why personal finances is important

Personal finances refer to the arrangement and management of funds for personal or family use. They are mainly arranged for meeting various expenses personal in nature such as paying medical bills, educational fees, insurance premiums and other short term debts. Personal finances are also arranged for meeting contingencies and for entertainments, holidays and special occasions.

As personal finances are highly associated with one’s life, financial planning forms its important component. A proper financial planning helps individuals to obtain, save and spend according to their financial requirement. Personal finances can be arranged from a number of sources such as personal savings, pension schemes, overdrafts, credit cards, social security benefits and loans. The best way of arranging personal finances is through ones’ personal savings. Through proper planning, management and assessment of your daily financial dealing, you can save money for a secure future. By keeping low credit balances, you can avoid pesky monthly payments. Avoiding impulsive spending and investing in lucrative opportunities help you in arranging personal finance for yourself.

Personal finances can be also arranged by way of borrowing short term loans. They are usually arranged for a period of one month, six months or a year. Usually small amounts are granted for personal finance. They include predatory lending such as payday loans, credit cards or consumer debts and overdraft loans. These loans carry a high rate of interest. Among these, payday loans are an instant source for personal finance. They are more expensive loans given only for regular salaried groups. They are also called cash advance loans, high-risk loans or loan sharking loans. Consumer debts are unsecured debts primarily taken for paying off medical bills, legal fees, and utility bills.

Personal finances are not only arranged for general personal purposes, but also have an important role in the education of students. Personal finances arranged for meeting students’ educational expenses are exempted from tax. The 529 plan is the best example of a tax exempted plan, popular among students in the United States. This plan is suitable for meeting their future higher education expenses. Another source of personal finance for US students for covering their college education expenses is the Coverdell Education Savings Account.

Personal finances help you in achieving your long term goals too. Through wise personal financing, you can buy a home or car. Before applying for personal finances, you must first check your financial status. An assessment of your current financial position will help you to decide on a comfortable, affordable amount. The next thing to be considered is the availability of loan from a reliable lender.

Financial firms are now offering personal finances at attractive rates and terms. The Internet is the best place to find a lender who can offer the best deals on personal finances. You can use personal finance calculators and other online tools for making wise decisions on personal finances. You can also seek consultation from a financial advisor who can give you information about a variety of services, investment accounts and loan options available for personal finances.