Personal Finance refers to the process of managing your money through budgeting, saving, and investing. It is a broad term that encompasses different areas including your income, expenses, insurance, investment, amongst others.
Proper management of your personal finance is an integral part of your wellness. You may be guessing how is it so? Well, to start off, in order to stay healthy, you want to benefit from proper and safe medical care- this is greatly helped in case you have the means required for the related costs as well as a good healthcare insurance in place.
Another example would be your food intake. Junk food may be much cheaper than growing and cooking your own quality organic produce.
Furthermore, the ability to have freedom from rush last minute shopping (frenzy purchase) is easily achieved when you have proper planning and forecasting.
5 Areas To Master Your Personal Financial Well-Being
1. Income
This is a source of cash inflow that you receive according to a period of time. It is the sum of all forms of revenues from salary, rents, payments received, interest received, to other forms of earnings over a certain period of time (daily, weekly, monthly).
To put it simple, income is money that you receive in return for working, providing a product/ service, investing in capital, or your status (e.g., pension, gift, grant).
2. Expenses
An expense is the outflow of money for payment of a product or service that you have used.
The expenses never end. Whether you have an income or not, you will always get something that needs your money- bills, grocery, medical expenses.
When speaking of expenses, you may also need to consider your Credit or Debt. If you have a huge debt, you have to pay it back in the briefest delay possible.
One good strategy is to pay off your highest interest-rate debt first. Switching to paying in cash instead of credit cards is yet another way to minimise on your debt.
3. Savings
Savings refers to the amount of money left from your income after you have incurred all your expenses. This is the most critical aspect of your personal finance as it determines your ability to take proper decisions towards financial freedom and consequently achieve a state of wellness.
4. Investment
Investing refers to putting your money at work for higher returns. There are several types of investment depending on the time taken for you to benefit from the yield. You may want to invest in mutual funds, government bonds, or real estate. In all cases, the idea is to get a higher amount of money than what was initially invested.
5. Insurance
If taken wisely and after proper consideration of the policy wordings and scheduling, getting insurance may be a smart way to protect against unforeseen losses and expenses. You can get insured against lawsuits, loss of income, huge medical bills, amongst others.
To summarise, it is important to conceptualise each aspect of what affects your personal wellness, be it in terms of your peace of mind, home settings, or comfort affordability. It is found that having a good personal planning is a great help towards your wellness!
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