When you start earning, you also need to plan your expenditure and savings. even though not in the form of a written document, you should definitely have a rough idea about your expenditure every month. When you are single, there is a lot of disposable income available to you. If married, you have a larger expenditure and different priorities for savings. Whatever be the case, you should have a plan of where your hard earned money is goingeither as expenditure or savings.
Personal financial planning entails planning for your financial needs, present as well as future, while keeping in mind your income. You should also have a rough idea of how much you spend on essentials like groceries, rent, travel, phone and electricity bills. Money for shopping/eating out/entertainment should also be budgeted for. These needs vary significantly according to your standard of living. Two people earning the same amount of money may have different spending needs, according to their habits, tastes and preferences. Apart from these, you must set aside a part of your earnings for some unforeseen events and emergencies and the remaining money you have every month, should be invested instead of letting it sit idle.
This is where planning is important. You should assess your current financial status, needs for future like insurance and retirement, and then invest the amount according to your risk appetite.
So the monthly cash inflows have to be adequately distributed between spending and accumulating wealth. Wealth is the value of all the assets you own, less the liabilities you owe. Your assets can be tangible assets like house, car, furniture, jewelry and the like, or intangible assets like bank accounts, stocks, debentures, loans given etc. |
