Defining Personal Finance

Personal finance is something every person has to, at some point in their life, understand. Whether you know it or not if you make money or have expenses then you have personal finance matters.

Personal finance is basically the money you earn and the money you spend. The whole idea of personal finance is to be able to afford what you need and, hopefully, what you want.

Good personal finance involves a lot of management. Without management you end up with financial problems, like credit damage and even possibly a bankruptcy.

In order to understand your personal finances you have to get them in order. To do this you need to do the following:

1. Gather all of your income information- check stubs or other financial statements of income, gather all bills – this includes any information on debts.

2. Go thorough your financial information and sort it out. You want all income in one pile and all expenses in another pile.

3. Find anything that is missing. If you have debts that you do not have information on then call the companies and get something in writing about he debts.

4. Create a record of your financial information. This record, your budget, will list your income and expenses.

5. Once you have everything written down you need to see if your expenses are greater then or less then your income. The goal is that you make more then you spend.

6. Identify problems with your spending, if any.

7. Develop a plan to allow your income and expenses to even out so you are earning as much or more then you are spending.

These seven steps will help you to get a good grip on your personal finances. You will be able to start to plan repayment of debts, see if you are spending money wisely and develop a plan to ensure you are never overspending and that your personal needs are met.

Understanding your personal finances is about more then making sure all your bills are paid. You will learn how to spend wisely and not waste money. You will learn how to make sure you are responsible for your debts, which will in turn help you keep a good credit rating. In the end you will be more relaxed about your finances. You will be able to borrow money when needed because your credit will be in good shape and you will not have to worry about meeting simple expenses.

Share this post