Personal Finance Information
|
Many people seek personal finance information from their parents, other family members, and friends. This is fine as long as these people know what they are talking about and have experience making good financial decisions. If they don't, then it's probably best not to seek their advice. Unfortunately, very little is taught in either our high schools or colleges on how to handle money matters. Financial illiteracy is a major problem that results in overwhelming indebtedness, the major cause of a great number of divorces, mortgage foreclosures, and senior citizens living in poverty during the retirement years. However, numerous resources are available that provide relevant information on all kinds of money issues. Some of the resources provide the basics and others are geared toward specific money issues or for people in varying life stages. For example, some resources focus entirely on investments while others target potential homeowners. A young adult preparing for marriage and a family has different financial concerns than the empty-nesters who are only a decade or two from retirement. But personal finance information is easily accessible that can answer questions and help in making wise economic decisions. Such resources include books, magazines, Internet sites, and even television and radio programs.
The experts aren't necessarily going to agree on every economic detail, of course. Financial gurus can have very different investment philosophies, for example. But they agree on the basic reality that a person's finances must be built on a solid foundation that begins with living within one's means. The amount of income going into a household absolutely must be more than the amount of expenses. Someone wanting to get control of her money must begin by assessing her own personal finance information. This begins with creating a net worth statement and an income/expense statement. The net worth statement lists all assets and liabilities. The difference between the total assets and total liabilities shows a person's net worth. For budgeting purposes, the income/expense statement is more important. On the income side is the amount brought into the household on a monthly basis less federal withholding and other payroll deductions. On the expense side are several components. The first is savings (though many people choose to tithe first and consider savings their second priority). Next comes all set monthly obligations, such as housing and utility payments. Another component in developing one's personal finance information, which many people overlook, is an account for annual or semi-annual obligations. For example, a person may pay homeowner association fees of $360 once a year. This amount should be divided by twelve and $30 set aside each month so the money is available when the fees are due. This should be done with every recurring obligation. The next component is for such items as food, clothing, housekeeping and toiletries, entertainment, and so on. This is a difficult category because the amounts spent on these types of items can vary from week to week.
Tracking daily expenditures is part of the process of assessing one's personal finance information. Many experts suggest writing down every single purchase made for a specified time, such as a week or a month, in order to get a good idea of where the cash goes. People are often surprised at how much money they spend without even realizing it. If the expenses are out of control, the tracking record can show where holes can be plugged. For example, it may be more financially prudent to bring snacks from home instead of buying snacks out of the employee break room vending machines every day. Even saving small amounts on a daily or weekly basis can make a difference to the monthly bottom line. Jesus once taught a parable that ended with this lesson: "He that is faithful in that which is least is faithful also in much: and he that is unjust in the least is unjust also in much" (Luke 16:10). The principle holds with money issues. Being faithful with small amounts of money can truly help the household budget. Several websites that provide personal finance information also include downloadable programs to help track expenses.
For many people, overwhelming indebtedness is the largest and scariest component of an expense statement. But ignoring the problem will not solve the problem. This is a very important step in assessing one's personal finance information. All debts, except for the home mortgage, need to be listed and totaled. Along with the name of each creditor, the list should include the total amount of the debt, the interest rate, and the minimum monthly payments. Using the income/expense statement, the individual can see how much money is left after expenses are paid. While the minimum payments need to be made each month, some financial experts suggest setting aside an emergency fund of several hundred dollars with any additional money before tackling the debt. This way, when an emergency car or home repair occurs, the money can be taken from the emergency fund instead of placed on a credit card which only increases the debt.
After assessing the income and expenses, a workable budget can be created that meets monthly obligations, sets aside funds for recurring annual obligations, establishes an emergency fund, and tackles indebtedness one debt at a time. This is a great start. Other goals need to be established, too, though. Retirement planning can never start too early. Here again, there are many resources on personal finance information websites about getting started in investing long term for the future. Insurance is another large area and consumers need to compare policies and benefits for auto, health, home, and life insurance. Other types of insurance may also be needed depending on individual circumstances. The important thing is for each person to learn as much as possible and then to make solid decisions. That way, a solid economic foundation secures one's financial future.
|
|
|
|
