Importance Of Personal Finance, Application And Methods

Importance of personal finance, application and methods

Introduction

Personal finances are a supremely relevant aspect in people’s lives, these have different ways of explaining and has several methods for their realization. For this reason, with this article, it is intended to explain very in detail each of the steps and strategies for the achievement of the goals and objectives and the relationship that the individual has to save and know how to handle all their income.

Developing

Personal finance is the management that a person requires to earn money, save and know how to manipulate income before improvist situations. Through individual financial planning that seeks to achieve attainable goals through strategies and thus guide people in which to invest their money in order to achieve real balance, where losses decrease.

Personal finances change every decade in humanity, this is why there are consequences on several aspects of social life such as social and family. In many studies it has been established that they are directly linked to the world economy. Therefore, there is talk that savings and investment are the solution for both particular and collective.

As stated at the beginning, planning can be a logical development and that seeks to achieve proposed goals with strategies. Therefore, five stages will be analyzed that make it possible to acquire financial success: Review of the current financial state

When reviewing the current financial situation, it has to do with monthly income and expenses, it can simply be expressed that income is all that is won permanently, either biweekly or weekly.

 Now, expenses are various money outputs that are exhibited for a period of time, such as fixed expenses that can be public services, internet, debts, food, monthly school, passages, or the variable expenses that are clothes are , personal toilet implements, go to cinema, buy makeup, etc.

Next, to set the objectives it is mandatory, that they are clear about their goals, their well -being and their financial position in the present, in order to be able to capture them in their daily life and can set a date to meet this goal. If therefore, achievements in accordance with the period of time in which they plan to achieve them must be fractionated.

When you say short -term goals or objectives, they are those that can be achieved in a period of less than one year, for example: avoid spending money on unnecessary things and paying debts.

On the other hand, the objectives in the medium term, can last a time between 1 year 5 years to get, for example: save money in a bank to obtain a heritage for their children, for old age or to get a car.

For the goals or long -term objectives, they are the ones that for the usual take a longer than 5 years, for example, buy a house, a car, a farm or make a trip outside the country.

On the other hand, the recently mentioned time intervals are only approximations trying to adjust them to their environment “however these deadlines obey more to market determinations within the economy in which we are moving” (Figueroa Delgado, L.EITHER. (2009).Personal finances. Business Administration Magazine, 65, pp 130)

In addition, this stage is truly the key for the financial plan to be manufactured, in order to sustain these fundamental ideas: “Keep future goals in mind, remembering the reward that will be obtained by achieving it, consider goals that constantly keep the plan in development financial, determine tangible goals that allow you to answer why you want to achieve them ”(Figueroa Delgado, L.EITHER. (2009).Personal finances. Business Administration Magazine, 65, pp 131).

Now, to develop the action plan, it is important that they take into account the first component that is to keep the adaptation, which will be the technique for your plan of the plan to change or redesign the goals if you see that the strategies proposed from the beginning I did not work for them. The other characteristic is what calls liquidity, "that allows them to change physical assets in money, quickly and comfortably without losing much value". (Figueroa Delgado, L.EITHER. (2009).Personal finances. Business Administration Magazine, 65, pp 131)

Therefore, in the manufacture of the plan, unexpected expenses must be assumed, due to which they can alter the objective of their goals, for that reason you must have a strategy of how to protect your money against these situations.

Another characteristic is related to the future, which is why two main activities are carried out: obtaining the budget and the structuring of innovative plans to achieve their goals. In that sense, the goods that must be achieved to obtain those future financial objectives, “as the trip to another country will be considered; To do this we must plan the value and date of purchase of the tickets, the cost of accommodation during the time we are, food spending, etc.”(Figueroa Delgado, L.EITHER. (2009).Personal finances. Business Administration Magazine, 65, pp 132).

When it is said to execute the project that has been built, it has as a novelty that it can be executed, in this sense, each step of the plan must be reviewed very carefully so that when it comes to executing everything it goes well and does not force it to look at which These are the consequences of that failure or have to reduce the expenses of their daily life. Do not forget that the plan is a resource to increase capital and that incorporates quality of life or social welfare.

