The world of finance is a vast ocean containing its various facets. We can divide the whole realm of finance into five categories, namely:
- Personal finance
- Corporate Finance
- Public finance
- Micro Finance
- Trade Finance
Amongst all these categories, the most important one is personal finance. It is the management of one’s finances to avoid unnecessary risk and to enable savings and investments.
The manner a person earns money and spends how much and which method has a significant impact on the lifestyle and quality of life does matter. Living a pleasant and comfortable life requires large amounts of money in various forms, and thus managing and taking care of one’s personal finance is a crucial thing.
One’s earnings or even lack of it can also lead to poor living conditions with lots of debt to be paid out and not having enough for even basic needs. People under the thrill of their young age often spend a significant portion of their earnings in frivolous things like shopping, excessive clothes, shoes and other consumer goods.
Besides, in this process get trapped into an evil debt trap of making various credit card payments or even loans of short term nature. Many people do not have a well-rounded view as to what they want to do with their finances, and they just lead their lives, as and when things come.
Individuals don’t set goals or the purposes of their earnings and thus fall into various traps of debt and low credit scores, which mars them for a lifetime.
GOALS OF PERSONAL FINANCIAL MANAGEMENT
Listed below are some goals for personal financial management:
ENOUGH CASHFLOWS FOR DAILY NEEDS
A person with his earnings should be able to meet his all essential daily needs like milk, bread, and other things. The primary purpose of going for work is that it should contribute to enough cash reserves for regular expenses.
Moreover, if a person’s income does not suffice even to fulfil this cash needs, then, thinking about a better source of revenue should be made thoughtfully. You can meet this objective smartly by crafting a realistic budget and pre-planning the number of expenses.
A budget will ensure that no amount of money is spent on unwanted things and savings gets systematic.
The emergency corpus is the integral aspect of personal financial management. In this, the element of savings around 20 per cent of one’s earnings is essential.
So many types of monetary crises may occur in one’s life like the tenant increases the rent of the house without prior notice, children want to go for a picnic from college; some loved one met with an accident, etc.
Reasons are many, and thinking about the present gratification without making provision for future crises is not a wise thing. From the onset of the job, savings should be made, invested or not and added to this emergency fund for taking care of oneself in the best manner.
Moreover, for fulfilling any emergency, loans without guarantor from online lenders can be availed. Short term in nature, these online lenders are operating digitally to cater to various funding needs of people from all strata.
For this, they do not even mandate strict collaterals or even co-signing requirements with other add on advantages.
It is another worthy goal of personal financial management. Protection of oneself from various calamities in life is something that every human aspires and should indulge in. It is done in the form of different insurance policies.
Insurance policy is the scheme of giving a regular monthly/quarterly payment to an insurance company and gets a significant corpus amount at the time of a pre-decided event.
This event can be for circumstances like
Accidents when one’s health gets impaired
- When one’s car gets stolen
- For taking care of one’s teeth
- For rebuilding and repairing the house
- For maternity benefits, old age support
- For Dental care
And the type of insurances in the United Kingdom include:
- Life/personal insurance
- Vehicle/auto insurance
- Home insurance,
- Social insurance
- Dental insurance
- Contents insurance
- Unemployment insurance
- Travel insurance
From the very beginning of one’s earning life, after the initial years, a person must accumulate a large corpus amount of money for retirement.
Retirement is a very vulnerable stage in one’s life when the ability to work gets elapsed. The dependence of external factors becomes a determining thing for leading a good life.
By ensuring that enough amount of monetary reserves are thereby the years-long of savings and investment, one’s primary goal in life gets fulfilled.
GAIN FINANCIAL LITERACY
Another not so known aspect of best financial management, including personal funding, is of becoming financially literate.
Financial literacy is the acquiring process of required skills and knowledge for taking right monetary decisions without minimum risk or loss.
This age, reading various finance books, undertaking various courses in investments or even watching of videos can add to the pool of one’s working knowledge of the finance sector.
It is crucial because going through life without utilizing and understanding the value of money and its right exploitation can only lead to haphazard finances.
Many people take unsecured loans for bad credit through online platforms. One must be aware of the fraud activities done by many loan companies without accreditation.
Many reputed online lenders offer to give credit even for those people who are having in their kitty bad debts to be paid off as well as bad credit history records.