What is personal finance?
Insight into personal financial arrangements is an absolute must to know in order to create healthy financial conditions. In personal finance management, there are many things to be considered, such as credit cards, investment types, pension preparations, reserve funds, and so on. Well, as an additional insight for you, here are presented some important points related to personal finance.
What is Budgeting?
Simply, put the budget can be defined as a list of expenditure versus monthly income list. By doing budgeting, starting from shopping planning, recording, and financial arrangement, then we can more easily in control and evaluation of our monthly budget. Then, how do we divide the portion of our income? Simply put, for your income for a daily needs cost of 50%, savings of 30%, and an emergency fund of 20%.
Division of Funding for Emergencies
The amount of emergency fund you should have is 6 x Monthly Expenses. That is, a number of emergency funds can support you for six months. When you get hit or fired, then you have enough time for recovery. Therefore, each receives a salary, first to set aside money for a reserve fund rather than the need for fun.
How to Share Money to Stay Productive
Fixed income every month must be carefully allocated so that your money can spin and produce more. However, do not allocate most of your money just for the sake of business investment alone, because it can be less good for other aspects of your life. Well, here's a picture how to divide the percentage of our financial portion to always remain productive and balanced.
a. Meet the Needs of Life 35-40%
At the time of generating abundant income often people forget the mainland for shopping and dissipation. Well, one rich businessman in Asia still trying to meet the needs of his life with a limited portion, which is 35-40%. This means that when he can earn $10000 per month, then $3500-$4000 portions are used to meet the needs of life, including clothing and food
b. For Investment 25-30%
Some income or salary that you earn should be able to spin and generate other sources of income. The portion allocated for investment is 25-30%. If you are an entrepreneur, you can use it for deposits, insurance, or open other businesses with little capital that can develop 30 percent of your income. Meanwhile, if you are an employee, then the budget can be used to invest in gold, stock, or open a certain business run by your wife or family members.
c. Social Activities 5%
tips divide the portion of money Well, social become one of the needs that must be met. Whatever individuals we are, we must still budget our monthly income for social activities. A simple example is to treat a friend. Why should I treat a friend? Well, according to successful entrepreneurs in East Asia, treating friends, be it old friends or new friends, is very useful in the development of social connectivity and business networks. The more you have friends who are happy with you, the greater the power behind you. Therefore, they always allocate 5 percent of their income to make friends as much as possible.
d. For Entertainment 3-5%
Physical and psychological conditions must be balanced to avoid disease. Therefore, do not overdo it to forget to refresh our body and mind. After work or within a certain time interval go on holiday and pamper yourself to live a harmonious and happy life. Use 5% of your income for this requirement.
e. To Develop 5-10% Knowledge
Over time, challenges and obstacles in running a business or doing the work will be more severe. Therefore, the ability of the self must continue to grow. Well, some successful entrepreneurs in East Asia, such as in China and Hong Kong, are willing to spend 15% of their money to add insight and knowledge, such as buying books and attending seminars. Science is very important for personal development, on career development, personal business development, as well as what your goals or goals stand for.
How To Make Financial Conditions More Stable
You must manage your finances (personal or company finances) carefully to make your economic situation safe. Broadly speaking, there are five steps to get to it. The five points are:
Many people can succeed despite having a small income because it is able to select shopping items appropriately. Buying goods that have not been urgent (urgent) will make the financial condition to be broken. Similarly within the company. Buying tools of production or investment that have not been able to produce a quick profit will make the company's financial condition becomes mess up. For that, the policy in choosing and determining items that will be owned is very necessary when the financial situation is still barely.
b. Paying off & Repaying Debt
If you already have the remaining salary or operating profit, then as much as possible to immediately pay off the debt, although gradually, installments (credit). Determine the targets be achieved within the specified timeframe to end the minus condition.
c. Saving & Preparing a Reserve Fund
Saving is a great way to make your personal financial condition or company stable. In addition to funding to meet your program or plan in the future, the savings can also be a reserve fund against unexpected or emergency situations.
d. Following the Insurance Program
Insurance provides many benefits. Insurance is similar to the reserve fund we receive in a situation we do not want. There are various insurance policy options that you can have. Life Insurance, health insurance, vehicle insurance, home insurance, and investment insurance are some examples of insurance that are often followed by most people.
e. Investing
If your finances start to be a little steady, then invest. The relatively safe investment is an investment in property such as land and building, gold investment, investment certificate of deposit, bonds (debt) and some others. The investment you make will be your stock in old age or when your business and your company are in crisis.
The Ideal amount of Retirement Savings Should Be Stored
To answer that problem, you must consider many things, starting from your current age factor, the nominal amount of savings you already have now, and what kind of life you want when you retire. Many financial experts advise set aside 15-20 percent of monthly income for pension investments.
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