Updated on March 22, 2009
Importance of personal finance in your life
It’s YOUR big responsibility. No one else’s.
During the industrial age, employees can expect their companies to take care of them and their family from the cradle to the grave. Employers can cover maternity and even pension. Not anymore. Today, we are expected to manage our children’s education, credit card debts, mortgages, retirement planning. These are tasks even professionals have to take time and data to analyze!
… the growing sophistication of financial markets means consumers are not just choosing between interest rates on two different bank loans or savings plans, but are rather being offered a variety of complex financial instruments for borrowing and saving, with a large range of options. At the same time, the responsibility and risk for financial decisions that will have a major impact on an individual’s future life, notably pensions, are being shifted increasingly to workers and away from governments and employers. As life expectancy is increasing, the pension question is particularly important as individuals will be enjoying longer periods of retirement.
Individuals will not be able to choose the right savings or investments for themselves, and may be at risk of fraud, if they are not financially literate. But if individuals do become financially educated, they will be more likely to save and to challenge financial service providers to develop products that truly respond to their needs, and that should have positive effects on both investment levels and economic growth.
Self-made millionaires have the habit of consulting with tax and financial planners to protect the wealth they worked so hard for. You should follow their example by taking control of your finances.
Minimize the possibility of growing poor
Corporations, big or small, can go bankrupt if they don’t manage their money right. This, despite having a dedicated accounting department or a full-time accountant. The importance of personal finance in your life is staggering.
How many hours a week do you give to planning your budget ? Considering whether you really need that new Mango top? Adding up to realize you spent P5,000 this month on gourmet coffee and dining out? How many years to you have to work to be able to retire comfortably and buy your beach house?
Personal finance affects your lifestyle and your future
Enjoy today and suffer tomorrow. Keep in mind that:
MONEY TAKES TIME TO GROW
Spending all your money now on designer clothes or good food (WANTS – not needs) means less savings. Less savings translates to less investments which means you won’t have enough for an emergency, down payment for a good house, health care when you’re old.
Finally, understanding personal finance has no disadvantages.
If you’re willing to invest years in your job to “gain experience”, you owe yourself a few minutes a day to learn something new about personal finance. If you’re really busy, consult with a financial planner . At the very least, get in the habit of saving 20% of your gross income. You’ll thank yourself later.