FTG / FINANCE / Basics of Personal Finance
Basics of Personal Finance | 06 Jan 2010

Mention the word financial planning and thoughts of penny-pinching and tightening pockets come to mind. This couldnít be further away from the truth.

Mention the word financial planning and thoughts of penny-pinching and tightening pockets come to mind. This couldnít be further away from the truth. By managing your finances, spending can be guilt-free. And the best part? It isnít hard to do.

Financial planning covers a wide spectrum of topics like budgeting, expenses, debts, saving, investing, insurance and planning for retirement, among many others. Having a basic understanding of each aspect and how they affect each other will help you manage your finances and build a solid foundation for the later part of your life. Whether youíre just starting on your new job, getting ready to buy your own home or thinking about your retirement, financial planning plays an important role in your life.

In this new column, I will cover different topics to give you a better understanding of how financial planning works. With some useful tips and suggestions, you can take the first step to managing your own finances. Many people find it hard to balance their accounts, especially when they are used to spending freely without much thought. There is nothing to be ashamed of if you are no expert in money; the most important thing is to get started. As the saying goes, ďA journey of a thousand miles begins with a single stepĒ.

To show you how easy it is to get this going, letís take a look at the very basic level of financial planning. All you need to do is simple calculation, so thereís no excuse for you not to start even if youíre really bad at math! Just use the calculator function on your mobile and youíre ready to go. First, think about how much money you would like to have at the end of 5 years. Take that amount, divide it by 5, then divide it by 12, and you will know how much you have to save every month in order to achieve your goal. So you just have to set aside that amount in your bank account once the paycheck comes in, and try your hardest not to spend it till you reach your target!

Indeed, the subject of finance involves a lot of numbers, but when it comes to personal finance itís more than just math. Remember that personal finance involves YOU, and you are a human being with emotions. While there are many advices out there that make much logical sense, they often neglect the huge role that emotions play when it comes to managing our finances. Just take a look at the example I gave earlier on: itís simple to derive the amount that you need to set aside in order to reach your goal, but itís really difficult to conscientiously save or stop yourself from spending the money. Thereís always that pair of shoes that you MUST have, the holiday that you really NEED to go for, and the list goes on. So you see, money is more than just numbers and math Ė emotional awareness and commitment are inextricably bound in the equation.

Article by Ash

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