The Significance of Personal Financial Management

The Significance of Personal Financial Management – Everybody needs money because of its critical roles in humans’ lives without which everything will likely run badly and even the primary needs may not be fulfilled. Unfortunately, a lot of people still lack understanding of how important it is to manage their personal finances.

It is true that managing personal finances is a tricky task due to the fact that it not only considers the incomes and expenses, but also learns how to make the two factors work hand-in-hand.

To motivate you to start managing your personal finance, here are some factors to take into serious considerations: 

  • An emergency fund, a useful fund in emergency conditions which cannot be handled with your fixed income and can be used at an unfixed time for any emergencies
  • A disciplinary method
  • A plan to leave financial inheritance to your family members
  • Financial risk reductions
  • financial independence


How to Manage Personal Finance

Managing personal finance, one of the ways to save your money until the end of the month, is a tricky task because it relies heavily on your motivation to do it.

People tend to spend so much money once they have it, but it surely is not a good thing. Instead, you can keep your financial conditions stable by knowing how to manage it.

Here are some tips to manage your personal finances.

  1. Have a note for your personal finance management. 
  2. Create monthly expenses. 
  3. Manage your expenses wisely. 
  4. Start investing. 
  5. Save emergency funds from the investment savings. 
  6. Have health insurance. 
  7. Pay your debts and mortgages. 
  8. Avoid consumptive debts.


Ways to Manage Personal Finance

One of the common ways to manage personal finances is the 50/30/20 which represents the primary needs, secondary needs, and future savings or debts respectively by applying the following steps.

Decide your primary needs

Spend 50 of your monthly income on your primary needs, including food, clothes, accomodation, transportation, education fee, electricity fare, internet fee, and so on.

Take notes of your personal wishlist

Your wish is a secondary need that gives you more happiness and increases your quality of life, including buying brand new cars and cellphones, and traveling to another country. You need to make your wishlist. Spend 30 of your monthly income for your to-do-wishlist.

Save and Invest

Lastly, spend 20 of your monthly income on saving and investment. This way will help you possess savings, especially to prepare an emergency fund.


Mistakes in Personal Financial Management

Managing your personal finance is not so easy that you can make mistakes quickly without even realizing it. For example, you buy a lot of brand new items without forethought and suddenly you have too much installment.

Small things may look insignificant, but may have terrible impacts on your future.

Here are some common mistakes when managing personal finance.

  1. No emergency fund
  2. Guessing expense amounts
  3. Not tracking expenses
  4. Counting incomes separately
  5. No travelling fund
  6. Neglecting tax fund 

It is crucial to manage your personal finances to keep your financial conditions stable. By doing such tips above you can start managing your financial conditions well and stabilize them in the long run.

Always remember that personal financial management is your responsibility requiring discipline, patience, and learning motivation.

You can make huge differences in your future finances by doing things the right way.

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