and ensure you get the best tax refund possible. The choice is yours, but in many cases, it could be well worth it.

The Bottom Line

If you’re like most of us, you don’t have too much extra income to spare. You need to be smart with your money and make changes in your lifestyle. Whether you invest in a tankless hot water heater or hire a service to maximize your tax refund, the choices you make concerning your money are paramount. Be smart.

How to Budget Your Way to Healthy Personal Finances

Budgeting may appear to be a time-consuming process and one which you think you are unlikely to stick to. However, we are now being bombarded with messages informing us of how we are descending in financial ruin.

Budgeting your weekly, monthly and possibly even annual expenditure will provide you with a plan to avoid being in financial difficulties. Do this now and you will benefit from it in the long run.

Budgeting is all about living within your means. It is about looking at what you earn and then examining what you spend each month.

Recently, the media has highlighted the fact that people are living beyond their means via methods, such as credit cards or loans.

Some may find that this is alright as long they have a healthy income, but jobs can be unreliable and if you find yourself without one then all those luxuries will seem impossible to finance.

Have a realistic idea of your finances

It will be impossible to write an effective budget for you and/or your family if you do not have the facts about your finances.

Firstly, it might help to visit your bank or whoever keeps records of figures. Rather than trying to collect payslips etc you can ask them to give you a printout of what is coming in and going out of your bank account each month. It is crucial that you concentrate on spending what you earn and not what you can borrow from the bank or have in savings.

You can also focus on other means of income, for example, if you own a rental property and receive income from this. The most important thing is to be realistic and know what you earn rather than what you wish you were earning.

Incomings and outgoings

The maths might seem difficult, but the important thing to remember is that your outgoings should not be more than your incomings. Make a list with two columns – one should be what you have coming in and then the other should be what you are spending i.e. bills, rent/mortgage, and fuel.

Remember to include every single thing you spend; think about things that you buy every week, but also the odd things that you might purchase every six months or even every year. For example, you might need your car serviced or to pay an installment on a family holiday.

You want your outgoings to be less than your incomings, and adjusting your outgoings may well be the hard part. You might use to spending much more than you earn, but you will pay for it in the long inexpensive repayments on borrowings.

Now that you a list of all the money coming into your household, you can use it to ensure that you are not spending more than this amount. If you find that you are spending more then look at how you might be able to cut down on your outgoings.

Think about whether you might be able to shop around for your utilities or insurance and you could look at buying less expensive brands in the supermarket.

Don’t be reckless

It can be tempting to live beyond what you can afford, but it will benefit to budget. Once you begin to budget and understand where your money goes, you will be able to concentrate on saving and building reserves for later in your life.

Savings prove very useful when unexpected things occur when you give up work for retirement or if you want to plan an extended vacation. Take the time to write your budget and stick to it; this will make drastic improvements to your lifestyle.

Warren Paine

Warren is the senior mortgage loan officer who has worked in mortgages and loan industry since 1995. He study in Harvard and major in Finance with a Bsc. Honor Degree. He possesses a Paralegal Certificate as well.

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