All over the world millions of people face financial troubles every year. The main cause of financial trouble is not lack of income, but tendency of over expenditure. It is important to have a clear idea of your income and your ability to spend because that helps you stay debt free. Too much use of credit cards to purchase expensive items and missing the credit card payment dates can lead to bankruptcy. In fact, there are thousands of people that apply for debt relief programs every year to stay out of legal trouble. In order to lead a debt free life, it is important to plan personal finance. In this article, I will focus on two things-personal finance and debt management or debt relief.
What is Personal Finance?
Personal finance is nothing but applying the principles of finance to take the money related decisions in a person’s life. It focuses on the ways a person or a family earns, spends and saves money. Personal finance planning also considers the future life events and impending financial risks that may appear with time. Successful financial planning is a dynamic process as you have to change your strategy time to time when income (salary hike) or expenditure (birth of a child) increases. Personal finance planning may include depositing money in savings account, retirement plans, investing money in stock market, income tax management and credit card expense management.
Financial planning is a major part of personal finance and it has 5 steps.
Evaluation: You can assess your financial condition by checking the income statements, property evaluation and money received due to inheritance.
Set the goals: Once you know exactly how much money you have, it becomes easier to set the goals to meet your monetary requirements. For example, if you have $10000 in bank and know that you will need $5000 to send your daughter in college 10 years later, you can start looking for ways to save money so that your bank deposit does not get reduced.
Set a plan: Financial planning is all about achieving the goals. For example, your goal is to accumulate $5000 for your daughter’s college fees and in order to achieve that goal you can create a plan. For instance, you can decide to reduce luxury expenses and find ways to boost monthly income.
Execute the plan: If you have decided to save $100 every month or invest $500 in stock exchange every year, then you must stick to the plan. It is easier to plan something and a completely different challenge to make your plan a success.
Monitor and adjust: You have to monitor your plan and make necessary tweaks to ensure financial security in future. For example, if next year a new life insurance scheme launches that promises to offer better ROI than your current stock market return, then you need to invest more money in life insurance.
What is Debt Relief?
Debt relief can also be called debt management. If you have spent too much and credit card companies are calling you constantly as you owe them money, then a debt relief program can save you from embarrassment. The debt relief service provider will negotiate with your creditors and try to give you maximum advantage. You will pay a fixed amount to the debt relief service provider every month and they will distribute the money among all the creditors.
How Personal Finance can Save Me from Debt?
One of the basic things that personal finance teaches you is that you should not spend more than you can earn. It stops you from frequent use of credit cards and helps you understand the difference between needs and wants. Personal finance planning also enables you to pay your bills on time. As a result, chances of overdue credit card payments reduce significantly.
Utilize the suggestions mentioned above and you will be able to lead a debt free life. However, if you are already in debt related trouble, then visit nationaldebtrelief.com to find a good debt relief plan for you.
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