Personal Finances

Many people could probably work on managing their finances. One thing many people work on, is trying to keep a good credit rating. It is important to pay bills on time, have little debt, not max out credit cards, keep a history of any borrowing, not apply for lots of loans, or borrow from a mix of lenders if you want to keep a good credit score. For a more in-depth way to keep a good credit score you can visit Credit cards have cause many to go in-depth which is probably why experts will say people should just cut up their credit cards and live on a cash-only basis.

When it comes to the financial planning life cycle, you can divide it into three stages. Stage one is basically focusing on building wealth. It is highly recommended you start as early as possible saving money. The time value of money even states that a dollar received in the present is worth more than a dollar received in the future. The second stage focuses on preserving and increasing the wealth you have accumulated and will continue to accumulate. Finally stage three focuses on living on the saved wealth.

The financial planning process can also be divided into three steps. Below are the steps.

  1. Create a net worth statement and a cash flow analysis to evaluate your current financial status.
  2. Set up short-term, intermediate-term, and long-term financial goals.
  3. Use a budget plan to plan your future cash inflows and outflows and to assess your financial performance.

For step one keep in mind that your net worth is the difference between your assets and your liabilities. The formula for net worth is:

Assets-Liablities=Net worth

For step two make goals that are realistic and measurable. Short-term goals are those less than 2 years, intermediate-term goals are those between 2 and 5 years and long-term goals are those more than 5 years. Goals can also be divided into primary goals, secondary goals, and third-level goals. Finally for step three, you will need to draw up a personal budget-a document the itemizes the sources of income and expenditures for a future period,which is often a year.

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