Understanding Finance - It's Time to Quit Making Excuses and Get a Grip
Understanding finance - what a joke! Are you like me? Are you really good at spending money but really bad at budgeting, paying bills on time, staying out of debt, investing, and saving for the future? Yeah, I thought so.
Guess what? We're not alone.
Understanding finance covers a lot of ground and most Americans are clueless about it. Nobody ever taught us these things. Oh yeah, we were quick learners when it came to writing checks, using credit cards, and making online purchases (my specialty).
But, now, it's time to wake up. For whatever reason - your finances are in a mess, your credit cards are maxed out, you're facing foreclosure, or retirement is closing in and you have no money in the bank. Whichever reason you identify with, it's time to change.
Your first step is understanding finance. Yep, finance is a scary, scary word. But, let's make understanding personal finance our goal and dig ourselves out of this mess we're in before it's too late.
What is Personal Finance?
There are many fancy and confusing definitions for the term personal finance. Wikipedia.org defines it as:
"the application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget, save, and spend monetary resources over time, taking into account various financial risks and future life events. Components of personal finance might include checking and savings accounts, credit cards and consumer loans, investments in the stock market, retirement plans, social security benefits, insurance policies, and income tax management."
Whew! That definition would make anyone dizzy just reading it.
The definition at Dictionary.com isn't much better and Merriam-Webster doesn’t even have the term "personal finance" listed! See, it's really not our fault we're so illiterate when it comes to understanding personal finance!
But we can no longer use that as an excuse. We're adults and it's time to get a grip.
Personal finance all boils down to thinking ahead. After all the bottom line in personal finance is to stay out of debt, be able to live comfortably, and save for the future. This includes being able to pay for the kid's educations, weddings, and your retirement so you don’t have to move in with your kids one day.
Let's break this down into bite-sized pieces and tackle personal finance head-on.
Understanding Finance Means Money in the Bank
Decisions, Decisions, Decisions
As Wikipedia says, personal finance is about the decisions you make with money. So let's start the journey for a brighter future by taking an honest look at and making decisions about your current financial situation.
This will probably be painful - but fight through the pain. To understand personal finance, you have to be honest. Only by taking a look at where you are financially can you take the necessary steps to taking charge of your future. Ask yourself these questions:
- Are you in debt?
- Are you considering bankruptcy?
- Do you know your credit score?
- Are your credit cards maxed out?
- Are you spending more than you're making?
- Do you run out of money before the end of the month?
- Is your career outlook bleek?
- Do you have unpaid student loans?
- Is your car loan driving you crazy?
- Are you in over your head with your home mortgage?
- Do you have an emergency fund?
- How much do you have in savings?
- Do you have a plan for your financial future?
When It Comes to Understanding Finance - Honesty is the Best Policy
That wasn’t fun, was it? Unfortunately, it's necessary. When it comes to understanding finance, honesty is the best policy. Only by being honest and facing your current situation, can you learn and make positive changes.
On your journey to understanding finance, we're going to answer each of these questions.
- If you're in debt, we're going to learn the best strategies for getting out of debt. We'll look at things like debt consolidation, negotiating debt, and credit counseling.
- If you're in so much debt that you're considering filing bankruptcy, we're going to learn about the different types of bankruptcy and if and when you should file.
- If you have the sneaking suspicion that your credit score is in the toilet, we'll learn how to check your credit score, how to understand your credit report, and raising your credit score so high lenders will be pounding your door instead of collectors.
- If you've maxed out your credit cards, we'll look at the best strategies for paying off credit cards as well as when it's okay to use them and the best credit cards available.
- If you're spending more than you're making, running out of month before you run out of money, and have no hope of making more money at work, we'll learn what a budget is and how to make one. We'll also take a look at cutting costs, saving money on everyday expenses and how to stretch your dollars while living as comfortable as possible.
- If things are looking pretty bleak at work, you feel you're in a dead-in job and the future's not looking so bright, we'll assess job outlook and ways to make more money and increase your income.
- If you're drowning in loans and mortgages, don’t worry, we've got it covered. You'll soon learn mortgage basics and understanding them as well as smart strategies for paying off those student loans.
- If you don’t happen to have anything in savings or an emergency fund, we'll learn how to save the smart way. You'll see money begin magically appearing in your savings account once you learn to save on those everyday living expenses, insurance, medical expenses, and by paying bills on time.
Get Financially Healthy!
The Sun will Come Out Tomorrow!
I hate to be the one to break it to you, but the journey to understanding finance is a never-ending journey.
But...stick around, you're going to learn so much about personal finance, you may make a career change to financial planning, credit counseling, or may even be able to retire as a multi-millionaire - yeah, right.
Seriously, understanding finance is something everyone needs to know - including you.
Right now, you're excused. We're going to go with, "But, nobody ever told me any of this stuff."
But by the time you finish reading and following these step-by-step instructions to understanding finance, you're going to have a firm grasp on understanding your current financial mess - I mean - situation, budgeting, saving money, planning for the future, and investing.
Stay Tuned! Keep Learning About Personal Finance as New Hubs are Added
Getting Out of Debt
Debt and Bankruptcy
Tax and Taxes