Appreciating the Importance of Personal Finance

If you are reading articles on this website, you will probably agree (perhaps based on personal experience) that understanding how to assess and handle your finances can be very difficult. At the same time, very few of us ever receive training in basic financial skills as part of our formal education. The unfortunate consequence is a society composed of individuals who not only struggle with increasing debt but cannot provide their children with prudent fiscal advice, having never acquired such wisdom themselves. Regardless of your economic position or your long-term goals, a strong knowledge base of good financial behavior when combined with self-discipline can bring you not only stability but wealth. In order to achieve these objectives, it is essential to understand and practice the underlying principles of sound personal finance.

It goes without saying that prudent expenditure and cautious budgeting are crucial components of ideal financial behavior. Yet while saving money is necessary in order to face various events in life (whether it be payment of college tuition, coverage of emergencies, an increase in the cost of living, and of course, retirement), it is often easier said than done. Just as you should practice good financial habits with a sense of self-discipline, so you should apply that discipline when determining how to achieve your goals. You can create a long-term coherent structure for your personal affairs via financial planning.

Creating a personal financial plan will allow you to identify what steps you should take to maintain financial stability and avoid debt. It will also establish a series of benchmarks that reinforce a healthy pattern of fiscal discipline, ensuring that when you need to draw upon your financial resources you will be able to do so. The plan projects your regular expenses and future income, allowing you to scrutinize all sources of income and expenses in a broader context. This can help you save by determining which of your variable expenses can be cut.

A plan can also assess your household and investment finances. Removal of high-interest credit cards contribute productively to your household finances. An overview of your insurance details is also worth conducting, as you may find that you are overpaying your rates. Planning can also help develop market strategies to diversify your portfolio. This will not only protect the stability of your investments but can even improve your earnings.

Some of the less considered benefits that you can acquire through financial responsibility are psychological. Those who have experienced troubles in the past know that that debt carries a mental burden as well as a fiscal one. Everyday stresses can become harder to deal with if you’re preoccupied with the consequences of rising debt and falling credit scores. In contrast, being aware of how to control your finances can make it easier to handle your affairs granting you a sense of self-assurance and knowledge that allows you to face problems with some security but without arrogance.

No matter whether we aspire to great wealth or simply good credit, all of seek stability within our lives. We live in a world where financial literacy is inadequately addressed and where fiscal self-discipline is needed more than ever. By handling your personal finances in a responsible manner, you can increase your confidence in both yourself and your future while gaining protection and prosperity in the process.

Siddarth Nagaraj

Siddarth Nagaraj is a junior at the University of North Carolina-Chapel Hill. He is currently pursuing a double major in Global Studies and Political Science with a minor in Geography. Originally from Winston-Salem, North Carolina, he is interested in socioeconomic inequity and cultural diversity in developing nations. He is also a Section Editor for The Hill, UNC’s only nonpartisan political review, and has written multiple articles on international affairs for the quarterly publication.

Since the summer of 2010, he has volunteered as a Savings Officer for the Community Empowerment Fund (CEF) in Chapel Hill, which seeks to promote financial literacy and help fiscally strained individuals achieve self-sufficiency. Apart from writing, Siddarth enjoys reading, travel, and watching British television programs. Upon graduation, he plans to earn a graduate degree and seek employment in the field of international development.

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