What is Personal Finance?

What is Personal Finance?

Each family and household is concerned about making ends meet and having money left over for investments and future planning needs. Personal finance is a collection of issues and components that are planned together in order to provide the family or household with current and future needs in terms of money for expenses, future wealth accumulation and retirement planning. Every family will have different assets, expenses and financial objectives, but the key components of personal finance would include assessing your own situation in terms of income, expenses and liabilities, assets, future retirement fund goals and wealth transfer goals.

What is Personal Finance?

In order to plan for the future, it is necessary to first determine your current situation. It involves determining your income streams, your monthly expenses and creating a budget to live by. Once regular expenses are covered, each family must then determine how they will save for retirement, how much they can save each month and where to place these monies so that can grow until needed. Therefore, financial planning is a critical component of making sure that you reach and obtain your financial goals. Financial planning requires a few key criteria which include setting your goals, create a plan of action, execute your financial plan, and then consistently monitor your actions and make sure you stay on track with the plan’s timeline.

Personal Financial Planning:

Some of the important areas of financial planning for your personal situation include the following:

• Current financial position and situation

• Credit card minimum payment

• On going household protection

• Investment goals

• Accumulation of wealth

• Tax planning issues

• Retirement planning

• Estate planning and wealth transfer issues

It is important to discuss these issues with your CPA or financial planner to ensure that you are able to construct a financial plan that will meet your goals through current needs, retirement planning needs as well as being able to transfer your estate according to your wishes.

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Video: 3 Principles of Personal Finance by Mint.com

This video outlines and gives an overview of the basic principles of what personal finance is all about. The narrator stresses the importance of spending less than you earn in your career, make the money you have work for you, and protect the money that you save and grow.

Disclaimer: This information is not a substitute for professional financial advice. See your financial advisor or CPA for questions and issues concerning any financial plan or situation.

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