So what is personal finance?
In the conditions of market relations, the topic of personal finance is becoming more and more relevant. There are many opportunities for investing personal capital. How competently and correctly the owner will be able to dispose of his personal finances depends on his well-being and financial freedom.
So what is it – your personal finances, what do they consist of? At first glance, the answer suggests itself: from money. But this is not the money that you received in the form of a salary and put a dead weight or spent on some of your personal needs, but those that are in constant circulation, working and bringing you some kind of profit. There are four main components of your personal finances. They are all closely interconnected with each other, and only with proper management can they bring you financial independence.
Components of personal finance
The first most important element of personal finance is, of course, income. Without them, there can be no question of any personal finances. Income includes all funds that can be freely disposed of. Incomes are active and passive. The source of active income is small. As a rule, for the vast majority of the population, this is a salary or income from entrepreneurial activity. In the current economic climate, there is a high probability of a sudden loss of this source of income. Personal finance management involves the creation of passive income, which is a profit from the investment of personal capital. If you properly manage your personal finances, you can have a constant passive income.
Such an element of personal finance as expenses requires special attention and competent management.
It seems that it is difficult to correctly predict all your expenses? But it is quite difficult to write down expenses and then strictly follow this list. There may always be a need for some unforeseen purchases. And purely impulse purchases are also not uncommon. Therefore, it is very important to set a restrictive framework for yourself, when a certain amount is allocated for expenses and under no circumstances should it be exceeded. A properly designed family budget, taking into account planned and actual costs, will help you with this. Creating a reserve and savings in the family budget will be the first step in accumulating personal capital. It should not be conducted from time to time, but constantly. Thus, analyzing expenses, after some time you will learn how to properly manage money.
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