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Overview
• Financial management is an
important part of financial
planning.
• When managing personal
finances, having a clear objective
and knowledge about one's
finances is an essential part of
creating a workable plan that is
right for you.
• Financial management involves
creating a budget, choosing a
bank, paying taxes, managing
debt, investing, retirement
Create a Budget
• To manage personal finances
effectively, it will require creating a
budget.
• A budget is a plan used to track
income and expenses. A budget is
also a good way to set financial
priorities like saving for retirement
or a vacation and managing debt.
• Creating and maintaining a budget
is easy to do with a software
program such as Quicken. Financial
software programs allow the user
to create a budget and to track
income, spending, debt
Choose a Bank that is
Right for You
• It is important to choose a bank that will
help you accomplish your financial
goals. Be aware that some banks charge
more fees for some services than other
banks.
• When selecting a bank, it is important to
consider whether the account provides
unlimited check writing, whether most
banking transactions will be conducted
face-to-face, or whether overdraft
protection is necessary. Also, note
whether the bank offers fraud
protection. Many banks offer zero-
liability protection for fraudulent
Pay Taxes
• Paying taxes on time is an
important part of managing
personal finances. If self-
employed, it may be necessary to
pay estimated taxes throughout
the year. Filing a tax return by the
deadline will avoid the payment of
costly penalties.
• Taxpayers that are unable to file a
tax return on time can obtain an
extension. The extension,
however, does not extend the time
Manage Debt
• It is important to take control of
debt.
• Keeping debt low is also an
important component of an
individual's credit score. While
making payments on time is the
most crucial factor, the second
most critical factor is the total
amount of debt owed.
• A debtor can improve a credit
score by paying down debt and
Invest Your Money
• Part of financial management
includes a plan to generate
income from investments.
• Investing is a good way to
generate income through
compound interest and capital
gains. Investments, however,
only make sense when an
individual is debt-free or has a
small amount of debt at a low
interest rate.
Plan for Retirement

• Planning for retirement is

essential to ensuring a
comfortable life in the future.
Investing in an employer-
sponsored retirement plan like
a 401(k) is a good way to
save for the future, reduce tax
liability, and earn tax-deferred
growth. Some employers will
even match contributions.
Plan for When You Die
• Estate planning is another essential
aspect of managing personal
finances.
• A will can ensure that property and
cash are dispersed to the
appropriate heirs.
• An individual with minor children
will also want to use a will to
appoint a guardian to care for their
children if they die. Also, consider
using a living trust to designate
property to specific beneficiaries. A
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• One thing that is common and evident
among the wealthy and successful is
their ability to master their personal
finance.
• Self-made millionaires and billionaires
are known to be thrifty, sensible and
frugal. Schools do not really teach
personal finance and many believe that
the ability to handle money well is a
natural flair rather than a learned art.
• The recipe for financial stability is not
exactly a secret. It is out there,
preached and lived through by the
wealthy and successful. Here are some
Spend less of what you
earn
• This is the most basic of all personal
finance rules – do not spend more
than you can afford to pay. Yet, this
is also where we most fail. Access to
credit gives us the power to spend
money we still don’t have. It is good
to a certain degree, but only if we
have enough discipline over our
spending. Managing personal
finance starts with learning to live
within your means. Know exactly
how much you’re making, then
create a budget that is within your
Budget for savings
• Build up your savings from day one.
This follows the first rule of managing
personal finance. What is left of your
income after expenses are your
savings.
• First, aim to create an emergency
fund – one that you can rely on
emergencies or when starting up a
business or transitioning from one job
to another.
• Second, save for investment – one
that will provide you with a passive
income.
Know what you’re
spending on
• Self-made millionaires and
billionaires still live on a budget
and know exactly where their
money is going. Knowing what
you’re spending on will give you a
clearer idea on how you’re
handling your money.
• Create a list of purchases made
and bills paid, go as detailed as
you can. Scan through your list –
do you see opportunities to save
or minimize your expenses? Are
Create passive income
• Passive income are earnings
generated without you having
to work or spend time on it.
• Royalties, rentals, interest
income, and creative licenses
are examples of passive
income you can build on.
• Passive income sources will
double your earnings without
using up time and effort.
Learn the art of
investing
• Money in the bank is safe but is not
most beneficial for you.
• While you can earn interest income,
you could also be losing value from
inflation. Inflation is the continuous
trend of increasing prices and
decreasing value of money.
• To combat inflation, you must put
your money to good use, in income
generating investments.
Take advantage of free
money
• Nothing is for free, right? If you
look closer, there is such thing
as free money.
• Financially aware individuals
know and take advantage of
free money like miles rewards,
loyalty rewards from stores,
discounts given when paying in
cash or in advance, and your
employer’s contribution match
for health insurance or
Simplify your lifestyle
• Downsizing is enriching.
Getting rid of the clutter will let
you focus on the important
things.
• There’s no shame in frugality.
Self-made millionaires wear
simple clothes, live in modest
homes, and drive basic cars.
• They splurge on more
important things like
investments, innovations, and
Health is Wealth
• Stay healthy. A healthy body
and focused mind are
necessary to better able to
work and create wealth and
income. Besides, getting sick is
expensive. Make yours and
your family’s health a premium.
Eat healthy, exercise, sleep
well, avoid harmful vices, and
make time for fun and relaxing
time together.
• Personal finances can be
learned and anyone can
achieve financial freedom
and wealth. It is just a matter
of knowing what you have,
and effectively managing and
enriching it.
• Discipline, hard work and
perseverance are important
aspects of getting rich.
• If you want to make it, do not
rely on luck or the
benevolence of others.
 Basic
Personal
Finance
Principles
and Practices
 12 PRINCIPLES OF
PERSONAL FINANCE
Know your take home pay

• Before committing to significant

expenditures, estimate how much
income is likely to be available for
you.
Pay yourself first.

