A 3 minute read that can change 3 years of your life…
We are flooded with financial decisions every day: How do we get out of debt, pay for our monthly essential bills, ensure that we save and invest enough towards life emergencies and retirement, settle our mortgage, and always ensure that we have a healthy credit card score and more. All these are challenges that the principles of personal finance can help us to solve.
Human needs are many, yet the resources at our disposal are limited. For most of us, our income is capped, yet we have a lot of monthly expenses to cater to. Hence, we have to set a budget and financial goals for ourselves. Good knowledge of personal finance can help us to easily achieve both our short and long-term financial goals. Hence, we should seek it.
What is Personal Finance?
When we talk about personal finance, we talk about those concepts that can help us become self-sufficient as far as money matters are concerned. These concepts include budgeting, saving, investing, insurance, banking, and retirement. As complicated as those concepts may sound, the good news is that you do not have to be a finance guru to understand them.
Instead, if you want to improve your financial health, you should befriend personal finance. And here, for a start, we will be discussing how to use budgeting and insurance to safeguard yourself and your finances.
Budgeting
Alright. Most likely, immediately you saw “budgeting”, you thought: “budgeting! That intense life of self-denial! Oh no! A life that won’t allow me to buy what I want…ugh!” Wait. There are many things budgeting is not, and abstaining from getting what you want is one of them. Rather, it is about simplifying your life by cutting out unnecessary things and services you do not need.
Budgeting is the most basic idea of personal finance. A monthly budget is a spending plan: it helps to tell how you put your money to use every month. It enables you to list what comes in, your income, and what goes out your expenses, and compare both. Using a budget has many benefits that can help you become smarter with your money.
For example, a budget can help you to set financial goals and keep you focused on them. You know, that item you saw at the mall the other day and badly want to get? You can budget for it. A budget can keep you on top of your spending and make you stay aware of your savings, investments, and debt. The most important benefit of using a budget, perhaps, is that it gives you total control over your money.
Insurance
Arguably, there is no personal finance concept shrouded in so many myths as insurance is. Argh! Who would ever want to take a life insurance plan, for example, when they are not planning to die any time soon? Oh no, nobody wants their car or house to get wrecked by any accident or disaster. But this is life. Disasters happen from time to time. The best we can do for ourselves is to be prepared in advance for them.
Even if you have designed a budget and started a retirement plan, insurance is one more aspect on which you need to work. Why? Because accidents and disasters happen from time to time and if care is not taken, they can completely ruin your life. This is why it is recommended you take insurance plans for those disasters and accidents that you are susceptible to the most.
If you have a family that is dependent on you to pay the bills, for example, you should take a life insurance plan. Oh no, you are not planning to die; instead, when you take life insurance, you are just planning for one of the disastrous eventualities of life. This insurance will help to take care of your funeral expenses and the family you leave behind. But before you do, you should know what type you should take. Permanent or term life? Also, how much coverage do you need?
In addition to life, other must-have insurance types are long-term disability, auto, and health. Also, apart from budgeting and insurance, other essential personal finance concepts you should grasp are investing, saving, emergency fund, banking, credit card, debt management, and retirement planning. Here, we will be discussing all these and more as we move. So, watch out for us!
