Re-visit of personal finances process in the country.

AuthorShaikh, Nazir Ahmed

Byline: Nazir Ahmed Shaikh

Personal finance is the management of financial resources. Saving helps us to overcome significant problems in our lives. To manage our income means to start a journey towards financial freedom. This does not necessarily mean having a luxurious life, but to adopt effective measures of achieving a certain comfort efficient management of money for each individual brings a qualitative growth.

Money is a tool, the means by which we support our unique values and priorities. Therefore it is important to create a financial plan, savings strategies. Goals and opportunities for individuals to save are different and it is difficult to find a suitable solution for all.

Many new investors don't understand that saving money and investing money are entirely different things. Saving money is the process of putting cold, hard cash aside and parking it in extremely safe, and liquid (meaning they can be sold or accessed in a very short amount of time, at most a few days) securities of accounts.

Saving money comes before investing money. It is like the foundation upon, which financial house is built, as it is savings that will provide with the capital to feed the investments. Savings could be of two types. One, the savings should be sufficient to cover all the personal expenses, including mortgage, loan payments, insurance costs, utility bills, food, and clothing expenses. Secondly, for any specific purpose which requires a large amount of cash in five years or less should be savings-driven, not investment-driven.

On the other hand 'investing money' is the process of using money or capital to buy an asset that could be a good probability of generating a safe and acceptable rate of return over time. True investments are backed by some sort of margin of safety, often in the form of assets or owner earnings. The best investments tend to be so-called productive assets such as stocks, bonds, and real estate.

Cash deserves respect. If you're struggling to curb your urge to splurge, you may want to keep better track of your recent purchases. The impulsive spenders tend to conveniently forget just how much they spent the last time they indulged. Impulsive people are willing to pay more because they mistakenly believe that they did not spend much of their budget yet. People with poor impulse control are especially bad about tricking themselves in order to justify a future splurge. But they only do it when they're debating a future...

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