Are you looking for how to start personal finance, in this content we are going to discuss all the necessary information useful for those in need of personal finance for dummies.
It is very important to take part in personal finance because no one knows tomorrow, some challenges may come up but with the help of personal finance, one can be able to scale through without much difficulties.
What you should understand is No time limit for starting up personal finance which means everyone can start it including old and young even students, but it’s wiser to start personal finance earlier.
What did you understand by the word personal finance for dummies?
Now let me explain for the sake of those who may find it hard or difficult to understand.
Personal finance for dummies: may be referred to as the method of directing and educating newbies that have zero knowledge about how they can properly manage their income so that they can be able to save for the future, spend wisely, invest, budget and wisely carry out finance activities that will benefit them.
We are going to walk you through step by step how to successfully carry out personal finance, We are going to elaborate more for you including the dos and don’ts concerning dummies personal finance.
The importance of personal finance
the below are the importance of personal finance for dummies
Enhancing financial literacy: Personal finance will help you to be able to calculate your income correctly and will help you so that you will be also know how your money goes out or invested. It will also help you on the best way to utilise your income in the right way
With personal finance, You will be able to give full accountability of your income.
Many people don’t know how to handle money properly like if they get a huge amount of money they will spend it lavishly which will make them money to finish, but still, they won’t be able to give full details on how they spent it or they won’t be able to invest it in an accet.
But with personal finances which will help to enhance their literacy, they will be able to carry out those required aspects.
It secures one’s future: Personal finance will help one to secure their future
eg as a worker who is saving for your retirement, it will you will enjoy it greatly when you retire Also you will earn more from the interest it brings. Etc.
The chart of personal finance
Let us consider the following aspects of personal finance that determine how things are done, which includes
Earnings
Expenses
Investment
Saving
Risk management
Let us explain them in full
Earnings: Whether you are a business owner or an employer you will always earn your income as long as you are working.
Earnings are those amounts of money or income that come in, it does not matter how you earn your income as long as it comes legitimately. You might be working under someone or in a company, you might be a marketer or you might be doing online business to earn your income.
Income is the fundamental of personal finance, without income nothing will work because everything is determined by income.
When you are making some earnings then you will be able to carry out other investments and expenses, now you understand why I said it’s fundamental.
Expenses: As long as you are alive living expenses must occur.
Doing expenses is part of human beings without it life will not be sweet or enjoyable, but it’s good to note that wisely doing these expenses will help a lot in terms of financial management. Expenses may be regarded as the outflow of earnings or income.
People spend expenses on things they need or value which may include buying foodstuffs, changing their wardrobe, buying utensils, repairing some damages, etc. All these are some of the expenses people make whenever they receive their earnings or income. Personal finance for dummies
Investment: Investment involves buying and holding an accet to make more profits with it in the future. Most times losses do occur in buying accet since the future is unpredictable, also sometimes gains are made from buying accet.
Example of investment includes
· Buying land to sell it in the fire
· Buying cryptocurrencies to add more value in the future so that more gains will be made.etc
Investment sometimes is full of many risks it’s better to invest in the amount of money you can be able to let go in case the unexpected happens.
It is more advisable to seek mentorship so that you will be guided properly when invoking some investment.
Saving: Everyone may get money but not all can save some, with the help of personal finance for dummies you will be able to learn how you can save money for the future despite many expenses and investments.
Saving is one of the ways to see that you are ready to face the future.
Instead of saving your money locally, it’s better to put it in a bank where it will yield interest you you.
By saving money locally I meant putting your money inside a wooden pig box or hiding it under your bed, This may be considered the old method of saving money which be easily affected by inflation making the saved money valueless.
Risk management: is the act of controlling your income wisely to be able to curtail some risks, I’m sure you know that life itself is full of risks so to manage these risks properly you need to follow these steps
· Don’t invest more than your income
· Invest in what you can be able to lose
· Stay away from fishy investments in which you may get scammed in the process.
· Learn how it’s done properly before embarking.
All of these will help you to manage your risks properly.
Step by steps on how to start personal finance for dummies
I hope you have been able to grab the ideas of what Personal _ Finance_ for_ dummies is talking about, It is those things you need to do rightly so that you can be able to be financially okay.
Now having known this let’s dive in on the steps to achieve this.
1. Know your income
It means you should endeavor to know the amount of income you bring to the table either weekly or monthly.
By knowing this you will be able to make financial decisions properly without overestimating.
2. Increase your means of income
By increasing your income it means looking for other ways to make money. Eg if you are an employer you might increase your income by doing another thing like opening a restaurant or gym center, by doing so you will have multiple sources of income.
