Planning

The Concept of Personal Finance Planning

The first purpose of a budget is to make sure that you make the maximum out of the income you have. A budget is not capable of providing you more money to spend in your life. But it definitely is capable of helping you to use your money effectively so that you will find enough finance to afford more things.

Confusing? Let me explain. When you make a personal budget for you are actually making a plan to use the fixed amount of money you have efficiently. Say you have a fixed salary and you start spending that without any concern on whatever you need (or actually you don’t), you will soon find that all your money in your wallet is exhausted. Now you will start using your credit card. This means that you are adding extra pressure on your finance.

But if you are financially responsible and have a fixed budget, you will spend only on the things that you will need. So you will be able to bring down a lot of unnecessary spending. When you are able to do this, the money you save is being added to the money you earned. This means at the end of the month you will find some money left in your wallet from your monthly salary. This is called savings. What actually a personal finance plan does is give you an idea how to make this saving every month. This savings you make each month can be added up to your investments. This certainly means that you are getting richer within your fixed income.