Personal finance is the management of your wealth, ie your regular income and the creation of a budget to know how and what you spend your funds.
Personal finances consist of evaluating your income, your financial needs and determining the amount to be allocated to necessary expenses;
Budgeting is about keeping track of your income, savings, and expenses.
Discover in this course why personal finances are important and how to control your wealth.
What are personal finances?
Personal finance is about managing your money to achieve your personal financial goals, usually over a long period of time, or even throughout your life.
Managing your wealth is necessary to live independently and free from the need whether you are planning your retirement fund or saving to buy a car. Personal finance consists of evaluating your income, your financial needs and regularly determining the amount to be allocated to necessary expenses. The main objective is to have a clear vision of your expenses in order to devote part of your money to saving and investing.
Money makes the world go round
Whether it’s paying for your morning coffee or taking out a home loan, we’re faced with financial decisions every day. This is why everyone must learn very early on how to manage their assets and regularly analyze their personal finances.
According to several studies, personal finances are one of the most common sources of anxiety in adults . Even the wealthiest people are exposed to money problems and financial stress; it is a phenomenon with which everyone can identify. So it’s not just about how much you earn, save or invest, but also how you get to a state where you are satisfied with what you have.
What is budgeting?
One aspect of managing your personal finances is budgeting, which is creating a structured plan showing your income and expenses . The basic idea is to put yourself in a position where you don’t spend more money than you earn.
A budget is defined by tracking your income and how much of that income you spend. Basically, a budget includes an estimate of the amount of money you need to meet the cost of living, your wants, and any unforeseen “emergency” expenses , as well as the money to put aside for investments .
Personal finance involves assessing your financial needs based on your income and regularly determining how much to spend on necessary expenses.
The importance of budgeting
Budgeting is absolutely essential to ensuring your financial freedom and security. It’s a way to focus on your long-term financial goals, keep track of your savings and spending, and exercise some restraint and control over your spending habits. , such as impulse purchases (i.e. those items you buy on a whim). Having a budget allows you to make better choices and, therefore, worry less about overspending and debt. Note that a household budget is useful regardless of your life or household situation. It allows someone who earns little money to make ends meet, just as it helps someone in a more comfortable situation. NOT’
You can track your particular budget in several ways. One of them is to have a numerical spreadsheet, which you can set up in Excel. Another way is to write down your budget plan in a notebook. However, if that’s too much effort, there are plenty of free templates available online .
There are also great budgeting apps that help you figure out a budget and stick to it, like Pocket Guard , which tells you how much money you have left to spend in your budget, or Wally , which lets you set a budget adapted to your needs. You’ll find other budgeting apps listed in this article .
Although it may seem complicated, one of the most common and effective budgeting techniques used for personal finance is the 50/30/20 rule .
