MONEY MANAGEMENT

No matter how much (or little) you know about investments, stock markets, credit cards, and insurance, your financial planning is most likely to fail if you don't have a solid understanding of your money.  The first and possibly most crucial stage in financial planning is to have a solid understanding of your finances, or your financial situation, and to be able to manage them intelligently.

So, what is your financial situation?

1) Earnings and Expenses: In order to assess how much money, you have in hand after taking care of your requirements and goals, what you make will be less important than how much you spend. To be in a better financial situation, one needs to set a ‘balance’ between earning and spending habits. And the same can be used as a benchmark to plan your finances. A positive or zero bank balance at the conclusion of most months corresponds to a weak financial trend, whereas a healthy bank balance at the end of the month typically indicates a tendency towards a strong financial position.

2) Assets and Liabilities: Your financial status now and in the future will determine how many valuable assets you possess. For example, assets like investments—in gold or silver, deposits, stocks, mutual funds, art or antiques, land, etc.- will add to your income (either now or in the future) or minimize expenses. Hence, assets play a crucial role in strengthening your financial position. On the other hand, liabilities weaken your financial position. Debt is something that you owe as a liability, which also impacts negatively on your assets, just like an old vehicle that needs a lot of fuel and repairs for the work it is doing.

There are four key areas of your financial situation are: 

1. Income

2. Expenses

 3. Assets, and

4. Liabilities. 

Conclusion:  How can one manage his or her finances using these four essential areas for a brighter financial future?

1. Keep a Record: Maintain an accurate record of every penny coming in and going out in your journal, excel, or other places of your choosing.

2. Monthly Budget: Develop the habit of making budgets regularly to make the most of your money. It will help you reduce your debt, spend sensibly, save money, and invest wisely.

3. Regular Savings: for future goals, to be able to face financial emergencies, and to build assets.

Hence, we can conclude that your financial strength, security, and stability will depend on how well you manage the four essential areas, not how much money you make or how little.

“Most people don’t plan to fail; they fail to plan.” -John L.Beckley

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