Ok, so you’ve made the decision to take control of your personal finance situation. Maybe you got denied for a credit card because of your poor credit score. Or perhaps you were overlooked for an apartment based on your lack of savings. Or maybe you received a medical bill and realized you can’t pay it. Whatever brought you here, congrats on taking that 1st step toward financial independence.

What is personal finance?

Personal finance is like being the CEO of your own kingdom. It is where you rule over your financial life, controlling, safeguarding, and growing your wealth. But what exactly does that mean?

Well, there are seven core aspects of personal finance that encompass a variety of key elements you should consider to effectively manage your financial well-being. Of course, based on your goals, each will be prioritized differently, but in general these aspects include:

Budgeting

Budgeting is the process of creating a detailed finance plan for distributing income, handling expenses and resources over a specific period. It involves estimating and tracking income sources, setting financial goals, and outlining how money will be spent or saved to achieve those goals. Basically, a budget is a way to ask yourself, “ What you gonna do with that paycheck gurl?”

Why budget? In a simple word – control. Budgeting allows you to take command of your money, make informed financial decisions, and ensure that your spending aligns with priorities. By creating a budget, you can easily evaluate your income and expenses, identify areas for potential cost-cutting, and allocate funds to different categories such as housing, debt repayment, and savings.

Saving

Saving helps to provide financial security and stability. It allows you to build an emergency fund, ensuring you are prepared for unexpected expenses or income disruptions. Saving also helps you to achieve long-term goals, such as buying a home, starting a business, or retiring comfortably. It prevents reliance on debt and interest payments, promoting financial independence.

Saving also creates opportunities for investments so you can grow that bag and build passive income. Additionally, it reduces financial stress and provides peace of mind, improving overall well-being. By developing a savings habit, you can secure your future and easily handle economic downturns.

Debt (Credit) Management

Effective debt management allows you to maintain control over your financial obligations and avoid falling into that horrible debt spiral that often destroys lives. It helps minimize interest payments, fees, and penalties, freeing up funds for other priorities. By managing debt responsibly, you can maintain a great credit score, which is essential for being approved for good loan (auto or mortgage) terms in the future.

Average US Finance Debt in 2022

• Credit card debt: $7,279
• Auto loans debt: $22,612
• Mortgage balance: $236,443

Debt management also promotes financial freedom, because it reduces the burden of monthly payments and allows you to allocate more resources towards savings and investments (or fun).

Investing

Investing offers the potential financial independence. By putting money into assets such as stocks or real estate, you can generate passive income and accumulate wealth over time. It preserves the purchasing power of money and helps you maintain your standard of living in the long run.

Insurance

Insurance provides financial protection, thus resulting in peace of mind. Policies, such as health, auto, or home insurance, safeguard your assets against unexpected losses. These act as safety nets, covering the costs associated with accidents, illnesses, or property damage. It also promotes financial stability by transferring the financial burden of a loss to the insurance companies and prevents you from facing significant financial hardships or bankruptcy because of serious health issues or a tragic loss of life within your family.

Retirement Planning

Retirement planning is essential for a secure and comfortable future. It allows you to ensure financial independence during your retirement years. By planning ahead, you can estimate your retirement expenses, determine your desired lifestyle, and set achievable goals.

Retirement planning also helps you take advantage of retirement-specific investment options, such as pension plans or individual retirement accounts (IRAs), to maximize your savings and tax advantages so you can enjoy your golden years with financial stability and peace of mind.

Estate Planning

Estate planning allows you to have control over the distribution of your assets after your passing. Through estate planning, you can create a will or trust to specify how your property and finances should be allocated.

It also minimizes potential conflicts among family members and reduces the burden of legal and administrative processes and fees. 

Estate Planning can provide clear instructions for guardianship of minor children, designate health care proxies, and establish provisions for long-term care. Lastly, estate planning can also help minimize tax liabilities and protect assets from unnecessary expenses or disputes. Doing this, you can provide for your loved ones, protect your assets, and leave a lasting legacy. This is how we change generational curses.

Wow.

That’s a lot.

But, in thinking of all of this, remember, you don’t have to do it all at once. Take your time, gather your resources, and learn. Because in the end, implementing these core aspects of personal finance, you will work towards achieving their financial goals and maintaining a stable financial future. 

And that is what this blog is about! Oh, btw – your next step is to start budgeting.

So subscribe today to learn everything you will need to know, little by little.

– Irene