Personal finance is the overall term for the various skills and concepts that go into financial planning and understanding how one uses money effectively, whether for an individual or family. Personal finance involves assessment and planning, understanding debt, and being in control of expenses.

Some of the basics of personal finance may involve learning how to make a budget in order to understand how much money is coming in versus expenses. More advanced personal finance may deal with making investments and other wealth-generating possibilities.

Are you wondering where to start when it comes to personal financial planning? Here is an article that outlines the five foundations you should establish if you want to improve your personal finances.

We all know that personal finance is a critical part of our lives. It’s the basis of our ability to buy houses, cars, and other things we’d like to own.

Types of personal finance

• Budgeting.
• Savings.
• Investment.
• Loans.
• Mortgages
• Retirement Planning.
• Estate Planning.
• Tax planning.

The principles of personal finance

1. Prioritization: Decide your priorities before spending—segregate all the unavoidable expenses from the ones that can wait.
2. Assessment: Before investing, analyze the costs and benefits of each financial product, investment opportunity, or business idea.
3. Restraint: The 30 -day savings rule is highly recommended. Before spending your money on something you want but don’t need, stop and think for 30 days. This financial technique protects individuals from impulse buying.
4. Knowledge: Develop an interest in financial management—better knowledge of finance and markets lead to better decision-making.

Foundations in personal finance

1. Save a 500 dollar emergency fund: Due to recent factors, the economy has been on a roller coaster ride that shows no signs of slowing down. Most Americans live paycheck to paycheck, struggling to make ends meet.

The most worrying thing is that many employed individuals don’t have enough savings to cover unexpected expenses, despite earning a regular income. This is due to lack of employment opportunities and unequal distribution of resources.

2. Get out of debt: In America, debt is the norm; everyone gets into their share of the debt. You have to be free from debt to be able to have any personal finance.

For example, many students rely on funding or student loans to help them get through college. This often takes a few decades to pay off and is deducted from their salaries as soon as they start working.

3. Investing: For financial growth, individuals invest in profitable assets—securities, bonds, mutual funds and fixed deposits. Investments require proper analysis of potential risks and returns.
4. Pay cash for college: There are many government subsidies and loans to help people pay for their education. However, there is still a great deal of inequality among different races and classes in the educational system.

This can complicate their financial management and future income.

However, avoiding student loans is entirely possible when students pick the right school and make the right choices. For example:

• You can apply for scholarships or student financial aid.
• You can also find a part-time job to pay your tuition fees.
• While you can use your own funds, you can also ask for help from parents or family members.
• Choose schools with lower fees and tuition costs.

5. Build wealth and Give: The final foundation for personal finance is to build your wealth and be generous. Wealth should be utilized for meaningful purpose.

Building wealth is the key to ensuring you have enough money in your life. It empowers you to have more control over your life and allows you to make better life decisions.

You should have enough savings and emergency funds to support your lifestyle.

Investing can help you build wealth by growing your capital. Insurance, on the other hand, may help you support yourself and/or your family after retirement.

Now that you reached your financial goals, you can spend it on yourself, or your family, or donate it to charity. Giving to others is a powerful way to enhance your personal development. This is because knowing that you have made a positive impact on someone else’s life can bring you peace of mind.