Personal Finance and Becoming Rich

Personal finance is a broad term that involves managing the money earned by individuals, maintaining a steady growth of savings, and investing it wisely. It also involves activities like banking, budgeting, mortgages, investments, insurance, tax planning, and retirement. This is a term that refers to the whole of the industry providing financial planning services to people and their families. They also advise about opportunities to invest better and about how to handle finances in an effective way.

The financial goals of people may vary, and the strategy to achieve those financial goals is also different for each person. To maximize the result of investments in savings and income it is important to be very aware of financial handling to differentiate between the better and the best advice. It ultimately helps to make smart and intelligent decisions.

Personal finance and its importance

It deals with fulfilling financial goals. The goals can be planning for children’s education, retirement planning, or meeting financial requirements in the short term or in the near future. Everything depends on income, insurance, savings, and investments.

Key areas of personal finance

The five main areas of personal finance are:

• Income- It is the beginning of personal finance. It is the total amount of funds received which we distribute into expenditure, savings, investments, and protection. Wages and dividends are also included in this head.
• Savings- It is the excess income left after spending. Savings are important to cover emergency expenses but all of the income cannot be utilized for this.
• Expenditure- It is the cash outflow from a household in the form of rent, household items, leisure activities, hobbies, etc. Control spending or expenditure is an important aspect of personal finance.
• Investments- It is all about building assets mainly in the form of stocks, shares, and bonds to get an extra income on the invested amount. There are risks involved with this as all the invested money may not earn a good return.
• Insurance- It involves protecting oneself from an unexpected turn of events like diseases and accidents along with wealth preservation. Life health insurance and retirement planning are included in this.

Financial planning should be started at the earliest to earn better benefits