Personal finance is basically the overall financial management that a person or a family unit exercises to plan, save, budget, and invest money over time, considering various economic risks and uncertain future life events, taking into consideration the present income and spending power of the family as well as its plans for the future. Personal finance has become so much a part of our lives that it is difficult to think of a single day when we are not involved in some type of personal finance decision or activity. For example, how many times have you checked your credit card bill or looked at your investment portfolio to make sure that everything is still there? Or, how many times have you applied for a loan or other form of financing to either buy a new vehicle, go on vacation, or pay off debts?
Regardless of how much money we have saved or spent, all of us experience days when we do not have enough money. This lack of financial security can lead to feelings of worry, uncertainty and even panic, especially if we have dependents or debt that we cannot control. A good way to combat these types of feelings of anxiety is to start planning early for the future and making sure that we are saving the money to provide financial security in the event that our savings will not suffice. Even if we have planned ahead for rainy days, this will not prevent us from having to go through those trying times when money is just not available. In order to have financial security in the future, we must learn to control our spending now and learn to live frugally today.
Many people begin their financial planning early in life by establishing a savings plan and investing for a college education or a college degree. These are often followed by a professional career that provides good salaries and a good quality of life. The combination of a good income, secure employment and adequate living standards allows many people to have a sense of security and even to think about the possibility of a comfortable retirement. But, even for these people, it is sometimes not enough to leave a comfortable lifestyle and retire comfortably at age fifty or sixty. Some people may need more money for their retirement savings or for other life necessities. This is where borrowing from family or friends or using life insurance and other financial instruments become necessary.
Retirement planning is an integral part of saving for the future. It involves setting aside a reasonable budget and investing to create a fund that will support future living expenses. This means that you will have a nest egg, but will still be paying for your basic needs such as housing, food, transportation, childcare and possibly some healthcare costs. This combination of relying on your savings and investment earnings and continuing to make timely financial decisions is what constitutes personal finance education.
We must also learn to deal with our debts and make wise budgeting decisions in order to reach our retirement goals. One of the primary reasons for needing to manage our finances after retirement is the fact that most people will have substantial debts to pay after they leave the workforce. The goal is to learn how to eliminate debt while still building wealth and having sufficient income to maintain a comfortable lifestyle. This type of program can only be accomplished with the help of an educational program geared towards personal finance and budgeting.
When managing our money after retirement, we will still need to take some proactive steps to ensure that our expenses do not get out of control and our credit cards are used in a responsible manner. This means that we should develop good money management skills and learn how to avoid getting into debt. In addition, we will also need to monitor our credit report to make sure that our information is accurate. Credit cards often lead to overspending and poor personal finance practices, so it is very important to be sure that we are using our credit cards sensibly.