Personal finance: how to manage it to improve your pockets and your economic productivity.
Personal finance is the skill that allows you to manage your funds actively to analyze, manage, and increase it. It includes budgeting, banking, mortgages, insurance, investments, retirement planning, and tax and estate planning.
Keeping a personal budget with your own expenses gives you the advantage of having a clear idea of your present, past, and future financial situation.
If you are reading this article you would probably like to learn how to best manage your assets.
This article is divided into 3 parts: the first is used to become aware of your assets and to become owners of what you own, in the second we will see strategies to increase your assets, while in the third phase we will see what are the best tools to manage your personal finance.
Phase # 1 - Capital analysis
You cannot analyze your pockets effectively without having a clear picture of your economic situation, the first step is, therefore, to verify what and how much you have in order to better manage your money.
Start by doing the accounts of your properties, to understand how much your capital is, draw up a list of your state assets by adding up all your assets.
You could object that you don't have all these goods to list, but I invite you to think carefully, there may be things you don't think about anymore, here is a concise list that can work as a base for you to start with:
- Bank account
- Postal account
- Fruitful coupons
- Stocks and stocks
- Prepaid cards
- Money scattered around the house
- Any valuables you would like to sell
- PayPal account
- More money
Now you should be clear on the cards the amount of your savings and the status of your personal finance, a necessary condition to manage your money correctly.
For better orientation, you can calculate your CashFlow, or your net income, that is the difference between your income and your expenses.
Now that you have calculated your average monthly CashFlow, mark it on a block of paper because it will be needed in the next steps to manage your personal finance.
Phase # 2 - Increase your revenue
The 4 fundamental strategies to earn, which to summarize are:
- Diversify your revenue. Having at least two incoming cash flows is an advantage not only for the amount of money generated but for having a financial lifesaver able to make up for a possible lack of money deriving from primary income.
- Building a system . Building a money-making mechanism is the best way to generate secondary, perhaps passive, income.
- Invest in knowledge. An effective way to make money is to invest in your passions, generating an income from your own hobby is certainly better than investing your time doing a job that you don't like or for which you have no interest.
- This point does not require much to be explained. The more you save, the better your financial situation.
These are the 4 main legs to increase your assets, to which I add some generic advice to manage your personal finance:
- Put your savings in an account without an ATM, so to withdraw you will have to queue and be discouraged to do so
- Create a job that generates passive income
- Save at least 10% of your income monthly
- Get into the habit of saving often, even if it’s a small amount
- Take care of your financial education
- Spend less and less of your income
- Limit the use of cards, use cash instead
Phase # 3 - Manage your personal finance
Correctly managing your personal finance can be a cure-all for your pockets, having the income and expenses automatically paginated in a convenient chart or in a clear list of expenses is a valid help.
There are many programs available to manage your personal finance, you can easily find them on the internet.
Now let's move on to some tips for managing your home finance:
- Focus on your financial growth. Leave the global economy alone and detached from the financial news that they broadcast on television. Have you ever tried to calculate the time you use to watch television or to be on social networks? Try it, you may be surprised. A media diet becomes essential in such cases if you run out of time and cannot maintain concentration for a long time. Do not waste your concentration by focusing on external factors that you cannot change, shift your attention to your personal finance which depends on your choices, instead leave out the global one over which obviously you cannot have control.
- Check your CashFlow. With the simple formula seen in the first paragraph, you can calculate your monthly net income, whatever operation you decide to do, try not to exceed this figure. CashFlow is considered as the starting point for investing, saving, and spending.
Only good debts. Good debts produce an annuity, they are an investment for the future, these must be most of the debts that you will take out, a car or a designer dress instead are bad debts, they do not return and do not produce money: pay attention to this fundamental distinction to properly manage your personal finance.
Use the card as a strategy. If you can't do without a credit card, decide in advance what amount you intend to spend each month and deposit this money into your credit card. Your main current account must have as a single movement the transfer of the chosen amount to the credit card. Then use only this money during the course of the month, forget about the main account and treat the money on your card as the only available source of money. Having a fixed and unchangeable amount chosen every month, it becomes easier to manage your expenses.
- Everything in one place. Buy a piggy bank and deposit all the coins you find in the house, every coin or flying banknote must be inserted in this deposit. Get into the habit of putting something in every day, little but often.
Learning to keep accounts and manage your personal finance is a useful skill that accompanies you throughout your life, not surprisingly I have included it among the most important personal skills.
If you have never managed your personal finance, it could be boring at first, but after a couple of months with the first budget under your eyes, you will immediately have the satisfaction of having your personal finances and economy of your home under control.