money mattersIn the midst of economic recession all over the world, it is becoming so important for us to have a better understanding about money, wealth, and personal finance.

The process of understanding personal finance is understanding “about us” and “about money.” This subject matter is not just about cashing cash, checks, paying bills, and meeting our monthly obligations but also about accumulating enough wealth to achieve family goals and aspirations through the application of sound financial principles and behavior.

While it is true that money is not “everything,” the bible is saying that money “answereth all things” and the “love of money is the root of all evil.” So why are we talking about money? And what does it mean to us? Is it good or evil? Does it give us happiness or or misery? Is it something we should strive for or a goal in itself?

My take is that, regardless of our personal feelings and approach to money, at the very least, we could hardly question that it is a means to an end. Unless we are able to build our own house, farm our own food, and make our own clothes, money is the vehicle to basic sustenance. Beyond that, we can all agree that money helps to achieve education, allow us to travel, and give us the ability to spend time doing things other than work. That is, money can make our life better and easier. And that’s what personal finance is all about – managing money with an end in mind of achieving goals, while avoiding the problems that arise when there isn’t enough money.

Actually, having or not having enough money causes us problems but of different kind and level. The truth is, it is us who have the problems and not the money itself. So in this topic, let’s assume that everyone of us clearly understood the purpose of money in this life.

money matters

Money is not equal to Wealth

It sounds like strange but money is just a commodity. It is something that could be traded around in bushels, barrels, or boxes; stored in silos and warehouses; or sold in lots and shipped in rail cars to the highest bidder. We use money to receive the value of what we produce by working, selling, or investing and to transfer that value to something else (food, transportation, clothing, shelter, or pleasure) that we need or want. Having money by itself, doesn’t really mean anything about wealth; as we know, we can have more than enough money but we can’t eat the food we want because it’s prohibited for us to take due to sickness. Or we can have money in our pocket say US$4,000 but we owe $5,000 dollar on our credit card bill.

Personal Finance “literacy” is becoming more and more important. Financial illiteracy is increasingly a handicap. It is not only important to pay attention to all facets of our personal finances; but also to be able to talk to professionals if you don’t do you own financial planning.

Issues of Personal Finance

a. Overspending

Almost everyone succumbs to the temptation to overspend at one time or another, but chronic overspending is a serious problem. Debts pile up quickly and form a barrier to achieving other financial and personal goals.

b. Surprises
Failing to plan in advance can give us an unpleasant surprise as you suddenly find ourselves struggling to pay those “surprise” insurance and utility bills at the end of the month.

c. Procrastination
Most of us tend to put things off, particularly for long-term goals and needs. Saving for retirement or college is more effective if we start earlier rather than later, even if we start in small increments.

d. Using emotion, not reason.

Allowing our emotions to cloud your mind can result in poor financial decision-making. Deals that look too good to be true usually are. Four-day weekends are fund and necessary at times, but are really worth a thousand dollars? Emotions and feelings must be tempered with reasons.

e. Financial Personality Clashes

What do we do if we are a spender and our spouse is a saver? We build a workable financial plan that relies on each person’s strengths to carry it out.

Personal Finance Defined

It is the management of individual or family financial resources to create enough wealth to achieve the basic needs, chosen lifestyle, and aspirations and goals of the individual or family. The objective here is to reach our family’s goals, in terms of both keeping what you have and obtaining what we want. We must be in-charge with our finances as a family because others will not. We must be CFOs or Chief Financial Officer of our own finances for our own benefit.

3 Basic Principles of Personal Finance

1. Money, income, and wealth aren’t the same.
Personal finance isn’t just about money or how much we make-it’s about how much we keep. Personal finance is concerned with wealth and the accummulation, preservation, and distribution of that wealth.

2. personal Finance isn’t just about the tools – it’s about behavior.
Personal finance requires the right set of behaviors to make the tools and techniques work (banking, investments, insurance, and retirement plans).

3. Personal Finance is a full-time job.
Personal finance is more than just sitting down once a month to pay bills. We must be aware of our responsibilities all the time – otherwise all that we strive for is liable to be wrecked in an instant.

Article next would discuss more about being CFO – Chief Financial Officer.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.