The subject of personal finance is very broad, but as a beginning, I would like to discuss what I consider the foundations of personal finance: Security, Stability,Growth and Protection & Management.
Security
Security to me means that I am prepared for the "hit by abus" scenario.I have life insurance to provide for my wife and children.Health, disability, auto and home insurance policies also provide me additional protection in their respective areas.I also have a list of where these policies are, who my agents are, phone numbers and basic policy information (#s, amounts, costs, etc.) I keep this information both in afile at my house and in a safety deposit box at the bank (a friends home will also work - think: "house burns down" scenario). Also my wife and my brother and sister-in-law who live nearby also know where these things are.
Stability
The next level of personal finance is stability.Stability to me means that first of all I live within my means. I don't spend more than I earn. Otherwise I am
spending my savings, investments, emergency money, or getting into debt. I have a lot of debt, but most of it is real estate which is producing some income. I try to avoid credit card debt and purchase everything with money I already have. I don't buy things expecting that next month I will have more money or I will get a big raise or promotion.
Growth
Once you are secure and stable, you can begin to think about
building your wealth. Not that you have to figure out how
to become the next Bill Gates or Warren Buffet. But you
have to start building the "nest-egg" that you will rely on
when you retire.
Protection and Management
The final level of personal finance is the protection and management of your wealth. Most people never develop wealth enough to need this level. But some of the concepts can be applied to any amount of wealth you possess, $10,000 to
$10,000,000.Part of the protection harks back to your will as we discussed on the first personal finance level: security.
Security
Security to me means that I am prepared for the "hit by abus" scenario.I have life insurance to provide for my wife and children.Health, disability, auto and home insurance policies also provide me additional protection in their respective areas.I also have a list of where these policies are, who my agents are, phone numbers and basic policy information (#s, amounts, costs, etc.) I keep this information both in afile at my house and in a safety deposit box at the bank (a friends home will also work - think: "house burns down" scenario). Also my wife and my brother and sister-in-law who live nearby also know where these things are.
Stability
The next level of personal finance is stability.Stability to me means that first of all I live within my means. I don't spend more than I earn. Otherwise I am
spending my savings, investments, emergency money, or getting into debt. I have a lot of debt, but most of it is real estate which is producing some income. I try to avoid credit card debt and purchase everything with money I already have. I don't buy things expecting that next month I will have more money or I will get a big raise or promotion.
Growth
Once you are secure and stable, you can begin to think about
building your wealth. Not that you have to figure out how
to become the next Bill Gates or Warren Buffet. But you
have to start building the "nest-egg" that you will rely on
when you retire.
Protection and Management
The final level of personal finance is the protection and management of your wealth. Most people never develop wealth enough to need this level. But some of the concepts can be applied to any amount of wealth you possess, $10,000 to
$10,000,000.Part of the protection harks back to your will as we discussed on the first personal finance level: security.
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