Managing personal finance is as important as earning money. When you successfully manage your personal finance, it will bring about the opportunity to both live in prosperity and feel financially independent and comfortable. If you feel like you do not have sufficient knowledge about personal finance management, feel free to explore basic finance concepts. Also, by putting into practice the financial strategies we have compiled, you can achieve better financial conditions.
Basic Finance Concepts You Need to Know
Basically, the concept of personal finance management means “managing the money”. Effective financial management allows you to set goals, draw a roadmap for these goals and put them into practice. You can start learning the five fundamental concepts of finance to successfully manage your personal finance.
Income
Income is the starting point of personal finance. Salary, retirement pension, dividend, and all other cash inflows are considered within the scope of income. Good financial management depends on how you utilize your income.
Expense
The expense can be defined as “a person using their income to procure goods and services”. To ensure a monetary balance, it is important to keep your expenses lower than your income. Otherwise, gaps might occur in your budget, forcing you into debt.
Saving
Saving is one of the most significant concepts related to personal finance and it means the remaining amount after all expenses are deducted from the income. However, you could allocate a certain amount for saving, before making expenses. You can save the money you have allocated in a way that it does not depreciate against inflation or as an investment.
Investment
Investment is based on investing money in assets such as stocks, investment funds, real estate, and bonds and generating income through these. Although the concepts of investment and saving are used interchangeably, it is safe to say that there are particular differences between them. The most distinguished difference is the risk involved. While saving generates low profit with minimum risk, investment generates high profit with a higher level of risk involved. Although investment is performed to make a profit, it can also result in losses.
Measure
Taking measures has a special role in financial management. The measures you will take help individuals and families to overcome unexpected incidents such as illnesses or accidents easily. Practices such as life and health insurance, mortgage, retirement, and real estate planning can be given as examples for taking measures.
Fundamental Principles of Personal Finance
There are specific tips and tricks that will enable you to successfully manage personal finance. These can be listed as follows:
1. Prepare a Budget
To properly manage your financial status, the first thing you need to do is prepare a budget. While preparing a budget, you can allocate half of your net income for monthly expenses. You can spend %30 of your income on shopping, traveling, hobbies, or entertainment expenses; the remaining %20 can be allocated for debts or savings. Income and expense balance can be ensured by acting in line with the budget.
2. Create an Emergency Fund
Do you have savings that will cover expenses such as the sudden breakdown of a house utensil, the breakdown of your car, or an abrupt dismissal from your job, without getting into debt? If your answer is “No”, then you need to create an emergency fund without losing time. In your fund, pay attention to keeping an amount that will cover expenses for at least three months and if possible, six months.
3. Set a Goal
If you want to become financially more stable in the future, you need to set up financial goals. First, decide on your goals and separate them into short and long-term categories. Next, determine the intervals in which you will work towards achieving these goals.
4. Utilize Your Savings
If you have successfully balanced income and expenses by adopting personal finance
management, you probably started to save money. To utilize your savings in the best way possible, you can download the Hayat Finans Mobile application to your phone, easily open up an account from our various account selections and start utilizing your savings.
Business