PERSONAL FINANCE
A COMPREHENSIVE GUIDE TO MANAGING YOUR MONEY
Simon Pike
Table of Contents
Introduction
Personal finance can be a challenge especially because money comes with a lot of temptations. However, if you set your mind to achieve financial freedom, you will become capable of doing the impossible things and enjoy an easier and more fulfilling life which everybody wishes to live.
By reading this book and following the plans and taking notes from the contents given in the book, the fear you keep inside wipes away the most. And, in order to witness the changes, you just need to implement what is said and reap the benefits like most of the successful people do.
This book keeps the tips that are carefully researched from the habits of financially successful people, individuals who have gained financial stability with less money and people who have become rich from nowhere. While reading the book, you will be filled with lots of choices that may depend on your personal situation. You have to pick up what is best for you and then move on.
If the thinking on Money Matters makes you feel overwhelmed or you simply want to ensure that your money is in the right place at all times, this is the guide for you. You can now start thinking of money in a different way and to consciously think of the future whenever you are spending and things will fall in place.
Personal finance is a critical aspect that most people ignore. It is not just for business people or wealthy people. Essentially, personal finance is a tool that anyone from any social class or income bracket should carefully consider.
Money is crucial when it comes to living well in the community, but you dont need too much money to become independent, happy or even successful. You merely need to know how to control your expenses and manage the money you have so that it can work for you.
Debts can be a source of worrying and anxiety for many people, and sometimes it is quite difficult to understand from where to begin when you want to manage your financial debts. This book will help you to get started on the path to paying off all your debts and become debt free.
Besides that, you will further learn how to get started with investments and make sure that your money works for you, and not the other way around. You will be taken through many exciting tips and lessons that you should follow to fulfill your financial goals. Get ready to learn interesting stuffs, including how you can become debt free without much hassle.
Chapter 1: Getting Started with Personal Finance
What is Personal Finance?
Personal finance is a financial management process wherein an individual manages his/her financial resources while considering various factors such as his/her personal activities, needs and wants, expenses for utilities, and the risks that are associated with any of these.
Simply stated, personal finance means managing ones money for future benefits.
With the intense marketing efforts of various companies, a person is tempted to buy their products either because he wants to follow what is currently popular or because he wants to catch up with his peers. However, because his money is limited, he cannot have the freedom to use it to buy anything he wants and to do whatever he wishes to do. Instead, he has the responsibility to manage it and to decide on what to buy and what to do. This makes personal finance one of the most challenging tasks that a person must take.
Personal finance, according to the Financial Planning Standards Board, involves four key areas:
Financial condition
Financial condition refers to the overall financial position of a person. Knowing his financial condition is important so that he will know what to change in his spending behavior depending on how better or worse his position is.
If his income is greater than his expenses, then he is on a surplus. He can increase his spending because he has sufficient money to settle his expenses. On the other hand, if his expenses are greater than his income, then he is on a deficit. He must either reduce his spending or increase his income to avoid enlarging his deficit.
Risk protection
Risk protection refers to the overall provision that a person has against the different risks that he may take. These risks include illness, death, properties and liabilities. This is important in personal finance because without adequate provision, a person will end up using more money to counter these risks. Illness and death risks can be backed up by insurance policies. However, property and liability risks can be backed up only by their payment.
Investments
Investments refer to the process of growing money for making large purchases in the future, such as buying a car, paying for expenses on education, planning for a family trip, starting a company, or saving for retirement. This is important in personal finance because managing someones money does not only mean reducing expenses; it also means allotting a part of it as savings for investment reasons.
Estate planning
Estate planning refers to the preparation of all the wealth of a person for distribution to his heirs after his death. This is also important in personal finance because there are laws that require a person to allot a part of his estate for succession. Along with the management of his financial resources, he must allot some of his money to his heirs.
Where does your money go?
The first thing to know is where your money goes. What happens during the time of interval between receiving your paychecks?
Keep a small notebook with you and take time to note any expense you made within the day. At the end of each week, summarize all your expenses into categories as follow: Food, transportation, luxury, etc. By the end of the month, you can see which category you spend on the most.
Getting your financial life together is not just a struggle but an ongoing uphill battle many people face. It takes time and dedication to shovel your way out of the mountain of debt, bad habits, and ignorance that have lead you to the position you are currently in.
Financial debt can be crippling. It can prevent you from having peace of mind, buying a house, making satisfactory share to your family or can even lead to getting divorced. Student loans are not the only cause for the ever-growing anxiety that may be slowly chipping away at your ability to sleep. Poor spending habits, credit card debt, or lack of knowledge may have caused you to be in the situation you are in now.
It is difficult for many people to admit fault if the situation they are currently in does not match the situation they think they should be in. It is easy to blame outside elements for every negative circumstance that has lead you to where you currently are. And for sure, outside influence has more than likely set forth the motion for your current dilemma, which does not mean that you are not at all to blame as well for the outcome. Before you get defensive, let me explain.
There is a concept that many people take part in without even realizing it. Its called The Rich vs. Poor mindset, which is basically a concept that shapes the way an individual mentally perceives a situation. It doesnt just apply to financial situations but in the way a person views the world on a regular basis, and the decisions one makes when faced with an obstacle.
If you surround yourself with people who dont have any real future goals or who are content with where they are in life and tell you that youre fine where you are, or who support you to continue bad habits, youre never going to break out of your cycle. Because, you constantly continue to do what youve been doing and this will make them feel bad and guilty about the worse situation they are themselves going through.
