Personal finance is essentially the application of the principles of finance and that too on the monetary decisions you make, be it as an individual or a family unit. There are quite a few issues and concerns which personal finance is known to address and that includes practically anything and everything. Be it the manner in which you obtain, budget and spend the monetary resources or be it taking into account the various financial risks and future events. The periphery of personal finance encompasses all this and much more. The major problem with most people lies in the fact that they fail to take care of their personal finance and this in turn inadvertently leads to debt. Once you’re caught in debt, you’ll have no other option but to look for avenues for getting out of debt. This is why you should take care of your personal finance as best as possible.
5 Steps to maintain healthy personal finance
Now, if you’re wondering what’d be the right key to unlock healthy personal finances, then obviously it could be done by effective financial planning. Financial planning is again a dynamic process and requires close evaluation as well as regular monitoring. If you scrutinize it closely, then you’ll realize that there are 5 essential steps involved.
- Appraisal: The very first step involves compiling simplified versions of financial balance sheets as well as income statements. Whatever be your income and expenditure, you must keep a tab on all of it.
- Aims: It’s important to have the right aim when it comes to financial planning. If you set the proper aim, then you can work towards achieving required results. It works more as a driving force for that matter.
- Planning: The next very significant step is to create a proper financial plan. It’s this financial plan that’ll tell you how you can achieve the aims you’ve got. Be it something as simple as reducing unnecessary expenses to increasing your present income, your financial plan can include all such necessities.
- Implementation: It’s discipline and perseverance that you’ve got to practice if you’re looking to implement your financial plan. Unless you’re disciplined enough with your entire plan, there are high chances that you’ll land up making a financial mistake and this could spell disaster in turn. You could also obtain professional help when it comes to executing your financial plan.
- Review and supervising: This is one of those aspects that most tend to ignore. Fact remains that as time passes, you should review your financial plan from time to time. If you fail to keep an eye on your finances, then you shouldn’t be surprised when you land up in debt.
5 Basic measures to take when in debt
Now, even if it so happens that you land up in debt, then there are some basic measures that you must take to get your personal finance back on track. Amongst all other available avenues for getting out of debt, you should try debt management before anything else. Debt management is essentially the very necessary act of managing your debts and in turn your personal finance. The following measures should tell you how.
- Write: The very first thing you should do is make a list of all your debts. Ensure the fact that this includes all your debts. Being honest with yourself and recognizing as well as accepting your financial problems is the key to effective debt management. It’d be best if you sat down with pen and paper and wrote down what you owe, to whom and at what rate of interest.
- Develop: Once you’re completely aware of all your debts, it’s time for you to develop a plan. The plan should be developed such that you can address your high interest debts first. If you start paying off your high interest debts first, then a huge part of the debt burden would go off your shoulders.
- Budgeting: While you’re managing your debts, it’s also important that you take some budgeting measures for it’s only then that you’d keep a rein on your finances while paying off debt. The idea is to not let your expenses exceed your income.
- Payments: Even while you’re following the above steps you must keep a tab on your payments. Make sure they’re made on time for missing out on payments at this juncture could spell doom for your finances.
- Credit: Finally, do go through your credit report from time to time to make sure of the fact that your debt payments are being updated regularly. If not, then do get in touch with the credit bureaus.
Keep in mind the discussion above and handle your personal finance with care. Don’t panic when in debt; rather focus on paying it off.