The concept of personal finance has become important and vital in this present world where economies are fluctuating and job security is no longer guaranteed.
In a world where people combine multiple jobs and have to work longer hours to make ends meet, your personal finances are important to almost everything you want to do, including your personal development.
Personal finance is about financial and money management.
It is a means of planning and managing your personal financial activities, such as earnings, savings, spending, investment, and tax, in the short and long term.
Personal finance could involve only you or you and your immediate family. It’s not just about working towards your retirement plan; it’s a lifelong practice that helps you plan for the present and the future.
For many, personal finance involves only your earnings and spending, and they also have no way to track them except the financial statement they get from their bank at the end of each month.
Personal finance helps you with financial literacy, financial independence, and financial growth.
If you plan to buy a home, buy your dream car, pay your mortgage rates, or achieve other financial goals, setting your personal finances is important.
The amount you earn doesn’t matter without a proper financial plan. You can earn millions every month and still drown in debt or live paycheck to paycheck without a proper financial plan.
Setting goals for personal financial growth is important in the following ways:
Financial Stability
As an individual, one of your dreams is to attain a level of financial stability where you don’t have to panic at the end of the month, despite getting a salary or earning profit from your business.
Setting your financial goals will help you attain a level of stability not just in your finances but in your life. Financial stability helps you with your income, manage the debt you have, and withstand any financial setback that could arise.
Goal attainment
Financing goals are as important as any of your life goals. Do you plan to get to a certain level of education? You will need some funds to get this done. Setting personal finance goals will help you plan for this.
If you’re 25 and plan on getting your first car at 30, you can invest or save a certain percentage of your income for the next five years to make this dream a reality.
Financial Resilience
The volatility of the economies around the world has made it important to have emergency funds. However, when you do not set personal finance goals, how do you deal with this when the need arises?
You can have a zero balance in your account, but you repair your damaged mobile phone within hours or a few days due to its importance to your business or earnings.
Financial goals will help you have emergency funds, investment portfolios, and multiple streams of income.
Financial Education
It’s not a cliche that experience is the best teacher. You cannot make informed and well-thought-out decisions when you do not have knowledge of money management.
Setting your personal finance goals will help you make informed decisions at different levels.
When you’re in the middle of making a certain financial decision, your financial goals will help you make the right and informed decisions.
It’s not just about keeping or having personal finance goals; how do you track them?
Budgeting
Budgeting involves the proper planning of how you manage your finances.
It’s like a cash book where you balance the credit and debit sides. When you have a budget, you spend within your means and avoid spending frivolously.
Once you get your paycheck, your inevitable expenses like rent, food, transportation, and others are sorted.
You can then move on to other expenses like investments and your savings, among other financial decisions.
To achieve this, you can create a percentage for this where a certain percentage of your earnings is spent on things highlighted in your scale of preference.
With a budget, you avoid having to borrow to fund your life and that of your family.
Automation
Technological advancements in the world have made it possible to automate your expenses.
There are financial apps and tools you can have on your devices to help you perform this task.
If your rent is fixed for a certain period, you can inform your financial institution to perform this task on your behalf. With this, your finances are tracked and monitored.
Finances are ever-changing, and you have to be flexible but firm. Flexibility involves having to review your finances and adjust accordingly based on your income and expenses.
However, you have to be firm to make your financial goals work. Even with a budget, if you don’t stick to it, it’s as good as nothing.
In conclusion, setting personal finance goals and tracking them is one aspect every individual has to pay close attention to. When you set goals and stick to them, you’re on your way to financial wealth and prosperity.