What is personal finance?
These are the cash flows that you receive from various sources.
- From work. You go to work in a polyclinic and treat people’s teeth there. You get paid a salary for this job.
- Self-sufficiency in work. You quit your job at the clinic, opened your own dental office, and treated people there.
- From business. You hired several doctors, but you yourself stopped working. Now you pay the doctors a salary out of the patients’ money, and you take a part of the total income for yourself.
From investments.If you’re living in another country or state to make money and you need to send money to your loved ones and need to save also. So, check the money transfer services. If you’re making a wire transfer with the bank then check out the chase routing number, regions routing number.
An asset is any property that brings you income. It kind of works for you. For example, a Microsoft stock is an asset because you receive dividends from it every year. The apartment you rent out is also an asset because you receive rent from it every month.
Liabilities, or obligations
And this is all that you spend your money on. The house in which you now live is just a liability because every month you pay utility bills in this house. The car you drive to and from work is also a liability, as it must be constantly refueled.
A mortgage is an obligation whereby you must pay a certain amount of money to the bank on a monthly basis. This is also a liability.
This is the money that you spend on liability payments or simply spend on yourself. The chocolate you buy, the school uniform for your child, the Maldives tour, the new iPhone are all sources of spending in your budget.
How are personal finance and age-related?
The best time to make money is 25-30 years. During this period of time, you receive some kind of education, you are young, ambitious, healthy, full of strength. As a rule, young people of this age do not yet have a family and children, so they can devote as much time to work as possible.
After thirty years, your value to a potential employer begins to gradually decline. With age, people may develop health problems, motivation to work may decrease, children appear, family problems, etc.
The only way to compensate for this “downturn in self-worth” is to invest. Create your own investment portfolio and independently build your financial future, relying on neither the employer nor the state.
If a person at the age of 25-30 begins to save money and invest it, then by the time he reaches retirement age he can become absolutely financially independent and collect a good investment portfolio. He will not have to wait for increases in his pension from the state, help from his children, or other relatives.
Unfortunately, most people don’t save, invest, or think about their finances at all. They live in the present, and after retirement, they find themselves below the poverty line. Personal finance is important.
How to manage personal finances?
To keep your finances under control, you need to follow a few simple steps.
You must take into account absolutely all income and all expenses that you have. Rockefeller, as a teenager, had a small notebook where he wrote down his every waste, even on all sorts of little things.
Analyze results every month
See how much you spend in total and how much you earn. Do you have anything left to save and invest? Do you still have money for personal growth and self-development?
If your expenses exceed your income, the situation is critical. You urgently need to change something in your life, otherwise, you will become bankrupt and owe everyone.
Make changes to personal finances
Think about how you can increase your income and cut costs.
About the costs. They can always be reduced if there is a desire. Consider if you can cut your internet spending. For example, is it possible to turn off the mobile Internet and do without it? Can you cook your own food instead of buying it in supermarkets.
Don’t be fanatical about cutting costs. You can limit yourself in everything and start saving money, but most likely the result will be terrible depression.
You must have a financial plan. Think about how much money you are willing to save and where you want to invest it so that after retirement you will receive income from your investments, and not wait for support from the state.
Monitor the implementation of the plan
Record on your spreadsheets whether you are following your plan, saving, and investing.