To address the habits that lead you to improve your personal finances, we must first understand a little about them. Personal finances are defined as the income and expenses of an individual or family group; as well as the financial products they use to manage them, such as bank accounts, credit cards, investment bonds, among others.
How to improve your personal finances?
This topic is closely related to the financial education you have, this means that the more knowledge you have about your finances, the better you can manage them. The factors that you should know fully about your finances are income, expenses, assets and liabilities.
Once these elements are understood, you can establish financial planning for optimal decision-making about finances, both your own and that of the family group.
Another important element to take into account in personal finances are the tools to manage them, these instruments are the bank accounts where we deposit the money, the credit products that we request, as well as the investment funds and shares acquired in stock exchanges.
Life insurance is also worth noting because it is an important investment for our well-being. It is important to know the financial products that best suit our preferences and planning.
All of the above has as a final purpose, that both you and your family group have better financial liquidity, can comply with the payment of taxes required by law, as well as preserve resources for the retirement stage. Also with good planning, it will allow you to make investments to expand your income in addition to acquiring assets in the future.
Practices to improve your personal finances
The first practice you can apply is to keep a budget of your expenses to understand where your money goes; and if there is a capital flight, remedy it immediately. With this, we will add another habit for the improvement of our finances, which is to establish spending limits so as not to waste the money that enters us and to invest it in more important areas, such as long-term savings.
Once you realize your expenses, budget your income and apply an equation called 70/30, this consists of taking your entire salary and dividing it into two parts, one part is 70% of salary and that is used to pay for your life; pay bills, rent, taxes, food, among other expenses for your livelihood.
The remaining 30% will go to a savings fund to cover future needs or emergencies that may arise. You can also use part of this money to invest in yourself; in your personal growth.
Another habit to implement is that of generating extra income outside the fixed salary. In this practice, we will be able to use a portion of our savings fund to make small investments in activities that we can do in our free time; and that allow to generate income, a good example are freelance Internet jobs or as it is known in Spanish speaking independent contractor.
All these habits to improve your finances are aimed at achieving our economic well-being and the realization of personal and family goals. That our money is always constant when undertaking a project, or taking a recreational trip as a reward for our work if it is what you want.
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