Financial Literacy Training Certification
ACCESS COURSE CONTENT HERE
Personal Financial Management
What Personal Financial Management Entails
At a very basic level, personal financial management simply means gaining an understanding of your financial situation in order to make the most of your assets in day-to-day life and in planning for your future.
One thing to keep in mind is that assets might equate to more or less depending on where you live based on the cost of living concept. The cost of living is basically the amount of money necessary to cover basic living expenses such as food, housing, commuting, and even healthcare.
But to many, all this really means is that you should watch what you spend and save what you’re able to.
That certainly isn’t a bad policy, but it’s one that fails to address the complexity or full extent of strategic financial planning.
To gain a more appropriate basic understanding for all that is entailed in setting yourself up for financial success, here are 10 reasons why financial planning is important.
Income. Analyzing your income to know how much you’ll have to put toward basic expenses, taxes, etc.
Cash Flow. Managing spending and planning ahead to make the most of your income.
Capital. Having leftover cash as a result of managing cash flow.
Family Security. Understanding the need to address providing for and keeping your family safe (through insurance and other means).
Investment. Making a plan to help your capital grow over time.
Standard of Living. Guaranteeing the most possible comfort due to prudent financial planning.
Financial Understanding Making use of your own decisions and results to better understand what works in your financial management plan.
Assets. Acquiring valuable assets (or investments) with low risk and limited liability.
Savings. Having emergency cash on hand or stored in high liquidity investments.
Ongoing Advice. Establishing a relationship with a financial planning expert to set yourself up for strong decision-making.
Some of these ideas involve the same specific types of financial management or strategy. However, understanding the significance of each of these points can help you to get a grasp of the full complexity of a sound financial blueprint.
Specifics of Personal Financial Management
Now we’ll address some of the specific strategies that go into addressing these areas of importance.