Personal finance may sound like a daunting topic – something reserved for the businessmen and investors of Wall street. That, however, is simply untrue. The fact is, personal finance simply refers to the way that you handle your personal income and expenses and how well you are saving and planning for your future. Proper handling of your personal finances now is vital to a happy and healthy future because, let’s face it, no one can work forever, and who would want to? The better you manage your money now, the sooner you can retire and spend time doing the things you love with the people you love.
The first step, as with anything in life, is to define your goals. It is important to know what you’re working towards. Good goals provide light at the end of the tunnel and can make otherwise tedious or slightly unpleasant tasks a bit more bearable because they are leading to something worthwhile. What is a “good” goal, though? Well, that’s entirely up to you, really. There are some characteristics all good goals have in common, though. That is, they should be SMART – Specific, Measurable, Attainable, Realistic, and Time-bound. Set your goal and don’t be vague. Make sure it’s something measurable – so you can know when you’ve reached it. Make sure it’s something you can actually achieve and be realistic. Finally, you have to set a time frame for your goal, not only because this helps you define the goal better, but because it also gives you incentive to work harder for it and helps with planning your strategy for meeting the goal.
Personal finance is mostly about saving money. It’s all about managing your money in such a way that allows you to put a little extra away for a rainy day or to save up for retirement or whatever your goal may be. The trouble many people have is that their idea of savings is stuffing money in the corner of the sock drawer or under the mattress. While this may be a good strategy for hiding it from the kids, it’s not great for making your money work for you. A basic savings account is certainly an improvement, but there are even better ways to handle your savings such as money market accounts and certificates of deposit which often have much higher return rates in exchange for a longer commitment. you could also invest the money in stocks, bonds, and/or mutual funds. These generally have a much higher return over time, but also carry much higher risk as they could easily drop and lose you a significant amount of money. The trick is to balance risk versus reward.
So take that money out of your sock drawer and get it to work for you. If your money isn’t growing, it’s shrinking. That’s simply all there is to it. So start now because it’s never too late to start saving toward your goals and to start making your money and your personal finances work for you.