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Personal Financial Management

by Misbaudeen Adeshina

 

How Personal Financial Management Can Increase Your Profit!

Personal finance management is coordination that relates total understanding and a means of taking full charge of one’s resource, in such a way that there are financial orderliness and total management of assets based on daily events towards future plans.

In a simple term, it is a science of cost reduction and savings increment; detail analysis of one’s income in order to know how much you will have to put towards basic expenses, taxes, e.t.c., for instance, make analysis on your income (your salary earnings, investment returns) and expenses (subscriptions, bills payments, housing and feeding, and other miscellaneous) at a particular period of time; you can evaluate your financial life curve.

Personal finance management is a skill that involves five key chain processes to drive out the expected result; this chain process consists of; (i) income (ii) planning (iii) spending (iv) saving (v) investing.

  • Personal Financial Management – Income:

This means individual earnings from his job or vocation which in turn used in financing and attending to his financial needs. This is the startup state of personal financial management. An individual uses his income to meet all his other needs and wants.

  • Planning:

A well detailed and achievable plan is the key to having good financial management. It’s important to give room for constructive criticism of the plan as it would enable it to work better. Before you formulate a plan, you need a set a goal that would serve as the basis for the plan.

  • Spending:

Individual spending is referred to as all the expenses incurred. It could be expenses from feeding, payment of tax, mortgage payment, insurance payment, purchasing of products, and all other expenses.  It can be categorized into two which are; cash and credit which literally means paid by money at hand and pay for by money borrowed respectively. The more you spend, the lesser your income. On no account should you let your spending be greater than your income which is why it is important to learn how to manage your spending in personal financial management?

  • Personal Financial Management – Savings:

This literally means excess money after spending set aside for future costs or for special goals. This is possible when you have a surplus between incomes and spending. You can either decide to save or invest the surplus. Although I would suggest you invest the surplus as that would give room for an increase in your financial income.

  • Investing:

This simply means the accumulation or acquisition of assets that would generate a return and would surely lead to an increase in financial income. It’s as intriguing as it looks but it’s also tricky as it required great attention and consideration so that the remuneration will serve as an income and not spending.

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Personal financial management is a set of skill that needs to be practiced as a culture. In reality, you don’t need to wait to earn big before you start making personal financial management. Start preparing for life after retirement or one during career set-back.

 

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