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Effective personal finance management helps you achieve your desired level of financial freedom. From there you can make a plan to develop your business. Besides, it helps you and your family have a more comfortable life.
Just like businesses, every individual or household has to deal with finances. If you do not know how to spend appropriately, you will easily encounter risks in daily activities. Therefore, being careful in spending and managing personal finances appropriately will help you become more independent, opening up more development opportunities. However, how can financial management become more effective? This is probably still one of the difficult problems for many people.
1. What is personal finance?
The question here is do you really understand what personal finance is? Only then can you create a complete management plan for yourself. Personal finance can be understood as the application of financial principles to personal or family finances. It involves common financial issues such as: spending, income, investing, or saving. This term can also be understood as the effective use of money in each individual or household. This helps you understand your financial situation, leading to a more comfortable life. Besides, you will avoid encountering unnecessary risks in everyday life.
2. Why is it necessary to manage personal finances?
Financial management plays an extremely important role in everyday life. From controlling spending to understanding capital sources and investments, managing your finances well helps you minimize the risks you may encounter in financial-related problems. This helps you quickly achieve your desired level of financial freedom. Thereby, you and your family will not have to worry too much about financial pressure.
3. Ways to manage personal finances
There are many ways you can effectively manage your personal finances . However, not all methods bring positive results for each individual. Therefore, it is important to consider and choose appropriate options to apply. Because this is not a simple job that can be completed in a day or two. You should practice financial management every day, starting with the most basic things. That way, you will have time to adapt, create for yourself a good habit of controlling spending and not get bored of taking notes and calculating with numbers.
a. Change your mindset about money
The pressure to make money, being wary of greed or feeling hatred towards material factors and promoting spiritual values are thoughts that are not difficult to find in some people. After all, avoiding thinking and talking about financial issues is just a way to avoid the reality that you cannot master money. “Giving up” or “not caring comes from the repression of stress and fear when you do not achieve what you have previously planned.
Understanding your emotions is the key to every problem. It helps you change your indifferent and fearful attitude to a proactive attitude when using money. Tana Gildea, author of The Graduate’s Guide to Money, offers a few suggestions to help you examine your feelings about money: “How do you feel about money? About your ability to earn it, save it, manage it wisely? If you don’t feel positive, you won’t have positive experiences.” Don’t depend on money, and don’t try to avoid thinking about it. It is an essential need of life. Instead, believe that you can control your spending appropriately to bring yourself joy.
b. Learn how to prioritize spending
You need to determine what is truly important to you to prioritize your spending. Make sure you have a clear financial plan before deciding to invest in something. Is the lipstick collection limited edition? Or cool new clothes from your favorite brand? Surely you will find it difficult to resist your personal needs and preferences. There’s no denying that spending more will boost the incentive to create more. However, if you do not know how to postpone temporary desires when necessary, it will be difficult for you to achieve the previously stated goals. Managing personal finances therefore also becomes difficult for yourself.
A small tip to help you manage your personal spending better is to create two accounts: one for necessities (things you need) and one for discretionary spending (spontaneous desires). This way, you will better control the source of money poured into revenues and expenses.
c. Set goals from small to large
This is an important step that makes personal financial management easier. Write down your goals on paper. Start with small, achievable goals within your ability. Try to complete it and repeat. Once you get used to that job, gradually increase your goals. Thus, you will soon reap the rewards of this effort.
Saving for a financial goal is inevitable. However, the more you save, the better it is. You should put your financial needs in context to know exactly how much you need to save and how long it will take to achieve that level of savings. As Mindy Crary, a financial planning coach, advises, “ The more clearly you define your goals, the more motivated you will be to achieve them, and from an initial goal, build smaller plans around it .”
Personal financial management is not a simple task, especially for beginners because it requires perseverance from each person. Newslax.com hopes that through this sharing article, readers will have a more comprehensive view of personal financial management and its importance. From there, build a suitable financial plan , favorable for future business development.
