Money
is never adequate, which is why we keep working day and night in quest of a
fortune. We're hoping to achieve financial independence and be able to live our
lives on our terms. It is not, however, as easy as pie; it takes continual
perseverance and a never-say-die attitude. However, with good management,
amazing success is always guaranteed.
“Financial
prosperity is impossible without constant planning and management of money”. – Sunday Adelaja
What is personal finance?
It
is an area of economics that deals with resource allocation, resource
management, acquisition, investment, insurance, and mortgages. Simply said,
whether it's for short-term or long-term projects, it's all about providing
money when it's needed to fulfill financial objectives. All of this, however,
is contingent on the source of income cash flow and how it is managed from the
moment it is deposited. The majority of people have financial difficulties as a
result of a lack of financial understanding, which is essential for making any
reasonable decision. To make a collaborative plan for the unknown future.
How to manage my finance
a)
Understand your basic cash flow
What
is my current financial situation? What are the many ways I make money? Are
they income-producing assets or solely from the salary? You can't manage
something you don't have, so know the precise quantity. To begin, verify that
your assets outnumber your liabilities and that your income exceeds your costs.
Fixed savings accounts, farms, dividend-paying stocks, real estate, a rental
investment, and starting your own business are all examples of assets that
generate income. Stay away from liabilities that may drain your bank account.
As
wages rise, so do costs and taxes, and the two become proportionally
proportionate. As a result, the never-ending race to find a balance between
costs and income begins.
“Never take your eyes off the cash
flow because it’s the lifeblood of business.” -Sir Richard Branson
b) Plan for your financial goals
What
am I hoping to accomplish? Make a list of your objectives. Writing and
preparing for anything has a lot of power. How long do you think it'll take? Is
it a short-term or a long-term project? To begin, make sure you have a goal
that is measurable, precise, and real. House savings, retirement savings, and
debt repayment are just a few of the financial objectives. Finally, keep track
of your progress by evaluating your objective regularly.
When
it is obvious that the goals cannot be reached, don’t adjust the goals, adjust
the action steps. -Confucius
c)
Make a budget that works for you.
When making a budget,
take some of the following procedures into consideration:
Ø Evaluate how stable your income cash flow is?
Do
you have a regular salary that you can rely on? Is it an hourly wage or a
variable wage? Do you have a variety of sources of income? Do you earn money
from a variety of sources? If you have this, you have provided for future
uncertainty by ensuring that if one income suffers a loss as a result of the investment,
the other income compensates for the loss. First, assess all of your
income-generating risks, including those connected with investments such as
stocks, real estate, and other sources of income. Are you willing to take the
risk? Do you have enough risk mitigation procedures in place to address such
threats when they arise? The more risks one sees, the larger the liquid
emergency fund.
Ø What are your spending habits?
Prioritize
your costs and pay attention to the most pressing and critical ones first.
Government taxes and mortgages are undoubtedly at the top of the list. Having a
good budget for your spending will help you avoid impulse purchases.
Consider
altering your saving practices, for example, if you have budgetary restrictions
or a need for additional saves. If you've been splurging on vacation and dining
out, consider cutting back for a time and putting the money toward more
essential investments. It all depends on your particular preferences and
objectives. There is no other option except to generate more money or to spend
less.
Ø How is your liability column?
Without a question,
boosting your asset cash flow is critical if you want to raise your spending.
Assume that the payment remains constant. As a result, avoid wasting money on
liabilities that are simply sucking money out of your bank account. Owning items,
you can't afford, such as an expensive vehicle or a house that is much larger
than your salary, is an example. Alternatively, you might rent a property until
you are financially secure and have a positive cash flow. Another question is,
what kind of liabilities do you have?
Do you have any current liabilities, such
as accounts payable, income taxes, principal, and interest on a bank loan, that
are due within a year?
Non-current obligations are those that are not due to
be paid in the near future.
Ø Evaluate your personality
It's
all about balancing your abilities and personality to discover the ideal
solution for you. Are you the type of person who doesn't pay attention to the
finer points of a situation?
Are
you a person who is rigorous and disciplined? Do you keep track of all of your
expenses, whether they're in dollars or cents? Then your budget will be a
perfect reflection of how unique you are.
Ø Stick to the budget
Make
it a habit by keeping a plan, perhaps for one week, to track expenses and fix
whatever is incorrect. It does, however, need tight discipline, which is always
difficult to maintain, but perseverance is the key.
Sample
budget,
d)
Establish an emergency fund
Emergencies and
unexpected costs pop up when you least expect them. It is critical to have an
emergency fund savings account for healthy personal finance. Machine failure,
high medical expenses, and fire breakouts are just a few examples. When a
person loses his or her work, emergency money might assist them in getting back
on their feet. Otherwise, one risks causing problems for friends and family, as
well as accumulating large debts.
e)
Pay your obligations on time.
Pay
off your obligations by prioritizing payments based on their outstanding
balances, no matter how little. Paying off debts not only prevents interest
from accruing but also improves your creditworthiness, allowing you to be
debt-free and invest in other vital initiatives.
f) Save for retirement
Regardless of your age bracket, preparing
for retirement is always a smart idea, lest you become a problem to your
children and grandkids. Having a retirement savings account offers many
advantages. It reduces taxation on income each year, and the earlier you start
saving, the more time your money has to grow. It also allows for a
well-balanced lifestyle afterward.
“The
question isn’t at what age I want to retire, it’s at what income.” -George foreman
Take away Recommendations
By.
Robert Kiyosaki (Rich dad Poor dad)
v “Keep your day job, be a great
hardworking employee, but keep building that asset column”
v “Financial freedom is a mental
emotional and educational process”
Key
Finance Management Steps
