In this blog we’re talking about the top 3 reasons why everybody needs to learn about personal finance management. And how to make an action plan towards it.
Reasons why you need to learn about finance management
Managing personal finances can be a challenge, especially when you want to make every Canadian loonie count. In fact, budgeting and staying on top of daily expenses leaves no room for making errors—mainly because you can easily fall into debt or be financially insecure! In order to avoid such a risk, you need to learn about financial management as early and effectively as you can.
To help you out, this article is your guide to personal financial management. Aside from getting yourself acquainted with the intricacies of budgeting, this will also allow you to enjoy the advantages of financial management—living your life as financially secure and worry-free as possible.
1. Determine the specifics of your income
The first step towards personal financial management is determining where your source of money comes from. This will vary for every Canadian generation, as each enjoys various different financial benefits, like daily allowance, scholarship money, income, or pension. The key here is to determine where it comes from and how much you currently have, be it on a weekly or monthly basis.
The main reason for determining your source of income first is to introduce the concept of budgeting—which allows you to avoid spending beyond what you can afford. It may be tempting to consider other streams of funding, like lending services or personal borrowing, however, this accumulates interest over time. Consider sticking to the immediate sources of money that you currently have—that’s the first step to success in personal finance management.
2. Review and make a list of what you need to pay for
Aside from determining your source of income, you need to know specifics of your expenses, particularly in relation to recurring bills. This revolves around living costs—the minimum amount you need to spend on basic necessities daily. It’s important to determine what these are and how much they cost, be it for school supplies, gas money, and the like.
Listing down what you need to pay for is vital to budgeting, especially once you have determined your source of income. After that, get a basic view of your cash flow—which shows your income and regular expenses, as well as what remains after the initial living costs. This is the baseline for proper personal financial management. Always remember as well that it’s good to save—it’s the best way to be prepared for any emergency, particularly with financial struggles.
3. Determine Needs v.s. Wants and stick to your budget
Now that you’ve determined your basic budget, you need to stick to it. This is definitely easier said than done since there are so many ways of shopping these days. For instance, online banking and shopping have made products and services easily available to all people. If you aren’t careful, you can easily buy too much and go over your budget.
Learn to allocate for your needs and determine what your wants are. Always remember that the key to maximizing all your resources includes paying attention to what you choose to buy with your money. To effectively do this, consider investing in things that cater to both your needs and wants—put simply, make informed personal decisions when you buy anything.
For example, you may increase your daily productivity at work if you took at least three days off work. You may want to take an active day off like by taking an out-of-town snowboarding trip in Banff. So, live a little and budget to do the things you love.
Overall, personal financial management means understanding how your money can work for you. It means being financially stable and systematically determining the inflow and outflow of your money. Aside from that, it means being able to prioritize your needs and saving enough for what you may want in the future.
Personal financial management also takes time to learn and you also need the right tools to organize your budget. Take the time to learn more about personal financial management and what you can use to your advantage!
Want to learn more about the advantages of financial management? We can provide you with a personal financial management app. Make bank and be financially secure with us!