Change for a Better: Understanding Your Personal Finance

Money is a subject that is often uncomfortable to talk about. And yet, it is a subject that everyone cares about. Most of us understand that we should be saving for retirement and investing, yet we don’t do it. Our parents tell us to pay our credit card balances off every month, yet we rack up more debt. Why? The answer is simple. Because we are human.

We have emotions and feelings. We have distractions. We have a lack of discipline. We have limited knowledge. We have a shortage of time. There are a million reasons why we don’t have perfect control over our money. But we can all make positive changes. And those positive changes can start today.

What is Personal Finance?

With the economy in shambles, it’s more important than ever to get a handle on your personal finances. But what exactly is personal finance? Personal finance refers to all aspects of your financial life, from spending and saving money, to investing and building wealth. It also includes debt reduction and building a solid financial plan.

Personal finance can mean many things to many people. At its core, it is about managing your money and assets, so they yield the most value to you. For many people, that means building wealth through savings and investment. For others, it means paying off debts, such as student loans or a mortgage. And there are some people who like it to mean that they can become more financially independent. Personal finance is a broad term, and it encompasses many goals. No matter what those goals are, personal finance tends to follow the same principles.

To help improve your personal finance, here are some important terms you should never forget:

  • Budgeting – This is one of the best ways to manage your income, expenses, and debt. It is the key to controlling your personal finance. It is not just about cutting up your credit cards; in fact, the opposite is true. Instead, it is about knowing where your money is going and allocating it to the right places. It helps you keep track of where your money goes and where it can be cut down. There are several personal finance packages available online and offline which can help you to manage your money.
  • Savings – Savings is all about discipline. It means not spending your money when you earn it. Instead, you should have the self-control to defer spending it until you are able to maximize its value. We define savings as “the removal of money from circulation.” It is done by depositing money into a savings account, setting it aside in a piggy bank, or storing it under the mattress.
  • Insurance – Insurance is protection against financial losses. It’s a risk management form principally utilized to hedge counter to the risks of an uncertain, contingent loss. It’s an entity providing insurance known as insurance company, an insurer, or an insurance carrier. An individual or entity that purchases insurance is also known as a policyholder or insured. The insured party receives an insurance policy, which is basically a contract containing brief details of the conditions as well as the circumstances wherein the insured gets financially compensated.

Personal finance can be a confusing subject, touching on taxes, loans, investments, insurance, and more. You must ask yourself many questions when you are looking to get a handle on your own finances, and often, it is difficult to find answers. Fortunately for you, there are many great books and online resources that can help you get a leg up on your financial future.

Conclusion

Personal finance is about more than just keeping track of your spending and saving money. It’s also about protecting yourself from financial disaster. While it’s impossible to predict the future, there are certain things you can do to protect your savings from unexpected events that will put an undue strain on your finances.

We all know how important it is to manage our own personal finances. If we don’t, we can end up with massive debt and ultimately ruin our lives. Managing our money is one of the most basic things we must do as adults. You need to make sure you are eating right, staying fit, and saving your money so that you can handle your bills, as well as your life in general.