Author: Serena Sorrentino
Publication date: 27.02.2024
This post may contain affiliate links, which means I may receive a small commission, at no cost to you, if you make a purchase through a link
Managing money is important because life can be unpredictable and having a plan B will allow not to sink into debt. Even the most organized person cannot predict every crisis, as happened in the previous pandemic. The only thing you can do is think ahead and do your best to cope with future difficulties. Achieving short- or long-term financial goals will allow you to adapt to future changes and unforeseen events.
Personal Financial
This term includes managing economic revenue and creating a budget on how to spend and save money. Having goals and a business plan will allow you to achieve meet what you want. Starting to plan and manage your own money could be the turning point for your future. But all this depends on your income, spending, savings, investment and personal protection.
What are the causes of mismanagement of money?
Not knowing how to manage and plan your finances can lead to constant and permanent indebtedness.
This attitude led Americans to accumulate huge debts, for example in February 2024, the Federal Reserve Bank reported that household debt had increased by $3.4 trillion since December 2019.
The Steps needed to Create and Plan a Personal Finance
The main areas of personal finance are:
• income
• spending
• savings
• investment
• protection
Income
The economic source that enters the economic fund and that allows an individual to support himself and the family. Sources of income are: salaries, pensions or corporate bonuses.
This economic income can be used to spend, save or invest in stocks.
So income is the first step to creating personal finance, and without that we cannot do it.
Spending
The expense is everything that is not invested, such as rent, taxes, travel or car insurance. These expenses reduce all the amount of money that an individual can invest or save.
The second step is fundamental because a wrong management of expenses, can lead to a deficit. Therefore the good habits and the management allow to control and to reduce the economic damages.
Savings
The economic difference between income and expenses offers a fund that could be used for a savings or investment. Through a savings bank account or at insurance centers.
However, having too much savings could be a negative factor because the quality of life could be minimalised excessively. So you should save 20% of your salary.
Investment
In your financial plan you can choose to invest your savings or only a part of them, buying assets or stocks that could multiply or triple in the future the money invested initially. This operation, if done in the wrong way, can involve risks that result in capital losses. Surely it is recommended to rely on experts in the field, who can produce a positive rate of return on investment.
The most common forms of investment are: private companies, mutual funds or shares.
As we said before, having a personal finance can be important to be able to satisfy your desires and offer more possibilities to yourself and your family.
But that’s not all, protecting your health or your family members is another way to use your financial plan. This is the last step of our financial plan.
Protection
In recent years, the demand for health or life insurance has increased.
The purpose of life insurance is to protect the insured person’s loved ones in the event that the insured person dies. Is different from the health insurance which is used to cover expenses not incurred by the national health system in the event of illness or accident.
Investing in assets like cryptocurrencies can offer an additional layer of financial protection and growth potential.
Start trading with Binance - one of the safest cryptocurrency exchange platforms.
You can also read about:
Comments