It must be maintained continuously to reach the plan, this is managed to constantly working on its purposes “regardless of the inconveniences that are presented on the route drawn, do not forget that in the end the reward will be for you” (Figueroa Delgado, L.EITHER. (2009).Personal finances. Business Administration Magazine, 65, pp 132).

It should be noted that periodic evaluations must be carried out to observe the progress described in the aforementioned stages and observe whether it is convenient.

Additionally, for your Marche Action Plan to create a financial plan, therefore you have to prepare success characteristics such as these: “First, save today to have a future financial support, which will allow us to give us time and achieve different goods and services that guarantee us an adequate standard of living and the creation of an individual wealth ”(Figueroa Delgado, L.EITHER. (2009).Personal finances. Business Administration Magazine, 65, pp 133)

The person has to start making investments in what he thinks will generate more profitability can be a food store or a sportswear warehouse with the income he has achieved from savings or financial strategies that were already mentioned, this normally It is known as fixed income, which leave small but reliable productivities for the financial field.

Secondly, the budget is one of the most relevant finance tools. With the budget you can plan the income and expenses provided for a certain period of time.

From the budget, a calculation obtained from income and expenses is made, to know in this detailed way which is the savings or deficit that its economy has.

To make a budget, it is necessary to collect the expenses and income of the month.

In advance to make a budget, it is necessary to classify all the expenses they make in the month, for example, know what money is spent if they are in things that truly need or are unnecessary things, prioritize expenses as it is, the food, transport to go to work, lease, public services; control what they want to spend and that, finally it is very important to plan savings, thinking about future plans.

To prepare a budget, they need to spend time, be sincere, orderly and hard when collecting the information; There are numerous templates and documents on the Internet that can help them to make the budget, when collecting expenses and income, they must be reflected in two different columns, to obtain, the difference of each.

Ideally, they begin with the income column, these are almost always going to make salaries, pensions or business profits.

The other column must be expenses, are all money outputs in the month, for example, fixed expenses and variable expenses, they can deduce that expenses are many more numbers than income, in addition the expenses are not equal to what length of the year.

From the above comes the comparison of income and expenses, they will observe what the result of budgets is, and this can yield three results: surplus, balanced and deficit.

Suppose that surplus came out, it is when the total income is greater than the total expenses "in this way we are generating savings, creating a financial remnant, which will give us security in the future" (Aibar Ortiz, M.J. (2018).Personal Finance: Planning, Control and Management. Ministry of Education, pp 21)

Now see if your result is balanced. This means that the total sum of income is the same as the total sum of expenses. This is what is known as living up to date, they spend as long as they have, and when it ends, they are desperate to collect the month "This is not a desirable situation, we must act to correct it" (Aibar Ortiz, M.J. (2018).Personal Finance: Planning, Control and Management. Ministry of Education, pp 21).

On the other hand, if its result is deficit, it is the worst situation that can be yielded because the result is the total sum of the expenses is greater than the total sum of the income. This situation must definitely correct, looking because they are spending more about the income they have, if these expenses are things that really need or are unnecessary.

In general, we can say that the most convenient is that the total expenses are between 80-90% of the total income, in this way they can generate savings for unexpected situations.

Observe how they can save, spend 80% of income on needs or tastes, such as traveling, going to cinema, buying a cell phone or having a business; Save 10% to attend unforeseen expenses, for example, get sick and have to go to the hospital they could get there to spend; get 10% to invest in a business that can generate more income.

conclusion

People must take into account personal finances, since they are a fundamental pillar for daily life allowing dreams and goals that arise daily by giving them adequate management, although these dreams and goals can be different for each individual and can have different times to achieve them. Within the planning of finance savings and budget can help a lot to meet the objectives by handling stable and ordered expenses. These expenses can be handled by determining the amount of income as well as saving and thus handling a balance that allows you to meet the goals.