Manage Personal Finance


Managing Personal Finance Covers Many Topics

The topic of personal finance is actually fairly broad covering mundane issues like balancing income, spending and savings, as well as how to compare mutual funds, saving for education while minimizing taxes, and getting mortgage insurance when setting up a mortgage for the house.

Some of these issues recur day-to-day like budgeting for food and rent, but other issues occur just a few times such as selecting a mortgage payment plan for the house. At each step of the way a person will need take the time out to learn the details of the particular topic to make an informed decision. Consider using personal finance websites like Wesabe.com or Mint.com to help document and analyze, and get some personal finance training from online or local adult learning courses.

Income And Budgeting Is A Form Of Individual Economics

At the heart of the study of economics is the issue of scarcity, which translates in practical terms to the issue of choice. Given that resources are scarce, how should we choose to maximize our gain? On an individual level economics becomes a lesson in knowing how to manage personal finance, and involves much of the same kind of thinking and decision making. Each person has a finite amount of resources in terms of money, assets and time. A person must choose how to use the money to satisfy immediate needs, and how to save or invest it for the future.

The First Step Is To Categorize Your Expenses

Income and budgeting is more complicated than simply cutting down expenses until they are equal to income. In order to manage personal finance, a person should take one or two months to record all expenses and then categorize them to understand where the money is going. Some examples of categories include food, shelter (rent or mortgage), education, entertainment, clothing, car insurance, and miscellaneous. A person must know how to prioritize these different categories. At the top goes shelter and food, but all other expenses depend on the particular value system of the individual. For some people having good fashion is paramount or important for the job, but for others fashion is not as important as getting a car to travel around.

The Second Step Is To Identify Opportunities For Savings

The money that is left over after deducting expenses from income is the monthly savings. But the story with knowing how to manage personal finance does not end there because a person must find an appropriate place to put the money. Leaving the cash in a checking account may be the most ineffective way to use the money. Instead, a person should consider opening a savings account which has interest rates that are up to 10 times higher than checking accounts. Another safe option is to put it into a certificate of deposit (CD) that forces a bank client to keep the money vested in the CD for a set amount of time but pays out at much higher interest rates.

The Third Step Is To Invest Your Money

Money in the savings account or in a CD accrues at low interest rates so are not usually considered investments. Investments are an aspect of knowing how to manage personal finance and include stocks, and bond funds which appreciate much faster but have some inherent risk. In fact, it is taken for granted that investment securities have an inversely proportional relation between their yield and their volatility. The yield is best thought of as a long term number that makes sense after the investment has had a long time to accrue. It is a long term number because in the short term there are large flucutations which means an investment can lose money. The key is that these fluctuations tend to average out so an average gain becomes more certain.

If You Have No Time Then Get Professional Help

One way to get ahead with less pain is to hire someone who can manage personal finance. These professionals are known as personal finance planner, some types of which include the chartered financial planner and the fee only financial planner.





Checkbook register is an accounting device that keeps track of incoming and outgoing funds for a personal account.
Checkbook calculator tracks common checking account transactions such as ATM withdrawals, checks and credit card entries.
Personal Finance Software is more general software that gives an individual many ways to track the flow of personal income and expenses.

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