The Science of Personal Finance
Steve Burkholder said, “If you’re saving, you’re succeeding,” on personal finance. The question is – are you saving money? Are you saving enough?
A lot of people think about personal finance as something that only includes earning and spending. You cannot blame people for something they do not know. Education plays a very important role in a lot of things. Personal finance is not an exemption.
Let’s take a look at this cycle.
The way you handle your money should follow at least this cycle of activities. There are other activities that come along the way but they will surely fall in one of these major activities. While depositing in a bank obviously falls under the ‘saving’ activity, getting a life insurance does not fall under ‘spending’ but under ‘investing’. You will eventually learn why as you go on learning about personal finance.
Also, even if you have achieved the financial success you primarily designed, the desire to earn should not stop. Why? Because as long as you exist in this world where you need to buy even only for bare necessities, you need to spend. When you spend, you take money out of your pocket. You have to replace the money you spent.
I think you are getting the idea now. Yes? You have every right to spend your earned money but you need to handle it wisely. This is what personal finance is all about. It involves a lot of thinking and planning. It involves learning about strategies to become financially free and successful.
You need to have financial literacy as emphasized in a previous article, Financial Literacy: What You Need to Boost Your Personal Finance. As expected, if you are literate, you are knowledgeable and skillful. You are a learned person. Imagine having that skill about your personal finance – you definitely have an almost guaranteed future.
The Benefits in Learning the Science of Personal Finance
- Discover new things about earning money, and growing your wealth.
Earning money is not only about being compensated for the service you gave. You should learn also that to earn is to profit. How are you going to profit? For example, when you open a savings or a checking account, you earn the interest.
It may be a surprise to know that a lot more ways to earn are available. You get a credit card and you get low-interest rates, discounts and incentives. You get an insurance and you get cash from easily accessible funds when you need it (depending on the type of insurance). You build an investment portfolio and you might have something for your retirement if you do it right.
Financial education plays a very important part in discovering these things. It is what contributes to your financial literacy and awareness. The many ways to get it is thru financial literacy programs, or from financial experts and colleagues that have practical and real-time experiences, or even from schools providing curriculum for this matter.
- Choose better options for your financial decisions
As you go along learning the basics and the complex matters about personal finance, you will discover the many ways to handle money. Financial tips are available online and from friends and acquaintances. This will help assist you in managing your business, or your personal money, for example.
Financial strategies are also available to obtain success. They provide principles that include prioritizing, assessing, and restraining. These things are very vital in keeping you focused on your cash flow, studying and weighing new and better ideas to earn, and fighting that urge to spend more than what you earn.
You will also learn that one of the options available is effective financial planning. In this activity, you will be able to realize and check what your current financial situation is. You will be able to predict what could happen to your financial plans. You will be able to execute these plans within your limitations.
- Regain your financial balance
You might have known people who have fallen into a debt trap, or experienced bankruptcy. Financial ignorance could have probably resulted these incidences. Two of the major activities – saving and investing – in the cycle of personal finance were probably ignored, or perhaps skipped because the person is not aware.
Earning little and spending more than what you earn can also be a factor. It is not easy to recover from these poor financial situations. Learning about personal finance helps in regaining your financial balance and constructing a strong financial situation again.
- Contribute to your country’s economic growth, and to poverty reduction agendas
It may sound easy to hear but it is also an overwhelming task to become financially educated, or literate. Depending on your personal beliefs and convictions, your knowledge and skills in handling your personal finance can grow up to the next level.
You, along with the others, can help increase awareness about financial matters such as bankruptcy, among others, and its bad effects on a person’s financial well-being. You can participate in the government’s move to educate, disseminate information, and share good practices in personal finance. What can be more exciting?
Though financial education is still a challenge among many countries, you cannot waver in your goal to continue pressing on what you have started. Your move to get educated, or be literate, about your financial situation and well-being is a very important move. You first step is vital to the future of the government’s goals about financial literacy.
The world has a complex market where you and everybody take part. There is a need to learn about personal finance. There is a need for financially literacy. The demands you make to yourself should also be the need others must feel. Your achievements will magnify the positive results and will definitely encourage others to do the same.
This is saying that you are not solely responsible for providing the financial education the citizenry needs because it is the government institutions’ roles. You are, however, responsible, in educating yourself, in becoming financially literate and involving yourself in the practices of personal finance.
If you have not considered learning about personal finance, now is the time to do so. You may even regret you have not started earlier.
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