3. Create a budget.
Budgeting is a way of preparing for what you will buy or acquire in the future.
Most dummies may find it hard to create a budget for themselves but I’m assuring you that creating a budget is not hard at all when it’s done properly.
Eg. If you want to buy a washing machine but your money is not up to it the next step you have to make is writing it down in your note or recording book, then start planning and saving up on how to get the washing machine.
Personal finance for dummies budgeting is one of them, We budget for the future without budgeting things it might lead people to be in debt or starve them of some good living, when everything is been budgeted it will work out easily without many difficulties.
4. Properly handle debts
Owning debt is one of the drawbacks people always encounter, living in debt is not good at all for your reputation
People may borrow money from
Bank
Government
Credit card company etc
Another thing with these loans is it’s not freely given Most of them come with interest which will keep on to multiple as time goes on.
Some of those things that made people to be in debt are:
· Doing expenses above their income
· Lack of budgeting
· Living and spending lavishly
Most times people borrow money to acquire an asset or do something more important e.g. a student loan which is only available for students.
When you are in debt try to pay it if not it will keep on increasing above your income which will badly affect you.
Another thing is don’t borrow above what you can not pay, personal finance for dummies
There are many ways to pay debts, one of which is through salary deduction.
You can also scale out a good plan on how to pay your loans, You can decide to pay it daily, weekly, or monthly before you know you have finished paying off your debts.
Instead of waiting to pay your loan at which you don’t know when to get such kind of money, it’s better to start paying it bit by bit.
5. Make time for yourself
It means as you are investigating and saving also remember to pay attention to yourself like spending on yourself.
You can decide to visit some attractive places or travel out and stay 1 week or month, and eat good foods that will refresh your body.
Try not to invest or save in a it will affect your feedings negatively
6. Buy Insurance
You can buy health insurance, life insurance, business insurance, etc. It will help slot in the future. personal finance for dummies
7. set good rules for yourself
Map out or make some decisions on how you can be spending and investing, then follow up those rules.
Eg you may decide to always spend $2,000 monthly as your expenses, Even if the expense is above the required amount spend some on it then put it on hold for next month to complete it.
8. Cut off unnecessary expenses.
Some people involve themselves in unnecessary expenses just to impress their friends, You should stop it earlier because by the time it will put you in debt none of your friends will come to your aid.
9. Don’t over-save.
Most times keeping money in a place will make it useless at times inflation may reduce the value. personal finance for dummies I’m not trying to say that saving money is useless but rather I’m trying to point out that instead of keeping your money safe at a place it’s better to invest it in landed properties or invest in business where it will yield more income for you.
10. Maintain a good credit score
personal finance for dummies Some people are found to not paying back when they borrow money from a bank or credit company but they don’t know that they are killing their credit score.
When you borrow money and pay it back it improves your credit score, it shows you are trustworthy with money. It will also grant you higher access to loans.
But when you borrow and refuse to pay it back it will bring your credit score low, which is very bad and may deprive you of accessing loans
personal finance for dummies when everything discussed here is been followed properly by dummies they will surely experience a financial turnaround.
frequently asked questions on personal finance for dummies.
· What exactly is personal finance for dummies?
It deals with anything related to how to guide dummies so that they can be able to save, budget, invest, stay out of debt, etc.
· How does one create a budget?
You can create a budget by writing down those necessary things you want to acquire, then start making plans on how to get them.
· Which way is the best to save money?
personal finance for dummies There are many ways to save your money They are
Putting them on a piggy bank (this is considered an old method).
Putting them in your bank account it will be yielding interest.
Use it to buy something valuable then when you need your money back you can sell it and get your money with some profit made from it.
· What way can debts be paid off?
You can do this by salary deduction or by paying it installmentally.
· What best way should I set my financial goals and achieve them?
In setting up your financial goals you have to write them down and set plans on how to achieve them, To achieve them set some rules that will help you and strictly follow the rules.
· How does someone start investing?
To start investing you have to start by buying valuable items like land, and houses and sell them in the future by then the price will increase.
You can also buy a taxi bus and employ a driver who will be driving and paying according to what was gotten. personal finance for dummies
Investment is not a child’s play you have to be educated about it so that you will be able to know the pros and cons of it.
· What is a credit score
Credit score may be defined as the summary of your dealings with loans or your integrity with loans.
This is gotten through the history of your loans, the history of many credit companies you have borrowed from, the history of how you paid back, etc.
Conclusion
With all these explanations about personal finance for dummies, I hope you will be able to know where to start on your journey to personal finance.
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