You may be thrilled to hear that you have received a gift of $10,000 from your aunty or maybe in a situation scratching your head how to recover all your credit card debt. There may be sometimes to extend your gratitude, you may donate money to the homeless and the sick. Like the above examples, there may be various situations in life that you may come across various states of affairs that you may have to handle your personal finances.
Managing your personal finances requires financial decision making of planning and taking actions. The process should be very carefully sorted out to avoid any financial difficulties and any legal kink. The planning process actually allows you to control your financial positions. There should be some specific goals and needs that need to be fulfilled depending on a case basis varies from family to family should be very carefully planned.
Personal financial activities depend on three main decision areas. How much you have to spend on your daily living expenses, some of the major expenditure you have to incur and some you have to shred it also for your recreational activities. You also have to make a bold mark in your mind to save your money for your long term financial securities. Sometimes your surrounding is distress like natural calamities or a war like situation where you have to assist those in need and share your finances.
There are certain steps that you need to follow to cater to your decision making process of your personal finances:
Verify your current financial situation
The first and foremost is to determine the current financial situation you are at this point of time. You should take into consideration your income, savings, the living expenses you have to incur including your total debts. A well prepared financial statement, taking into consideration your assets and liabilities is a strong foundation for financial planning activities.
Build up your financial goals
You should always keep in mind your financial goals and make it a point to analyze the financial values several times of the year. Things that you need to consider how you look forward to handling your money is influenced by factual knowledge, or is influenced by others. What are your priorities that has to be sorted out like household needs or desire for luxury items or social pressure that you may undergo. Economic conditions have to be assessed also that obviously effect your goals and priorities. The main purpose of this analysis is to differentiate the needs from your wants. You have to be very specific about your goals in order to formulate a viable financial plan.
Find out to identify alternative action plan
You should always have alternative plans chalked out when making the decisions. You should be creative in decision making is a vital component in effective choices. Suppose you may opt for public transport, car pooling, renting a car or company’s car while going to office than buying a car as you may not consider a necessity.
Convert your plan into action
The next step is to develop your action plan. Like you want to increase your savings by reducing your spending or by increasing your income through working extra time and likewise consider your tax payment initiative