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 planning, and estate planning.

Assess Your Financial Situation
Determining one’s net worth is an important element of managing personal finances. By assessing net worth, it is possible to place a monetary value on one’s financial situation. Financial assets include:

money in a bank account
stocks
bonds
mutual fund accounts
retirement accounts
future income expected from Social Security benefits and pension plans
the value of a business or real estate investment
a personal residence, if the property will be sold or the money invested in it will be used to pay for living expenses in the future
Items such as cars and clothing are generally not included since it is impossible to live off them unless sold for their cash value.

 

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 management, and financial goals.

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. For example, a number of banks charge fees for account maintenance, teller services, ATM usage, overdraft protection, and online bill paying.

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.

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 allowed to actually pay the taxes owed.

Manage Debt
It is important to take control of debt. Although most people have some kind of debt, such as a car loan or a mortgage, high interest debt can lead to disastrous consequences. Warning signs of too much debt include only making the minimum payment every month, making late payments, having at least one credit card that is near its credit limit, and taking cash advances to pay bills. To get control over debt, an individual can sell investments, negotiate with a creditor to repay the debt in a payment plan, or file for bankruptcy.

 

Invest Your Money the right way with Polk partners
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. For more info you can check out Polk partners

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