What Defines Good Personal Finance?

What Defines Good Personal Finance?
  • Opening Intro -

    Personal finance mainly explains how one uses his or her money.

    It entails how a person is spending, saving and investing.

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Personal finance is a delicate balancing act where one should control his or her spending rates as we mostly deal with investing and saving. Knowledge in personal finance is very essential for a person to know how to best utilize his or her money in the best way possible.

Important points when dealing with personal finance are:

1.The financial position of a person, that is, if you have enough money to sustain your expenses and savings. This should be a clear start when making a decision to spend or save money. This also helps to make an individual know the strength of one’s purchasing power.

2. A person’s goals and ambitions should be well articulated in order to know what are the highest and lowest priorities of a person. Money should be spent in order of priorities from the highest to the lowest priorities.

Money is a catalyst in the mode of exchange of goods and services.

INVESTMENTS

This is putting money and resources in developing projects and it is also putting money in equity and bonds and trading in shares. Investments are there in order to ensure flow of cash and they can bring a loss or a profit. Effective management of businesses and investments will bring a good output and profits will be realized, while mismanagement of an investment or business will eventually result in poor returns and hence losses will be incurred.

In personal finances the choice of business and the market that the business can serve is very essential before one concludes on which investment opportunity to venture into. In investing one should be a risk taker and should be ready to take the challenge to start a business. Before investing one should look at how much money to spend on the project and the returns that the project will bring forth and how long is the projection of the investment, that is: is it long term or short term? These questions will bring clarity on the suitability of investing in that business and its viability.

BILLS

These are the expenses that one has incurred in a period of time. They can be for example: water bills, electricity bills, rent just to name a few. For effective utilization of money, the bills should not take more than a third of one’s salary and one should live within his or her means. The more the bills the lesser the savings and investments.

DEBT AND CREDIT

Credit and debt go hand in hand. That is, when someone takes a debt from a financial institution or a person, he or she incurs a debt. Credit and debt is essential especially when someone is in shortage of money or when an emergency emerges and there is little or no money to cater for the emerging issue. The problem is that the more the debt and credit the lesser the savings and investments. Personal debt also eats into profits gained and hence diminishes profits. Balancing debts and credit especially in investments is a delicate act that if well managed can be of no issue to the person.

In conclusion, personal finance if well handled can make a person wealthy or poor according to how he or she utilizes the money. Wise utilization of money will always bring good rewards at the end.

 
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Last update on 2017-12-12 / Affiliate links / Images from Amazon Product Advertising API

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Categories: Consumer Financing

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