The key to personal finance

Extra effort in managing personal finances will result in a more positive use of personal resources. With achievable and realistic goals, your financial situation will improve in no time. However, for the affected part of the individual, this requires proper planning and follow-up. It is also necessary to evaluate at some point to see if the objectives set are achieved or if additional intervention is necessary to improve the financial situation.

Disposable income:

• Regular household cash
• After budget cash or net flow

The regular household cash flow is what remains after the expected annual expenses are subtracted from the expected regular annual income. After fiscal cash or net flow, it is simply what one gets after subtracting regular household liabilities from known assets. The portion of regular income that does not go to normal expenses is a very important resource that can be diverted to other personal financial goals. A balance sheet should be able to determine net worth before continuing to plan how to save enough for bigger and bigger purchases.

Factors to consider if a net increase of 50% is desired:

• Full debts
• Unpaid debts
• Investment instruments
• Return on savings – savings + interest earned
• Outstanding student loans

It simply means that when liabilities decrease, a person’s net worth increases with it. The number one piece of advice for people considering financial advancement is to avoid taking out hefty bank loans, as they pose ever greater dangers to your credit score, especially when interest is piling up. Debt collection will be a much-needed boost to personal finances. The more debts are settled, the less debt there is, which has a positive impact on its balance sheet and also on its solvency.

Personal investments make up the bulk of a person’s net worth and so it is always a good decision to acquire as many valuable assets as a person can in their lifetime. This does not mean that foresight should not be employed here, but on the contrary. Investing by buying back profitable assets must always be preceded by careful analysis, so that a purchase really energizes one’s portfolio. The general trend is that if you are a risk-averse investor, high-risk investments are avoided. These are properties whose value changes with the ebb and flow of time, such as real estate, precious metals like gold, and other physical assets known to have volatile values.

The riskiest among us, those whose courage is undeniably more resistant to fear, easily trade the stocks and other financial instruments of our time. In this type of assets, the rule is that the higher the risk, the higher the possible gains. This type of investing arguably needs to be studied and re-studied by its very nature to avoid excessive losses and catch gains when and where they are likely to fall.

Since savings are an important and integral part of a person’s net worth, careful research is needed to find the names of institutions that offer better products or simply better rates for hard-earned money. For example, US soldiers have the opportunity and privilege to take advantage of the DOD Savings Deposit program which has very high interest rates at 10%.

Savings accounts and CDs serve you in two ways: first, by increasing your total net worth, and second, by giving a much-needed buffer to your personal finance portfolio, as mainstream trends everywhere show. The reason is that these instruments are federally insured and grow at a steady and favorable rate every year.

One thing that has consistently damaged net worth is student loans because they can linger long after a person has graduated and worked. To counter the negative impact of this situation, an effective practice is to take advantage of seasonal tax breaks. With the US Opportunity Tax Credit alone, an individual can save up to $2,500 and those still studying should completely avoid private student loans in favor of federally funded loans, as these have lower or fixed rates in general.

The most effective ways to maximize cash flow:

• Very informed financial decisions
• Make and stick to a budget
• Control impulse purchases
• Implement cost reduction measures

Smart financial choices can sometimes be the difference between ruin and progress. For example, we have the choice between buying a house that will later become unaffordable or renting modest accommodation. If the sale price of the house turns out to be more than 20, when the actual sale price is divided by the annual rent, it would be wiser to rent. Managing personal finances doesn’t have to be a daunting task; it just takes patience and practice.

Where you can cut costs:

• Reduce unnecessary expenses
• Cooking instead of dining out
• Examine car insurance cost cutters
• Collection and use of coupons
• Buy wholesale rather than retail, where applicable

There is absolutely no shame in using coupons and the benefits are huge, it can even become a habit. Why pay full price when a little vigilance in cutting and saving coupons goes a long way? If no printed material is available to glean coupons from, the internet is still there, the perfect place to search for printable coupons.

Cook at home and batch cook. Then freeze for later meals. Do your due diligence to take care of leftovers and you’ll likely save a fortune in the on-the-go budget. There’s no shame in saving edible foods and it does wonders for a family’s or individual’s food budget.

Cut back on company offers, like phone plans, cable or internet plans, anything that has hidden charges, focus on them and ask to get only the basic service, only pay for what you have actually need and use. Extra features are expensive and add up in the long run.

Carpooling is also a way to save money, and if you absolutely have to drive, drive carefully to avoid fees. These little things all contribute to managing your finances in a healthy and productive way. And habits that are changed also stay, so it’s best to make sure you’re making changes for the better.

How to estimate: tools for determining value

• Simple net worth calculator
• Retirement calculator – many are downloadable
• Mortgage rate calculator, again downloadable
• Spouse or Partner Income Calculator for Multiple Income Households
• Loan calculator, free on many sites
• Currency converter – already widely used everywhere
• Household budget calculator – a standard for many housewives
• FICO score range tool – again available for free online
• Student loan calculator – for up to date interest rates

These personal finance calculators are absolutely necessary when strategizing and setting up your long and short term goals, tax payments and schedules, mortgage resolutions and other financial milestones. The closer the estimates are to the actual numbers, the closer you will be to achieving your plans and these are highly dependent on calculators.

Personal finance is simply net worth, cash flow, relevant planning, savings, investment instruments, budget or allowances, and cost cutting. If efforts are made to understand the concepts in theory and applied wisely, a personal balance sheet and credit score will continually improve beyond recovery and go well into growth.