In the era of the digital world, everyone is seeking money. The main motive of every person has become to earn the plenty amount of money. Everyone is engaged in earning a livelihood. Many peoples attain their satisfying level of money but it is still not known to them how to manage money. Here are mentioned beyond the basics of personal financial management.
What is financial management? :-
“The wisdom of managing the utilization of money properly is known as financial management.” It may be known to a person how to earn money? But it’s quite difficult for everyone to manage the use of money. We can not decide where we should spend how much amount of money? and what will be the feedback of the money we will spend in a particular spot. Even after getting familiar with the basics of financial management, we can not manage it properly, so here we are going to discuss beyond the basics of personal financial management.
Ways to personal financial management:-
1. Divide your money-
The most efficient way to manage your personal finance is to divide it into portions of your needs. It will provide you to know your account properly. You can recognize your expenditures and savings. So it will be profitable to divide your money into two portions:-
A) Savings Portion :
It would be convenient for every person to separate money for savings, otherwise, the mixture of expenditure and savings would be so messy and as a result, you will have no money for the savings.
B) Expenditure portion:
After separating the savings portion all you have is your expenditure portion i.e, the money you can spend for your liabilities and assets.
2.Maintain a diary:
Maintaining a diary is always considered a good habit. By making a diary of all your calculations you can easily differentiate your money for expenditure and savings. It will be easy for you to know where to spend more and where to spend less.
3. Avoid unnecessary spendings:
Every human wants to fulfil their needs and requirements from the money he gains. But, we should make sure that if it is not that much required or it is not our basic need, we should avoid spending here, or we can spend here lastly when we have money left from our expenditure portion after the fulfillment of all basic requirements.
4.Share your financial management plan with your family:
Sharing is the best way to reduce stress. Sharing your financial management plan to your family can be helpful for you as it will make them understand the need for money and it may sometimes happen that you can get a new and efficient idea from your spouse or any family member.
5.Rescue emergency fund:
This is the most important point and the point which got missed by everyone in their financial management. There should always be some amount of money for an emergency otherwise God forbid, if you have an emergency then you will have to take debt or loan and this will disturb your financial management.
The strategy of savings and expenditure:-
“The perfect manner of saving can also make a man rich “. You should be aware of your savings otherwise you can not manage your finance properly. Here are some aspects of savings:-
1. You can make insured individual retirement accounts (IRAs), which are tax-efficient savings account.
2. You can invest your money in mutual funds but be prepared for bearing loss sometimes.
- Avoid extra expenditures.
4. Avoid taking debt and loans.
5. You can make any kind of insurance and policy.
When we talk about expenditure then it is not that much simple as it seems to us. We should efficiently know our expenditure. You can follow the following tips mentioned below:-
The major priority of every mankind should be the tax. It would be a sign of responsible citizens to separate your tax amounts from your expenditures.
After-tax, You should spend money on food, milk, vegetables, fruits and every type of grocery you need.
Then it comes to assets. After-tax and groceries you can spend your money on assets.
Then lastly you can invest on your wish list. But as I said previously, avoid unnecessary expenditures.
SIGNIFICANCE OF PERSONAL FINANCIAL MANAGEMENT:
Personal financial management can make us fully understand what we had earned, what we had spent and what we had saved, and what amount is required for us to fulfil our needs and it can also help improve our standard of living.