• Before paying bills and other

financial obligations, set aside
an affordable amount each
month in accounts designated
for long-range goals and
unexpected emergencies.
Start saving at young age.

• Recognize that your total

savings are determined both
by the interest you earn on
those savings and the time
period over which you save.
Compare interest rates.

• Obtain rate information from

multiple financial services
firms to get the best value for
your money.
Don't borrow what you can't
repay.
• Be a responsible borrower
who repays as promised,
showing you are worthy of
getting credit in the future.
Budget your money.

• An annual budget to identify

expected income and
expenses, including savings,
will help you live within your
income.
Money doubles by the "Rule
of 72".
• To determine how many
years it will take your
money to double, divide
the interest rate into 72.
High returns equal high
risks.
• Recognize that no one will pay
you high interest rates on a
sure thing. Diversification of
assets is the best protection
against risk.
Don't expect something for
nothing.
• If it sounds too good to be
true, it probably is.
Map your financial future.

• Take time to list your financial

goals, along with a realistic
plan for achieving them.
Your credit past is your
credit future.
• Be aware that credit bureaus
maintain credit reports, which
record borrowers' histories of
repaying loans. Negative
information in credit reports
can affect your ability to
borrow at a later point.
Stay insured.

• Purchase insurance to
avoid being wiped out by a
financial loss, such as an
illness or accident.
 S T O
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KEYS TO SUCCESSFULLY MANAGE
PERSONAL FINANCES

• Thoroughly Assess Your Financial

Situation
• Create a Realistic Budget
• Comb Your Budget for Unnecessary
Expenses
• Adjust Your Mindset
• Deal With Your Debt
• Start an Emergency Fund
• Save for Retirement
• Closely Monitor Your Credit Report
• Take Advantage of Technology
Determine Your Long-Term
and Short-Term Financial
Goals
• The first place you should start with
personal financial management is
establishing goals.
• Without a comprehensive a detailed list
of goals, you will not have the right level
of motivation needed to make necessary
changes.
• Write down all of the financial goals you
can think of, both long-term financial
goals, such as purchasing a piece of
property, or retirement, to less
significant short-term goals, like taking
an international vacation or paying off
credit card debt.
• Consider listing your goals in the
order you would like to achieve
them.
• Long-term goals require a
consistent approach whereas
short-term goals can be treated
almost like a reward. When you
reach them, they really boost your
confidence.
• Completing certain goals helps
you accomplish others. For
example, becoming debt free
makes it easier to save for large
purchases like a down payment for
Thoroughly Assess Your
Financial Situation
• When thinking about a retirement
plan, people often dive right in
and hastily scratch out a budget.
Their intentions are admirable, but
they’re overlooking this crucial
first step.
• Take time to look at the big
picture. You must know how much
you have to work with before you
can budget, save, pay down debt
or set financial goals. Whether it’s
business or personal, as Marcus
Create a Realistic Budget
• Budgeting is simply deciding how
much to save and how much to
spend.
• In the 50/30/20 plan, for example,
after-tax income is allocated to one
of three categories: 50 percent for
needs, 30 percent for wants and 20
percent for savings.
• Whichever model you choose, take
every expense you can think of into
account.
Comb Your Budget for
Unnecessary Expenses
• Your budget will expose careless
spending, but it will also highlight
opportunities to save.
• Look for opportunities to save
money that benefit your health at
the same time.
Adjust Your Mindset
• People associate good spending
habits with discipline, and that
certainly plays a role. However,
changing your whole mindset about
money will make it easier to resist
impulse buying and stick to the
budget.
• That way, if you’re saving up for
socks, a morning at the spa or a well-
deserved vacation, you’ll be less
likely to buy things that aren’t
important to you. If you continue to
track spending, purchases that don’t
Deal With Your Debt

• Whatever sacrifices you make

to avoid debt or climb your way
out of it will be worth it. Debt
severely limits your ability to buy
what you need when you need it.
It keeps you from being generous,
rewarding yourself, saving for the
future and fulfilling your dreams.
Start an Emergency Fund
• Every day, people go into the red
because they’ve set nothing aside
for emergencies. Start socking away
as much as possible each month.
Experts suggest saving enough to
cover three to six months’ worth of
expenses. Mind you, Black Friday is
not an emergency. A Brazilian
blowout is not an emergency.
Examples of an emergency include
job loss, a blown transmission and
rabies treatment.
Save for Retirement
• The importance of building a nest egg
can’t be overstated. The golden years
sneak up quicker than you think. It’s
never too early or too late to start
saving, but saving is far more
burdensome the older you get.
• Consider this scenario: A 25-year-old
woman has a retirement account with
an 8 percent rate of return. She
manages to save a little under $500 a
month. By the time she turns 65, she’ll
have around $1.7 million to retire on. If
the same woman waited until she was
30 to start saving, she’d have to save
closer to $750 a month to end up with
Closely Monitor Your Credit
Report
• Carefully review your personal
information; any changes that you
didn’t make could indicate identity
theft and should be reported right
away. Check for errors, accounts you
don’t recognize, and collection
actions that are unfamiliar to you.
Disputing mistakes is easier than
ever. Just follow the prompts on the
website.
Take Advantage of
Technology
• There are dozens of apps to help
you manage your money, create a
budget, track spending in real
time, and make investments.
Many are free.