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Personal Finance is a branch of conventional finance that studies how people acquire and use financial resources on an individual or family level.
They are the study of money and the set of decisions made with it, including investment, spending, and income. Therefore, this type of finance focuses exclusively on the management and acquisition of the different types of financial resources in the family nucleus and at the personal level of the individual.
This concept is of great importance since a correct use of personal finances provides effective tools that will allow the individual to act promptly in any financial situation, since it allows him to analyze and study the data that intervenes in his financial resources, significantly influencing the result of their monetary investments and reducing the margin of error.
Personal Finance Course
- Generate greater use of investment opportunities.
- Promote a steady stream of income to the protagonist.
- Promote the analysis and study of the variants and areas related to personal finance.
- Anticipate the different situations in which the individual may need extra money.
- Provide tools to plan for the timely and correct use of financial resources.
- It is boosting the family and personal economy.
- Analyze the personal and family environment to reduce the margin of financial error.
- Provide the necessary information to enjoy a full life without financial worries.
- Personal finance planning
- The phases of the personal-finance planning process are listed below:
1. Identify Priorities
By making a list of priorities, the processes being carried out are identified and found. In this analysis, it should be taken into account that these processes must have quantifiable characteristics if you want to optimize personal finances.
For example, a car entails a certain periodic gasoline expense, a periodic maintenance expense, and a certain tax expense; however, it could also generate some savings compared to other types of transport; these variables must be measured and compared to make the best decision.
Likewise, the payment of other expenses such as apartment rent and utility bills should considere
2. Study The Financial Situation That Is Available
In this step, the economic situation of the family or individual nucleus must analyze, identifying the sources of income and all the expenses that count, as well as the savings and, in general, the inheritance.
Based on this, a result of the monetary balance obtain; this result provides the necessary clarity regarding the available financial resources.
3. Determine Financial Goals
The objective or goal is chosen considering the previously calculate financial situation; this objective must be punctual and realistic. The factors that may hinder or optimize said objective increases, sudden layoffs, illnesses, extraordinary events, bonuses, etc
4. Determine a Period
It is important to define a period in which these goals will develop base on the establish objective.
This process must taken into account if the objective plan to execute in a short, medium, or long period since this will be relevant in the subsequent planning stage.
5. Methodical Strategy
In this step, the previously identified information take into account and based on this, the most appropriate strategy to execute designe
To design this strategy, the individual must study all the information present very well since there are key and highly considered tools so that the plan provides the best possible results.
In this stage, the execution of the strategy carried out previously carry out. This execution must supervise and monitored since, if an altercation occurs, the subject will able to act in time, intervening promptly in the face of said inconvenience.
7. Analysis of the Result
The last step of the planning is to analyze the impact obtained in the previous execution process to determine the strategies to maintain or improve the process.
Personal Finance Examples
- To acquire life insurance, an individual plans his finances to reduce his expenses by 10% and acquire said insurance.
- To save for his daughter’s college studies, individuals decided to plan his finances and save 8.5% of his monthly income for the next five years.
- An individual carries out a financial strategy to reduce expenses from $3,000 to $2,500 last month to reduce household expenses.
- To save money to buy a car, individuals execute a strategy, planning their finances. This strategy was based on saving 7.5% of their income and reducing their expenses by 10%.