Navigating the Maze: Personal Finance Management in a Modern World

Introduction

Money is one of the essential parts of living life. There is a more significant number of people who are spending their entire life in earning money or getting trained to attain more wealth. However, other significant issues that are linked with finance are the management of personal finance. Globalization and modernization have made changed the expectation of the people and caused them to spend a higher amount of money on various technology-based and fashion-based items. It is often found that people keep on spending higher on unnecessary things and don’t possess scheduled recurring expenses which leads to multiple issues (Altfest,2007). For those who are struggling with managing their finances amidst the complexities of modern life, seeking economics dissertation help can provide invaluable strategies for effective financial management. This report will explain the issues regarding personal finances and financial planning, which is needed to attain personal financial goals. This report has also revealed my reflection on personal finance issues and my action plans to overcome the problems.

Personal Finance

Personal finance is a concept that manages the money, Investment, and saving of an individual. It possesses banking, insurance, Mortgage, tax and estate planning, budgets, etc. It explains the whole industry, which provides service of finance to the households and individuals and provides them advice regarding opportunities of investment and funds. It is regarding the attainment of personal financial objectives, which includes planning for retirement, saving for the education of children, and short-term needs of finance. There are various factors which affect personal finance that consists of the income, expenses, goals of individuals, and requirement of individuals (Sherman, 2016). However, if ineffective planning is done over finance, then it might create significant issues that bring financial disaster.

Personal Finance Issues

Personal finance issues are the mistakes that are made by the people that lead to significant financial hardship.

Excessive spending: One of the more significant issues which are faced by an individual regarding finance so the extreme spending activities of the people. When an individual doesn’t do adequate planning and spends money on unwanted items, then there is the maximum possibility that a person will face financial hardship (Rosefsky, 2002).

Never-ending payments: There are increased expenses upon leisure activities like cable televisions, internet connections, music services, or membership in a fancy gym. This forces an individual to pay every month and year but results in owning nothing. One should save more amount of money and make a simple lifestyle to enhance its savings.

Sustaining life on borrowed Money: The usage of credit cards has increased in a pacer manner, and people find it a straightforward mode of making transactions. However, when people started depending on the credits, then they start spending as compared to earnings. The consumers pay double-digit rates of interest upon the groceries, gasoline, and other necessary items, which makes the process of things more expensive (Madray, 2009).

Paying off debts with savings money: One of the significant issues which arrive at personal finance is the payment of the debt from the saving accounts. People face problems when they make investments in life insurance plans but don’t have enough money to pay the fees. The replacement of the incomes for spending in purchasing of insurance plans could increase debt and lead people to numerous issues(Bloomberg, 2019).

Lack of plan: The future of financing is highly dependent on the present state of investments. If an individual doesn’t make effective planning and budgeting, then it leads to numerous financial issues (Sherman, 2016).

Personal finance planning

Personal Financial planning is one of the concepts which possess various aspects of planning, such as budgeting, saving, retirement, insurance, and planning. It is a more significant part of personal finance and provides detailed knowledge to the people regarding works to be done to save money. Personal financing planning is considered as to how one should look forward and future proceeding of people to attain its aim. When planners of finance take part in the preparation, then they treat problems or make plans (Madray, 2009). There are various means of saving money, which are explained below.

Budgeting: A budget is one of the road maps which segregates the money and helps the people to understand what is coming in as compared to what is going out every month. The creation of a detailed budget helps the individual to have smarter decisions over the finance regularly. The budgeting also stops the people from purchasing or spend money on unnecessary items. The building of the budget must be on paper or budgeting spreadsheet (Altfest,2007).

Cutting expenses: The people need to reduce the costs and have a clear understanding of where a larger amount of money is spent. One can avoid certain variable expenses such as unnecessary subscription services, recurring of the membership, and refinancing of the Mortgage values. The reduction of costs helps in freeing up more amount of money and add extra money to the budget. This even assists an individual to pay back the loans and credit cards expenses quickly and boost up the emergency funds (Detroit & et al., 2003).

Coming out of debt: It is very problematic for the individual to get out of debt and mainly when one faces a higher rate of interest on loans and credit cards. The essential step of getting out of debt is to pay investments to amount more than the minimum amounts every month. One should pay off the credit card balance as early as possible because additional interests and other charges could increase the debt (Rosefsky, 2002).

Saving for retirement: Although individual companies offer for the full pension plans and social security, however, an individual need to plan and save for their retirement. The saving for retirement should be taken as a priority instead of the afterthought. One should opt for different retirement plans such as Tax-advantaged plans funds and many other investment plans which can help the people to attain a good sum of money during their retirement. Productive investment is one of the essential parts of planning for retirement(Bloomberg, 2019).

