Figuring Out Your Finances: Your Guide to The World of Personal Money Management

Written by Posted On Friday, 02 November 2018 17:41

Handling money is an essential, crucial life skill. Everyone needs to know how to manage the money they earn. Managing money involves lots of considerations such as paying bills on time and saving money for emergencies. People need to know precisely how much money they're earning each paycheck after taxes. They also need to know what others in the family are earning. A spouse may be bringing in a part-time or full-time income. Everyone should know how much money they are paying in bills large and small. Fortunately, there are steps people can take to understand the world of finance and improve their financial picture both right now and as they grow a personal nest egg.

 

Each Paycheck

Financial management begins with understanding a paycheck. Most people are paid every two weeks. Gross income is the amount of money people earn before taxes and other deductions. Net income is the amount of money they bring home after all taxes are paid. Many companies allow employees to alter their take home pay by choosing to contribute to a retirement fund such as a 401k that allows them save for retirement and enjoy certain kinds of tax benefits at the same time. A employer may match the retirement savings account up to a certain amount, thus adding to their paycheck in the long term.

 

The Bills

Managing finance means knowing what bills are being paid each month. Everyone needs to pay for a place to live. They also need to pay for clothing, food and a mode of transport of some sort. Larger bills should be noted such as the mortgage, the average food bill each month and any car loans for one or more vehicles. Other large bills include the cell phone, money to pay for a child's lunches and student loans. Each person may face other, smaller bills such as utilities, vet bills and even money for a morning cup of coffee. An overall budget can help anyone see what they're earning and what they're spending money on each week.

 

Saving Money

Many people have certain financial goals in life. For example, home ownership statistics indicate many people would like to buy a home of their own in their favorite neighborhood. They may also want to save up for retirement, help a child fund a college degree and take an occasional vacation. Saving money can be done in many ways. People can look for ways to cut their budget or chose to earn more money. Savings should be both short-term on a monthly basis and long-term including yearly and five year life savings plans.

 

Investment Options

While saving money is a human need, the question becomes what to do with the money they've saved. Inflation means that a dollar earned today may not have the same value as a dollar in the future. This is why it helps think about where to invest. Many kinds of investment opportunities exist. People can buy into the stock market. The stock market has risks but it also offers the opportunity for greater rewards over time. Another form of investment are what are known as bonds. Bonds can be purchased from many places including local governments and private companies. This form of investment carries less risk but may offer less possibility of reward. It's up to each person to think about their overall comfort with risk. Each person should also think about changing plans depending on their life stage. Young parents have different needs than an older couple approaching retirement. It's a good idea to try and save at least five or ten percent each paycheck. This is an excellent way to build up savings over time while still paying all bills.

 

Careful attention to all aspects of finance means being money savvy. People who know what they're earning, spending and saving are those who remain in control of all aspects of their finances.

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