Let’s face it: your finances largely affect how you spend your everyday living. It plays an important aspect when you are determining what to wear, what to eat, where to go, where to live, what to drive, what to do during your free time, and even what hospital to go to when you are sick. In some cases, it seems as if your personal finances control you. But, this should not be the case. You should start taking control of your finances instead of letting it define your life.
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Taking Charge of Your Finances
Clearly, it is vital that you pay much attention to understanding how personal financing works. If you can just apply the principles of financial management in your everyday monetary decisions, then you can probably be a lot better in controlling and managing your personal finances.
Constructing a Financial Plan
The art and science of personal finance start with constructing your personal financial plan. By coming up with a blueprint on how you should spend, save, and possibly capitalize on your money; you’ll start making the most of your finances in no time. Below are the general steps in coming up with your own financial plan:
1. Evaluate your Finances.
The first step in making the right plan is to assess how well you are doing now. Examine your ways of obtaining money and assets, along with ways on how you save or spend your resources. Prepare a personal balance sheet. The list should include all your personal assets, along with their presumed values. Do not forget to jot down your checking and savings accounts, credit cards and investments in the stock market. You may also include your social security benefits and other monetary privileges that you are enjoying such as your monthly income. After listing your monetary resources, you should then match it with a list of your expenses from your monthly food allowance to expected monthly bills and other liabilities such as mortgages. This way you can see how much you are capable of spending and saving.
2. Identify your Goals.
Your goals provide direction to your plan. Usual goals for financial plans include raising funds for personal necessities such as saving for a new house, a new car, a long-awaited vacation, or an education plan for your kid. Your financial goal may be a single endpoint, or it may be a long list of your personal ambitions. In deciding what your plans are, you should take note of the plan’s feasibility. Do not make plans that are impossible to achieve.
3. Devise a step-by-step plan.
After you have identified your goal, determine the steps you should take in fulfilling your financial goal. This may include cutting down on unnecessary expenses, exploring new sources of income, or saving more money in the bank. Whatever your steps are, make sure that you are capable of implementing and following your plan. Do not forget to examine possible problems that may interfere with your steps. In such cases, prepare an alternate plan of action. Also, you ought to construct a time frame for your plan.
4. Carry out the Plan.
This is probably the hardest part- implementation. When executing the plan, you need to constantly remind yourself about your goal. That way, you can stay motivated and inspired to follow the steps. Equip yourself with the utmost discipline and large doses of perseverance. If possible, look for support groups that can possibly encourage you to stick to your plans.
5. Monitor and assess your plan.
Keep an eye on how your steps work for the fulfillment of your overall goal. Examine if your plan is really working and if it is still feasible and beneficial for you as time passes. Be open for alternatives or possible changes to your plan, especially if unforeseen circumstances affect the consequences of your assumed goal.
