The «Personal Finance» deals with our own finances, includes the analysis and planning of the sources and uses of personal funds over the years, savings and investments with the objective of achieving an improvement in the due quality.
Financial planning is the process that helps us become aware of our current financial situation, determine our goals and objectives, and develop strategies that will guide us toward achieving those goals.
Abstract
The «Personal Finance» dealing with our own finances, includes the analysis and planning of the sources and uses of personal funds over the years, savings and investments with the objective of achieving quality improvement due.
Financial planning is the process that helps us realize our current financial situation, determine your goals and objectives, and develop strategies that will lead to the achievement of those goals.
Financial planning
Financial planning begins with the recognition that each of us makes that we all have different needs and goals.
Good financial planning covers a number of critical areas, including retirement planning, health plans, taxes, investments, cash management, and budgeting. Depending on our particular needs, it may also include plans to guarantee the education of our children.
However, the personal financial planning process must be an integrated process. Although there are different areas or parts of it, changing one of them can impact the ability to achieve our goals. Therefore, it is important to see the complete photograph before making any decision that may impact our future financial well-being.
The reality is that a good salary with enough money to spend is not a guarantee of financial success, nor does a modest salary necessarily have to promise failure in these tasks. In fact, most of the people who have financial problems, such as excessive debt, correspond to the middle class of our country. Actually, one of the most important points to achieve a successful financial plan does not have to do with the income of each one of us, but with starting to establish it.
For most people, meeting financial goals and accumulating wealth takes time and planning. However, regardless of our starting point, knowledge and smart decisions can dramatically increase our chances of achieving our goals.
Good personal financial planning can help us avoid serious mistakes, such as: incurring excessive debt, ignoring our opportunities for a comfortable retirement, not having enough cash when required, or having insurance that does not correspond to our real needs..
Personal financial planning is very important because with it we can make smart decisions about saving to buy a home, to guarantee the education of our children or to adequately cover contingencies. But in addition, it can support us in dealing with major changes in our lifestyle, such as marriage, divorce, the birth of a child, job change or retirement.
None of us would go out on a raft to cross the ocean, especially without a map and proper instruments to guide us to our destination. Even, nobody would do it without having defined, at least, a destination of our trip. The same concept applies to our own financial situation: no one can save without having a specific goal (which may or may not be conscious but exists), and no one should invest without clearly defining their long-term goals and objectives.
All those people who have dreams, illusions, goals and objectives in life can benefit from a personal financial plan. The fundamental reason is that this plan is nothing but the map that will guide us to our destination.
A financial plan helps us, first of all, to clearly identify and list those dreams and objectives that we all have, and gives us specific elements to make decisions that will allow us to achieve them. But also, it allows us to encounter unexpected obstacles along the way that could threaten our future well-being.
Today people need to know how to properly manage and use their monetary resources to ensure future well-being, whether it be for the education of their children, buying a house, a car, to live better after retirement or retirement, and even to cover any eventuality or emergencies that arise, among many other alternatives.
Although many are not convinced, our lives are governed by finances and money, regardless of the profession we have and the ups and downs that arise at different stages of life. In this sense, it is important that we have a good management of our personal finances, because this way we will be able to reach the middle age financially and retire comfortably.
For example, from the age of 40 when you regularly reach the best level of income in a job, you have to be very careful to waste money, including when you should start taking care of and managing more resources, since we enter to the parable of income, because soon they will start to decrease, while some expenses increase (constant medical check-ups, medicines, trips, restaurants, etc.).
Personal finances are related to the problem each person faces in managing their monetary and non-monetary resources. Decisions have to be made about the best way to manage your own resources, to satisfy your needs and to be clear that with each decision you make you are managing your personal finances.
Since we are aware that each decision we make regarding our monetary resources influences our personal finances, comes the second part: How to properly manage those resources ?. This is where the financial culture comes in: in what to invest them, in what term, where and how to do it.
On many occasions, even when they know how to differentiate between real assets and productive assets, people turn to banking institutions, because they think they have specialists who can answer these questions; However, what these "specialists" do is channel resources to some of the bank savings or investment accounts that pay very low interest, leaving aside other investment alternatives that offer much higher returns.
The ability to manage personal finances appropriately, has associated a level of prior knowledge that facilitates decision-making, such as the tools necessary to make yourself the best administrator.
To start in the administration of personal finances, you must start by making a personal financial plan, in which we calculate our assets, prepare a budget, establish financial goals and define strategies and priorities.
Subsequently, the financial culture part begins, addressing the concepts of savings, investment, risk, return, liquidity, diversification, term, among others.
Then we get to know the characteristics of investment instruments, the types of markets in which they operate and the macroeconomic indicators that influence and impact them such as inflation, interest rates, devaluation, etc.
We must not forget the part of the analysis of each instrument, of the investment companies, of the financial and stock markets, which is of the utmost importance; for example, in the case of the stock market, which for many people is a very sophisticated, specialized and complicated market, we can see it in a simple and clear way, and not as a game of chance or a club in which the wealthy large amounts of money are exchanged; Another case is that of investment companies, which can provide us with an adequate diversification of our resources that we could not achieve by investing on our own. In other words, it ends by establishing investment or financing strategies.
Most people have a hard time saving; They do not perceive this responsibility as a priority in their life, and even more so if they have already committed themselves to a series of periodic expenses. However, his tranquility and that of his family are priceless. For this, it is important that you review your assets and the unnecessary expenses that are making "noise" in your personal balance on a monthly basis.
Be aware when requesting credit. First think about whether this application is really a priority in your life or if you are getting carried away by that advertisement that gives you the ease of paying it at "comfortable fees", for example. Even today, there are many banks that are promoting information campaigns that educate the client about how to take care of their credit.
Take advantage of the end of the year to save, as it will surely be the best time when you receive money for the payment of utilities, extra and vacation bonuses, bonuses, etc. It is always advisable to also have a certain amount of money saved, in case of an emergency that is not covered by the insurance company.
Have a complete view of your financial statement, and check if it presents a negative or positive balance. If it is negative, immediately go to find a solution. Create a plan through which you know exactly what your monthly cash flow is. In this way, you will be able to prevent unexpected situations and, most importantly, provide well-being and tranquility to your family.
conclusion
Personal financial planning provides direction and meaning to our financial decisions. It allows us to understand how each decision we make affects other areas of our life. For example, a particular financial decision could be the key to buying a home, but it could also prevent a comfortable retirement. By viewing each decision as part of a whole, we can consider its short, medium and long-term effects on our life goals.
