In a world full of soundbites, clichés, and quick tips or advice, it's easy to take two or three positive things from an article in an attempt to apply them in your life quickly. One of the things that makes the Internet great is the ability to share information really, really fast. Unfortunately, this can also be a curse as the wrong information can also be retreived just as quickly. With that being said, what truly is personal finance?
According to Investopedia.com, Personal finance is defined as, "the science of handling money". If we attempted to break this down more however, what exactly is the science of handling money?
For some people personal finance is a very simple thing. They measure their finances as income coming in and expenses going out. For other people, personal finance is very complicated and involves budgeting, savings, and containing expenses as much as possible.
The most interesting thing about personal finance however, is that finances are truly that, personal. What I mean is that everyone has their own priorities in life. Some people believe the mortgage payment is the most important for example. Others may determine that the water and electric bills are more important. In order for someone to be good at personal finance, they have to take the personal out of the equation.
Let's say for an example that your normal paycheck was cut off next week. How would you pay your bills? How would you prioritize who receives money and who doesn't? This is truly what makes finance personal.
It is very easy to become confused when it comes to paying bills. If you were not able to pay everything this month what would you prioritize? Is the car payment more important so that you can get back and forth to work? Is the mortgage payment more important so that you have somewhere to live? Is food, electricity, and water more important so that you can eat and live normally?
Personal finance can never be mastered, because it is constantly changing with your environment. Only with proper planning, and a good emergency fund, can you prepare for all the things that life will throw your way. Otherwise, all of these questions that have been asked during this article will crop up at some point in your life. If you would like to make personal finance a little less personal, then you must use a budget and have an emergency fund.