PERSONAL FINANCE

What People Should Do To Be In a Better Financial Situation?



What People Should Do To Be In a Better Financial Situation?

Financial security and monetary independence is one of the most prized objectives of an individual's life, something that he pursues all his life. However, financial security and stability is not easily maintained, it required certain steps, analytical and practical financial planning and sound economic orientation to be applied to an individuals' life so that he or she can gain monetary independence. This paper will serve as a guide to outline certain steps and practices that can help individuals attain a better financial position in their lives.

Personal Financial Planning and its Scope

Personal financial planning is the platform on which to build wealth individuals and families. It is the tool that helps us efficiently manage our financial resources and, therefore, to achieve our financial goals. In recent years the planning process applies to the household economy has taken a big boom in many parts of the world and is contributing to the progress of the same (Ramsey, 2009). This discipline covers the key areas related to the economic welfare of a person or family. They are:

Basic financial planning.

Financial Planning for essential assets.

Insurance Planning.

Investment planning.

Retirement planning.

Succession Planning.

Tax planning.

Individual's financial position is closely linked with managing debt and being in a better position for its timely repayments (Klosowski, 1999). Debt becomes a problem when it can no longer be effectively serviced and it begins to get out of control. One of the biggest misconceptions with being able to manage a debt load is not the amount of debt one has - it's his ability to be able to repay it. In theory, someone making $10,000 per month with $40,000 of debt could be in a more secure financial position than someone who makes $1,000 per month with $10,000 debt.

Having more than 1 or 2 credit cards

Having more than 1 or 2 credit cards is probably unnecessary. Having just one makes it easier to track and control one's spending. One should not be tempted into 'points' cards or low introductory rates because he will usually find himself paying way higher interest rates in the long run. A credit card must be used as a substitute for carrying cash and not a substitute for borrowing (Klosowski, 1999).

Having no savings

Having no emergency funds or savings of any kind is a sure sign one may be in trouble. 30-40 years ago, most people did not feel the need for credit because they had savings to cover unexpected expenses or treats. Now, most people do not save because they 'have access to credit'. The following steps ensure a better financial position for an individual, where he can spend less, save more and earn benefits from sound financial planning:

Using credit or borrowings to cover regular living expenses

This is a sign of the case when a person is probably spending more money each month than he brings ...