This Article is About
personal finance
using computer software
assets and liabilities
financial decisions
inaction
incomes
amount of money
several ways
time limit
Thinking Of Personal Finance? Read This!
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Thinking Of Personal Finance? Read This!

There isn't a person who hasn't heard of personal financing and running their personal accounting, but, not so many persons are actually do it. Not everyone has enough reasons to be doing it. Some of them even find personal financing a repelling topic. There are probably plenty of sources for each action and inaction, but the bottom line is - some people know how to make the best use of personal financing, and they're doing it well.

Why is the personal financing benefial for you?

- Realistic income and outcome insight - you'll get a clear, fully realistic insight on your incomes and outcomes. You'll know how much and how you're actually earning, and how much and which expenses you have.

- Asset and liability insight - you'll see which assets you have, meaning, which things you've invested in that provide you constant income, as well as which liabilities you have, which things you've invested in that take money from you. You'll also know which current financial decisions you're making that influence future assets and liabilities.

- Budget creation - you'll be able to define budgets for each segment of expenditures, based on your realistic incomes.

- Create savings - every resource that comes in, but is outside defined budgets should be invested in assets or put in savings.

- Grow your incomes - after you'll know minimum amount of money you need in a certain time limit, you'll start to look for appropriate income sources that will match with expenditures, or ideally, exceed them.

- Get on top of your finances - the best feeling you'll get from doing personal financing is that you're on top of your finances. You'll know which money goes where, and where it will go before it even comes to you. This will also prevent you from doing inappropriate or unwise financial decisions.

How to start doing personal financing?

There are several ways to do it, depending on your personality and technical skills. If you're keen on using computer software, there are personal financing programs that have all aspects of it covered, and even calculates all transactions, balances and transfers, and does accounting. But, you can also create custom programs in Excel file, or write everything out on paper. Personal finance softwares are highly recommended because of user friendliness, which is making the whole thing much easier to do and saves you lots of time.

Before starting the personal financing, you have to know your goals. Why are you truly gonna be doing it? Is it to save certain amount of money? Or to manage your investments? Or to lower your unwise expenses? Think about your current financial decisions, and in which way you want to change them? Base your financing around that.

Then, you'll have to educate yourself a bit about income and outcome types. The more you know about this topic, the more directed your personal financing gets, as well as the better results of it.

The actual personal financing consists of income accounting, outcome accounting, and budget management.

Income accounting refers to categorization of each income. Is that income active, passive or portfolio? Is it constant or one time? How can you count on it in the long run?

Outcome accounting refers to categorization of each outcome. Is that outcome asset, liability or expense outcome? When you give money away from you, you have to be fully aware of what does that act of giving really mean. It may mean further future costs, or incomes. It may even mean you simply threw the money away in the wind. Learn more about creating assets, lowering liabilities and expenses.

After certain time period, it is advisable to calculate overall incomes and outcomes, to understand the balance and see which aspects of your money management should be improved.

Budget management refers to creating budgets for each outcome category. Predefined outcomes are a proper preparation for future, to obtain maximum financial benefit. Sometimes, things cannot be planned, though...

In the end, those who never did personal financing don't know what it really represents, and aren't making use of it for attaining financial wealth. Those who are using it, are well aware of everything that happens to them, and know what to expect in the future. They often find a way to create savings and smart investments. They end up with living cost much lower than their incomes, therefore, creating wealth.


Street Talk

Great points Josip. I have to agree, people would be better off following your advice. :)

Reply
  about 7 years ago

I'm writing from personal experience. Personal financing allows you to get wiser in investments and savings....

Reply
  about 7 years ago
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