Personal Finance

AREAS OF PERSONAL FINANCE

• Income. 

Income refers to a source of cash inflow that an individual receives and then uses to support themselves and their family. It is the starting point for our financial planning process.

• Spending. 

Spending includes all types of expenses an individual incurs related to buying goods and services or anything that is consumable. All spending falls into two categories: cash and credit.

• Saving. 

Saving refers to excess cash that is retained for future investing or spending. If there is a surplus between what a person earns as income and what they spend, the difference can be directed towards savings or investments.

• Investing.

Investing relates to the purchase of assets that are expected to generate a rate of return, with the hope that over time the individual will receive back more money than they originally invested.

• Protection. 

Personal protection refers to a wide range of products that can be used to guard against an unforeseen and adverse event. Common protection products include life insurance, health insurance, and estate planning.

THE BASICS OF PERSONAL FINANCE

• Do a monthly budget. 

Budgeting is simply making a plan for your money. It’s the foundational habit you build all other money habits on.

• Live on less than you make.

If you realize you have more money going out than coming in every month, you need to adjust your spending. 

• Save an emergency fund. 

You need to save for a rainy day. When you’ve got an emergency fund in place, you’ll be ready for whatever comes your way.

• Get out and stay out of debt. 

Your income is your greatest wealth-building tool. And when you pay off your debt, you take back your paycheck—and your life.

• Plan for the future. 

As far as investment strategy goes, you want your money evenly spread across the four kinds of mutual funds: growth, growth and income, aggressive growth, and international.