Managing Change – Personal Financial Management
Introduction
Making personal financial management is a very important thing in our day life. It helps us to plan our savings and avoid any future financial situations. Actually by personal financial management we know how much we must spend and how much is the savings and borrowings.
Summarizing Section
Expense sheet
This expense sheet is the key of the personal financial management. At the end of the month if the person realized that he didn’t save money, so he has to prepare the expense sheet or budget plan which encourage the person to clarify his expenses and savings. Expense sheet has different parts.
Calculation of income level
Is the total of all the incomes that the person have. More specifically it’s the sum of the post tax income or disposable income, partner’s income, investment income, rental income and other sources of income.
Calculation of expenses
Is the total of all the expenses that the person have. For example, grocery’s expenses, medical necessaries, laundry, phone and mobile bills, transportation payments. Lifestyle expenses include expenses like buying daily newspaper, clothing, personal care, entertainment, travel, holiday, eating out, and gym membership. Fixed expenses include expenses on house rent, childrens fees, and home loan and other.
Personal Debt Management
There are number of concepts we have to follow to avoid falling in debts and awaiting payments. In case of getting loans, we should to keep account of the loan amount, the repayment period, monthly installment, interest reset frequency and the amount of loan already paid. So, by doing this will lead to well managed debts.
Calculation of a persons financial net worth
Net worth is calculated by the difference of assets (house, land, etc) and liabilities (loans, borrowing). By getting positive net worth leads to better financial plans in the future.
There are 4 ways to better personal finances
Teaching children about financial management to avoid future clumsy spending.
Creating savings account.
Spending less on entertainment
Should opt for insurance policies for emergencies situation.
Analysis Section
We have to create expense sheet to limit our expense which help us to cover it.