Personal finance involves individuals or a family and deals with all the economic aspects of one’s life. It talks about our income, what we save and spend as well as how we make the budget? So the importance of personal finance is well understood. It has the potential to give us the financial freedom.
We need money for our survival and for fulfilling our needs. For this we need to save money, invest it properly and in turn we need to make a budget, trim our expenses, select appropriate financial instruments and this is where personal finance comes to picture. Personal finance is the only tool which can help us in managing our money efficiently.
Personal finance enables us to save our money and teaches us to save it. Personal finance deals with budget which is an important principle for managing money. A budget is a financial statement which talks about our financial goals and expenditures. A budget is an important tool for building a sound financial plan which in turn will enable you to analyze your income and expenses. Budget helps you to work according to your needs as well as wants and keeps a check on your expenditures. Personal finance tells whether you are financially fit or not? You need money for your kids’ higher studies and enough cash for your daughter’s marriage.
Personal finance is a means through which these targets can be achieved easily. Budget will only allow you to save money monthly and stop irrelevant expenditures so that you buildup a good amount in a year. Budget should be followed strictly as this will make you a disciplined person. Never spend beyond your salary and more than what you planned in your budget. This is the very basic principle of personal finance budgeting and this emphasizes the importance of personal finance budgeting.
Personal finance teaches you to be realistic and practical. There is no room for emotions when it comes to money matters. Remember to be practical; if you cannot buy expensive clothes, have the same car as your friend owns or dream a house you thought of buying then for god sake don’t get emotionally attached to these dreams if your pocket doesn’t allows you to do so. Spend on needs and not on wants; at times, people are trapped in heavy debt just because they run after such financial dreams which they could never achieve. People think loans are the easiest way to fulfill these luxurious dreams but they forget that ultimately that payment will only be done by them and at times it will be more than the actual price. Pay your shopping bills on time and limit the use of your credit card. Avoid loans as much as you can and keep cash in your pockets as this will itself restrict your spending because you can spend only with what is in your pocket and not over-exceed your limit. So, follow basic principle of personal finance and reap benefits from it. Remember to plan effectively and realistically.