Subdivision of traditional finances in charge of analyzing the use of financial resources at a personal or family level.
Personal finances are a subdivision of traditional finances in charge of analyzing the acquisition and use of financial resources by individuals at a personal or family level.
They are the study of money and the set of decisions that are made with it, including investment, spending, and income. Therefore, this type of finance focuses exclusively on the management and acquisition of the different types of financial resources in the family nucleus and at the personal level of the individual.
This concept is of great importance since a correct use of personal finances provides effective tools that will allow the individual to act in a timely manner in any financial situation, since it allows him to analyze and study the data that intervenes in his financial resources, significantly influencing in the result of their monetary investments and reducing the margin of error.
The main objectives of personal finance are listed below:
The phases of the personal-finance planning process are listed below:
By making a list of priorities, the processes that are being carried out are identified and found. In this analysis, it should be taken into account that these processes must have quantifiable characteristics if you want to make optimal use of personal finances.
For example, a car entails a certain periodic gasoline expense, a periodic maintenance expense, a certain tax expense, however, it could also generate some savings compared to the use of other types of transport, these variables must be measured and compared to make the best decision.
Likewise, the payment of other expenses such as apartment rent and utility bills should also be considered.
In this step, the financial situation of the family or personal nucleus must be analyzed, identifying the sources of income and all the expenses that are counted, as well as the savings and in general the patrimony.
Based on this, a result of the monetary balance is obtained, this result provides the necessary clarity regarding the available financial resources.
The objective or goal is chosen, taking into account the previously calculated financial situation, this objective must be punctual and realistic, since, also, the factors that may hinder or optimize said objective, increases, sudden layoffs, illnesses, extraordinary events, bonuses, among others.
For example, an individual wishes to increase his annual income by 10% or reduce his expenses by 40%, he must take into account all the factors that have the strength to intervene in said objective.
Based on the established objective, it is important to define a period of time in which these goals will be developed.
In this process, it must be taken into account if the objective is planned to be executed in a short, medium, or long period since this will be relevant in the subsequent planning stage.
In this step, the previously identified information is taken into account, and based on this, the most appropriate strategy to execute is designed.
To design this strategy, the individual must study all the information present very well, since, in it, there are key and highly considered tools so that the plan provides the best possible results.
In this stage, the execution of the strategy carried out previously is carried out. This execution must be supervised and monitored, since, if an altercation occurs, the subject will be able to act in time, intervening in a timely manner in the face of said inconvenience.
The last step of the planning is to analyze the result obtained in the previous execution process, in areas of determining the strategies to maintain or improve the process.
Here are some examples of personal finance:
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