Conversations about money are often uncomfortable and challenging and we usually try to avoid them. Instead, we are taught that money does not matter and that there are things much more important than it. Hence, many go through their childhood not knowing how to handle their finances and struggle to lead a desirable life. So even though these conversations feel difficult, we must not shy away from conversations regarding money because money plays a huge role in practically every aspect of our life, from education to health. Personal Finance is about accomplishing your own financial goals. These goals could be anything planning a vacation, planning for retirement, or saving for your college education. It depends on your income, spending, saving, investing, and personal protection. So, not only is it important for the current generation to understand the importance of money but also to utilize this knowledge in whatever they might do.
To do this let us understand what personal finance is first. Personal finance is a broad term that covers managing your money as well as saving and investing. It encompasses several things such as budgeting, banking, insurance, mortgages, investments and retirement and tax planning. As you can see it really is very important! To make the most of your investments and savings it is essential to become financially savvy and for that, a knowledge of personal finance is a must.
With all this in mind let us now dive into how we can utilize this knowledge to the best of our advantage. These tips might seem elementary but they go a long way towards furthering your understanding of the subject. The three tips are-
- Finance Prioritization: This means that you can look at your finances, discern what keeps the money flowing in, and make sure that you stay focused on those efforts and expand them as and when you get a chance.
- Assessing the Costs and Benefits: Before doing anything it is very important to always do a cost-benefit analysis. The risks that you take in whatever you chose to pursue must always have a benefit great enough to justify the risk in the first place.
- Restraining Your Spending: While it is necessary to enjoy life, it is also important to look at the big picture and understand that your spending must be in proportion to your earnings, at every salary that you receive you must set a certain amount aside for the future so that you always have control over your life no matter what happens.
Understanding how to manage your finances is an important life-planning tool that can help set you up for a life without debt, you gain control of financial stresses and have a way to manage the unexpected surprises that life can throw at you.