Insurance: Insurance is also one of the essential aspects of finance which is required by each of the individuals. Since accidents and disasters are not specific and can happen anytime in a life period, which could lead to a financial shortage, insurance is required by an individual to protect life and keep a safe roof over the head. Although people generally perform protection over automobile gadgets or buildings, it is even more essential to ensure one’s life. There are different types of insurance, and one must choose the best-fit insurance plan to attain higher benefits (Detroit & et al., 2003).

My Reflection upon personal financial issues

I am a very fun-loving person and an open-minded person who keeps on spending a larger amount of money on leisure activities. Being the only child of my parents, I am provided with a good amount of money to spend. However, when I completed my schooling, I started facing financial issues and found that my financial decisions for managing money are shallow. I reviewed that I have severely used my credit card to pay for things and many other tickets, which had provided me rewards programs and cashback rewards. Since many of the cards had higher interest rates, there was an accumulation of a larger amount of debt, which was very difficult for me to pay. Although a credit card is a beneficial method of payment and helps in establishing a credit history, but unwise usage and over expenses have acted as significant issues in my case. This has also ruined my credit scores and didn’t allow me to collect rewards. The further consequence of the spoiling of the credit score had completely trashed my credit history as I missed payments. The late payments had affected me in attaining loans for studies. This incident has made me realize that one should pay their credits on time and keep the balance of debt lower and make usage of other modes of credit to attain solid credit scores. Apart from credit card misuse, I also face personal finance issues as I even misused my student loan money. Since I had to study in an overpriced and prestigious college, I got a college and chose to pay the payment via a student loan. At the initial phase, I was not getting student loans due to a lower credit score, but later, I got the loan through other different methods (SunTrust, 2018). However, since my expenses had increased when I reached college and pocket money given by my parents were not enough, I started misusing student loan money. The lack of budgeting has, however, caused a shortage of money, and this is the reason that I began to make the usage of student loan money to fund my expenses. I had even used the funds for a spring break trip to London, which had dig deeper hole after I complete my graduate.

However, later in my third year of bachelor studies, I realized that I had made a big mistake by spending a larger amount of money in personal expenses, I had decided to do financial planning and manage it. Since we were taught regarding the ways to plan the finance in the third year of bachelor’s studies, I made an application of it and planned my investment. At the initial stage, I identified the underlying problems which had caused the financial issues. During this process, I realized that I used a larger amount of money to attain a higher standard of living and thus established the goal to save money and make usage of cash only to fulfill the purpose of life. I adjusted my expectations and learned to live in a small sum of money and make usage of money rather than a credit card. I further created a budget wherein I made a chart for the monthly spending plan of payment. The creation of the budget has helped me in solving my financial issues. I had also determined my priorities of finance to guide my choice of spending wherein I kept pay off my credit cards in the higher priority list and buying fashionable clothes in the least priority lists. Although it was not easy for me to pay off all the credit card balance, I took small steps to address the issues and started paying a low credit card balance each month. This had helped me to get out of all the debts more quickly. It is also called as Snowball effects wherein payments are made on each of the obligations, but the significant focus is given on one debt to be paid off faster. I had even developed realistic plans to accomplish my goal. I had made timelines of 24 months to pay back the debt balance and also wrote the current debt balance to pay it off within the stipulated time frame (SunTrust, 2018). I even kept reviewing my plans and adjusting them as per requirement. I made fine-tuning in my projects and even improved it to accomplished goals in a quicker manner. Lastly, I also got myself prepared for tackling the challenges and made myself flexible for necessary changes. I had started building saving so that I can handle the expenses which could be encountered in the future.

Conclusion and Recommendation

Finance is termed as an integral element in every person's life. The ability to make an intelligent decision of investment is known as financial management. The managing of personal finance is highly essential for economic wellbeing. Effective planning and management keep track of the personal expenses and assist in the calculation of net worth of personal income. It can be concluded that if an individual doesn’t make effective decisions to save personal finance, then they can face significant issues that could be hard to solve.

It is reviewed from the studies that when an individual doesn’t make an in-depth concern over the utilization of the funds than they face significant scarcity of money and could lead to various issues. It is thus recommended that one should make effective planning strategies and control its financial affairs. The individual needs to minimize their expenses on unwanted stuff, which are of less requirement and save a larger amount of money in terms of investment or retirement plans so that they can attain benefits in their future. Moreover, it is recommended that students should earn their own money by teaching other students or joining part-time work.

References

Altfest, L.,2007. Personal Financial planning. New York, NY: McGraw-Hill Companies.

Detroit, M. & et.al., 2003. Finance: A Fine art. Chichester: Wiley.

Madray, J., 2009. Compiling personal financial statement. Lewisville, TX: American Institute of certified Public Accountants.

Rosefsky, R.S., 2002. Personal Finance (3rd ed.). New York, NY: John Wiley & Sons, Inc.

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