What is Personal Finance?
Well, it’s a lot of things. But primarily, personal finance defines all economic decisions and activities of an individual or group of individuals, otherwise known as a “household”. It encompasses the application of the principles of finance to the monetary decisions for budgeting where income and expenses play an important role.
Personal finance includes a review of…
…savings, mortgages, insurance, liabilities and retirement among others. It addresses the ways in which individuals or families obtain loans, create smart budgets, and spend monetary resources over time; taking into account risks factors and life events. Personal finance is a very individual activity that depends largely on one’s earnings, living requirements and individual goals and desires.
Fortunately, there are online resources that can make the planning side easier and more convenient.
A good example is SettleiTsoft®, which provides powerful financial and budget tools that are extremely valuable for subscribers, allowing them to detail their income streams and expenditure habits, while helping to maintain control of their finances. Interestingly, the software also helps users in financial distress through the debt negotiation process in a 24/7 virtual environment.
By combining these features in an intuitive online software platform, SettleiTsoft® provides a genuine debt relief software solution for consumers who want to control and manage personal finances in a systematic manner to achieve savings goals and for those consumers whose monetary crisis goes beyond the use of financial tools and debt management programs.
The key component of personal finance is…
…financial planning, which involves the evaluation of your current financial status to forecast short-term and long-term economic needs within individual financial constraints. The components required to build personal finances with accurate financial planning may include checking and savings accounts, credit cards, consumer loans, investments in the stock market, retirement plans, social security benefits, insurance policies, and income tax management.
Financial planning is a dynamic process where several factors directly influence the outcome of the desired goals and requires regular monitoring and reevaluation. The following steps are necessary for good financial planning:
- Assessment – The most important element for good financial planning is an accurate assessment of the individual’s current personal financial situation. This process can be accomplished by compiling data from a financial balance sheet and income statements.
- Setting Goals – Once a thorough assessment is performed, the next is to set realistic goals with an objective to meet certain financial requirements. Choosing financial goals that you are excited about is strongly recommended. Though certain aspects of personal finance are generally applicable to everyone, it is essential that you select those aspects which are most important to you.
- Creating a Plan – Developing a realistic plan which specifies in detail how to accomplish your goals is critical. For example, a plan may determine and reduce unnecessary expenses, increase sources of income and create guidelines for investments. You are less likely to achieve your financial goals without deciding upon a plan. By tracking your spending for a period of time, you are able to estimate how much you spend per month, on average. If not, use your best guess and adjust as needed in the future. Keep in mind that you will increase the probability of reaching your financial goals by not making unnecessary purchases.
- Execution – The execution of a financial plan requires discipline and guidance. It is very common for people to obtain assistance from professionals such as accountants, financial advisers, investment planners and lawyers. When it comes to personal finance, the sooner you start executing your financial plan, the better. Depending upon your financial goals, it may be hard to realize the importance of the time factor. For example, if retirement is planned for 30 or more years down the road, you may have the misconception that you do not have to save for it right now. You need to consider that the more time you have to save for retirement, the smaller amounts you will need to set aside. Remember the power of earning interest. Due to compounding interest, the money you save today begins growing over time. Therefore, you may accomplish your financial goals that much sooner.
- Monitoring, Tracking and Reassessment – Over time, your personal financial plan may be changed by external factors. Therefore, the plan must be monitored continuously for possible reevaluation and adjustments. This means scrutinizing your income and spending to make sure you’re staying on track and following the financial principals you’ve decided are most important to you. When it comes to tracking, consider online financial software like SettleiTsoft® to manage your accounts and keep you in control of your financial life. The SettleiTsoft system platform may use this information to generate a financial forecast as well as settlement proposals to creditors in an attempt to satisfy outstanding balances.
Remember, since personal finance and/or financial planning is a personal choice and results may vary depending of multiple factors, consulting a qualified professional is always a good idea.