We tend to receive money almost every time. Students receive money when going for school. Salaried workers receive money when time for compensation is due. In much the same way, the woman who operates a provisions store or the one who sells at the market receives money after a day’s work. But it is sad to note that people still experience “poor” financial life after receiving quite some good amount of money. Why is this so? It is because largely, people often fail to appreciate that just as it is important for us to get money, how we manage the monies we have got is even more crucial. Simply, no regard is given to personal financing, hence the difficulty in addressing financial needs as and when they fall due.
The subject of personal financing could be appear or be presented in a relatively complex manner but I present in this article what I call “personal finance made simple”, which I strongly believe will help you to improve your personal financial life for a happier living.
Personal finance could be defined as the mechanism whereby an individual, a group or family budgets, saves, invests and manages their finances to yield them optimum benefits. The highlighted words are vital to personal financing and that is what it is about. In this article, I discuss in brief these components.
Finance is a broad area of life and it has many dimensions, one of which personal finance. The word “personal” indicates that it is about a person or about individuals- it is about you and me. That is the first thing to note.
In finance, we consider areas such as budgeting, savings, investment and management of financial resources. So in personal financing, we are talking about how you budget for various expenditure needs, save and invest when not all money is “consumed”; and manage your money and other financial assets for a sound financial life. This is the second thing to consider. I present detailed information on these areas- budgeting, saving, investment and financial management- in other related articles.
Budgeting as an aspect in personal financing simply involves establishing clearly your expenditure needs for a period and deciding on how you are going to finance them. The practice of depositing money into a savings account, whether through a bank, savings and loan or microfinance or any related firm can be termed savings. It can even be seen as putting money in your “susu” box in your room or giving money to someone to keep for you for a period, after which you go for it. Investment, which is often misunderstood as saving or seen as the same as savings, differs from savings. It describes you committing your cash into a particular asset say buying goods to sell, a mutual fund or buying shares. You must not forget that students buying books to study and parent paying for the fees of their wards are all forms of investments. The main differentiating factor is that investment is aimed at making good returns on invested funds but saving is just a preventive measure for consuming monies one does not want to spend.
Personal finance is similar to any pursuit for which there is a goal to be achieved. The primary goal therefore, of personal finance is for the individual to have a sound and well controlled financial life for great financial advantages.
Personal financing is important for every individual for the reasons that follow. It inculcates financial discipline in you. You stand the chance of saving yourself from lots of unplanned purchases. Thirdly, you benefit from making the best out of the limited money you have. Again, you are very likely to meet all your financial commitments as and when they fall due. This will save you any shame and embarrassment thereof. Additionally, you will find yourself enjoying and even lending to people when others are begging and seeking loan because they failed to manage their financial lives well.
In ending, I wish to mention that personal financing is really needed by all and sundry in the wake of rising cost of living.
Source: Isaac Nana Opoku